Our methodology
Our analysis set out to answer two key questions:
- How do credit unions' digital offerings compare to the digital offerings of incumbent banks?
- What are their strengths and weaknesses?
We started by quantifying the number of features and functionalities credit unions offer on web and iOS.
Next we compared our findings with mainstream banks' web and iOS offerings in order to identify similarities and any areas where credit unions are unique.
In total we analyzed 10 organizations: 3 credit unions and 7 incumbents.
The credit unions were Affinity Plus, Alliant, and PenFed. Affinity Plus consistently ranks as having one of the best digital banking apps of any credit union. And Alliant and PenFed are two of the largest US credit unions, collectively serving over 2.6 million members and holding $41.94 billion in assets.
The incumbents were Bank of America, Charles Schwab, Citi, JP Morgan Chase, PNC Financial Services, US Bank, and Wells Fargo.
Nailing down the basics
Our analysis unearthed two striking findings.
First, when it comes to basic features like accounts, payments, transfers, and cards, incumbents' and credit unions' offerings are, on average, broadly similar.
All 10 firms we analyzed have the same average number of account-opening features. That said, credit unions lag slightly behind on account features and payments, and by a more significant margin on money transfers and cards.
Second, the credit unions we analyzed have more feature-rich open banking capabilities than incumbents. Where the three credit unions we picked had an average of 11 open banking features, incumbents averaged nine.
Research suggests open banking is increasingly important to consumers, with 72% overall — and 75% of Millennials and Gen X — saying they'd switch bank or credit union if their current one didn't connect to their favourite fintech apps.
Interestingly, the market average for open banking is 10 features, which means the three credit unions we analyzed have superior offerings.
It's worth noting that the credit unions we picked have three of the best digital banking offerings. Alliant, for instance, won a technology excellence award in 2018 and was recognised for the quality of its digital banking experience again in 2020.
With this in mind, it may well be that the results would change if we added more credit unions to our analysis.
That said, open banking is an increasingly critical component of money management. So credit unions' superior approach could simply mean they're better-attuned to their customers' needs, which is, after all, a fundamental part of their ethos.
Trust is probably also a factor.
By definition, open banking entails extensive data sharing between financial institutions. But in a 2021 survey, 57% of respondents said they didn't trust banks to keep their data safe.
In comparison, credit unions enjoy higher levels of trust. This may have made members more receptive to open banking and encouraged credit unions to focus more of their efforts into improving their capabilities in this area.
Where do credit unions need to improve?
While the credit unions we analyzed are doing a good job of meeting members' basic needs — and a great job on open banking — there are still some significant gaps.
Overall, incumbents have, on average, around twice as many features and functionalities as credit unions.
On the web, they average 261 to credit unions' 159, and more than the market average of 231. And, on iOS, they average 220 to credit unions' 125, and more than the market average of 191.
The biggest gaps are in wealth management and junior accounts.
On both the web and iOS, none of the credit unions we analyzed have any wealth management features. By contrast, incumbents average 40 on the web and 29 on iOS.
Similarly, credit unions have no junior account capabilities, while incumbents average 2 junior account features on both the web and iOS.
There's an argument to be made that, because credit unions tend to serve a very specific audience, the lack of junior account and wealth management functionality isn't necessarily a deal-breaker.
That said, it's safe to assume many credit union members are parents who would value products that enable them to give their children some financial independence while keeping track of their spending. So, perhaps, credit unions might want to consider adding junior account capabilities.
Similarly, there's a growing community of retail investors — including members of credit unions — who would likely be interested in investment products from an organization they trust. So, here again, adding wealth management capabilities would enable credit unions to give their customers more value.
Most significantly, research shows Americans overwhelmingly prefer to bank through a mobile app.
We've argued before that implementing the exact same feature-set across the web and mobile isn't always practical or desirable. And a more feature-rich mobile offering doesn't necessarily mean the user experience will be better.
The flipside is that credit unions need to meet their members where they are. And if members prefer to bank on mobile, credit unions need to make sure they are able to perform important banking tasks on mobile, and not force them to switch to the web.
What's next for US credit unions?
Far from being the laggards of the US digital banking space, our research suggests credit unions are holding their own against incumbents, largely thanks to a solid set of basic features and excellent open banking capabilities.
But while the foundations are undoubtedly solid, there's plenty of room for improvement if they want to strengthen their market position.
The modern American banking customer expects to be able to perform basic tasks like paying bills, viewing account balances, or freezing a card quickly and seamlessly from their mobile app. That's non-negotiable.
Where the true opportunity to stand out lies is in offering value-added, highly personalized products that enable members to grow their wealth and take care of their loved ones.
Using the high levels of trust they already enjoy as a springboard and, more importantly, listening to the market more closely could enable credit unions to gain the edge over incumbents by continuing to do what they've always done: putting members' needs first.
Want to learn more about credit unions' place in the market and how they can enhance their digital offerings?
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