Sometimes the drive to innovate one’s payments systems can run into the argument: ‘our legacy system has worked well for us and continues to serve our customers—why do we need to change?’ This argument can be particularly compelling when faced with the significant investments needed to implement these kinds of changes and the challenges involved in terms of regulatory uncertainty, wavering timelines and difficulties choosing the right vendors and expertise.
While the ‘it works so don’t break it’ philosophy can make sense in certain circumstances and for specific timeframes, the overall evolution of the payments industry towards faster, more digital and more open and flexible payment platforms—something we can see in real time across Canada and in jurisdictions around the world—suggest that there are some very real competitive advantages and opportunities to modernized payments systems.
In this article, we discuss five key opportunities that can help unlock growth for credit unions and other small-to-medium financial institutions in Canada.
1. Empowering Members with Immediate Access and Speed
Implementing real-time payment systems allows credit unions to meet the increasing demand for instant financial transactions. Members benefit from immediate access to their funds, quicker bill payments, and instant peer-to-peer transfers, all of which make their financial lives easier and more convenient. For credit unions, adopting real-time payments can reduce processing delays, improve cash flow management, and attract members who prioritize speed and efficiency.
Many small businesses operate on tight cash flows, so timeliness of payments can be critical. As more financial institutions are able to offer real-time payments services like Interac e-Transfer for Business, or the upcoming Real-Time Rail system being developed by Payments Canada, many consumers will be swayed towards FIs that offer real-time payments services versus those that don’t.
For credit unions, being a part of the real-time revolution will both enhance member satisfaction and strengthen member loyalty in a competitive market.
2. Attracting a Digital-First Demographic Through Seamless Smartphone Transactions
Integrating with mobile payment platforms like Apple Pay, Google Pay, and Samsung Pay allows credit unions to align with the growing trend of mobile-first financial services. Members, particularly younger ones, benefit from the convenience and security of making payments through their smartphones, which can be used anywhere contactless payments are accepted. This integration helps credit unions stay relevant in an increasingly digital world, leading to increased transaction volumes, stronger member engagement, and the attraction of a tech-savvy demographic that values ease and innovation in their financial dealings.
A study by the Canadian Bankers Association found that nearly half (46%) of Gen Zers (people born between approximately 1997 to 2012, so teens and young people in their twenties) use mobile apps as their leading banking method (compared with 29 percent for all demographic groups combined.
3. Protecting Members and Building Trust with Cutting-Edge Fraud Defense
Modernizing payment systems with advanced fraud prevention tools, such as AI-driven analytics and machine learning, is crucial for safeguarding members’ financial information. Members can gain peace of mind knowing their transactions are secure, and their personal data is protected against sophisticated cyber threats. For credit unions, enhancing fraud prevention capabilities reduces the risk of financial losses, lowers the costs associated with fraud management, and builds trust with members. By prioritizing security, credit unions demonstrate their commitment to protecting their members, fostering a deeper sense of loyalty and confidence in their services.
4. Innovating with Fintech Collaborations for a Superior Member Experience
Collaborating with fintech companies through open-banking initiatives opens the door to innovative payment solutions that might otherwise be out of reach. Members benefit from a broader range of services, such as personalized financial management tools and seamless payment options, all within the credit union’s ecosystem. These partnerships can allow credit unions to offer cutting-edge services without the burden of developing them in-house, enhancing their competitiveness and attracting members who value advanced financial solutions. By embracing open banking, credit unions can expand their service offerings and better meet the evolving needs of their members.
According to thebhive.ca, Canada is a hotspot for fintech, with over 1200 fintech companies. In 2021, Canadian fintech investments unlocked a record deal valuation of $9.4 billion.
5. Delivering Tailored Financial Solutions and Insights for Enhanced Member Satisfaction
Utilizing advanced data analytics enables credit unions to offer highly personalized financial products and services tailored to individual member needs. Members benefit from customized financial advice, targeted product recommendations, and personalized alerts that align with their unique financial goals and behaviors. This level of personalization can lead to a more satisfying and supportive banking experience.
For credit unions in particular, data-driven personalization deepens relationships with members, boosts satisfaction and loyalty, and creates opportunities for cross-selling. This approach ultimately drives revenue growth and enhances member retention by providing relevant and engaging services that resonate with members on a personal level.
What’s Next?
The path to payment modernization is not without its challenges. Credit unions must navigate the complexities of legacy systems, regulatory hurdles, and cybersecurity concerns while managing the significant financial and operational costs of transformation. One way to manage cost concerns is through collaboration. PPJV, for example is a joint venture among three provincial Centrals and more than 50 prairie credit unions combining forces and resources to develop modernized payments services.
Ultimately, the long-term benefits of embracing modernization far outweigh the difficulties. By committing to real-time payments, mobile integration, advanced fraud prevention, open banking partnerships, and data-driven personalization, credit unions can continue to fulfill their mission of serving members with excellence.