On This Page

I recently attended the 2024 America’s Credit Unions Governmental Affairs Conference, where one of the speakers said something that caught my ear: Essentially, the younger demographic is not fully aware of the concept of a credit union, its unique characteristics compared to other financial entities and the reasons why they might want to consider banking with them.

This is unfortunate for younger consumers, who will be missing the benefits of credit unions, such as typically lower interest rates. But it is also a major issue for credit unions themselves, who risk facing a shrinking member base as a result.

Why do credit unions struggle to capture the attention of younger consumers?

At the same conference, I had the opportunity to speak with several credit union executives, and the problem resonated with the entire group. One reason credit unions might be struggling to register with younger consumers is their limited adoption of digital payments, either for collections or as a facility for their members.

Many credit unions, even some of the largest ones, do not offer digital payment types that have become the norm for younger generations, like Google Pay, Apple Pay, Zelle or Venmo.

As I spoke with credit union leaders and other experts, we all agreed that part of the reason for this is structural: the decision-making boards at credit unions have a lot on their agenda, and they also have various competing priorities for resources and budget. But navigating a way through these practicalities to be able to offer members — young or otherwise — the ways they want to pay (and the ways they are already used to paying for everything else) will be vital to gaining and retaining new members.

And a quick look at recent consumer research shows us why.

Consumer bill pay expectations are trending towards digital

ACI’s annual ACI Speedpay Pulse study is the largest, longest-running survey of consumer billing, payment and communication preferences in the industry.

The most recent results show that 47% of consumers want to pay their bills with alternative payment methods, such as PayPal, Apple Pay and Google Pay. For Gen Z and Millennials, that figure rises to 59% and 61%, respectively, but even a healthy 24% of Boomers would pay with a mobile wallet.

We see the risks of not fully catering to these expectations in some further research from PYMNTS, which found that 64% of credit union members were interested in seeing their credit union add more payment capabilities, and 27% stated that they would switch providers for more innovative solutions.

Collections can be the perfect on-ramp for credit union payments innovation

So how should credit unions respond?

Another credit union VP I met at the conference was proud of the way his organization’s focused selection of services had led to great customer satisfaction scores. But he was equally honest about the fact that limited payment options were a weak point when it came to collections.

It is common for credit unions to finally get a hold of overdue members on the phone only to ask them to go to a branch to make a payment. The conversion rate of this approach is quickly approaching zero as the world goes digital. It would be infinitely better to be able to take the members’ repayments on the phone by debit card or any other payment method they had on hand.

This scenario throws into relief the business case for investing in new payment channels (and absorbing the cost of taking those in-the-moment payments, which might cost a few dollars per transaction), because the cost of missing repayments altogether is much higher.

This also underscores the potential for credit unions to use collections as the best place to begin introducing new payment options — adding debit card, Apple Pay and Google Pay, for example — and experimenting with self-service channels for overdue members. These use cases can have a near-immediate, meaningful business impact while also serving as an on-ramp to wider payments modernization.

What to look for in a payments modernization partner

The right payments partner for credit unions looking to undertake this journey will be able to provide more than robust and secure technology solutions. They will also offer the consultative support services and expertise needed to ensure that the project is delivered in a way that maximizes efficiency and tightly manages costs and resources.

As an example, ACI Speedpay offers a simple and manageable way to accept the most used electronic payment methods, including ACH, debit, credit cards, Venmo, Apple Pay and Google Pay. It allows overdue members to self-serve to bring themselves up to date, and it offers a pathway to better fraud defenses through ACI Fraud Management, featuring ACI’s incremental learning, which adjusts to new behaviors and outperforms traditional models by more than 10%.

Learn more

Today, alternative payment methods don’t just enable banks and credit unions to provide members with a variety of options and a frictionless payments experience — they have also become essential for businesses looking to compete in the evolving digital economy.

Connect with me on Linkedin for regular updates on payment innovation opportunities for lenders, and head here to learn more about ACI Speedpay.

Senior New Business Developer

John Savoia has 24 years experience in fintechs, cross-border payments, money transfers and real time payments. He has been public speaking for 30 years as well as participating as a LinkedIn segment host talking about payments.