By Roy Urrico
Finopotamus aims to highlight white papers, surveys and reports that provide a glimpse as to what is taking place and/or impacting credit unions and other organizations in the financial services industry.
Plano, Texas-based Alkami Technology Inc., a cloud-based digital banking solutions provider for credit unions and banks, released its 2023 Alkami Data Telemetry Report: State of the Industry. The study revealed key areas of opportunity for regional and community financial institutions (RCFIs), such as credit unions, to differentiate against competition.
This report revealed consumer insights such as a greater withdrawal of funds to pay “normal” expenses, an increasing reliance on credit cards, and heightened economic stress. The data also reflects significant opportunities for RCFIs to provide tailored financial guidance, while offering consumers increased loyalty and revenue.
Represented by nearly two dozen financial institutions ranging in assets from $500 million to $15 billion, the 2023 Alkami Data Telemetry Report used de-identified data collected over nearly five years (2018-2023), across more than 1 million account holders. The data analysts considered 2.16 billion transactions.
“De-identified means that we do not use any personal identifiable information (PII) with our account holders before including them in our aggregated research panel,” said Mark Leher, director, product management at Alkami. “We do not connect any transactions they make back to any individual account holder's PII.”
Alkami further supplemented the report with market research, collected January 23 to February 13, 2023 among more than 800 digital banking consumers aimed at identifying current attitudes and perceptions about the latest financial services and national economy.
“This first Telemetry report, taken from the wealth of de-identified transaction data in Alkami’s platform, demonstrates our commitment to providing RCFIs with actionable insights to help consumers through this inflationary cycle,” said Alex Shootman, Alkami’s chief executive officer.
“Along with this report, we have created a repository of the latest go-to data insights to serve the financial services space. Through analysis of proprietary telemetry data and primary research findings, Alkami intends to be an ongoing source of insights to help RCFIs differentiate from competitors, engage their account holders, and grow revenues,” said Allison Cerra, Alkami chief marketing officer.
Consumer Stress and Evolving Money and Payments
The data telemetry report analyzed two principal areas: consumer financial stress and the evolution of money and payments.
Regarding consumer financial stress, insights found the current inflationary environment impacting consumer behavior. Per digital banking consumers who responded to an Alkami research study fielded in the first quarter of 2023: post-COVID, 16% of consumers withdrew more money in the past 12 months to pay for “normal” expenses. In addition, consumer reliance on credit cards grew by more than one-third of consumers in the past 12 months, with 40% of consumers finding their financial situation “overwhelming.”
Then, noting how the concept of “money” is changing, Alkami identified four factors impacting the economy and coloring the current financial landscape: buy now, pay later (BNPL), cryptocurrency (crypto), earned wage access (EWA), and peer-to-peer payments (P2P).
Leher added, “As these four trends continue to emerge and evolve, and gain traction among consumers, credit unions need to provide their account holders solid foundational financial support.
The study found BNPL increased in popularity to the detriment of consumers’ financial wellness as purchasers become more dependent on BNPL for everyday purchases. In addition, the report revealed more than 75% of BNPL users fall under the age of 50; and the average BNPL user has 26% more credit cards than a non-BNPL user, while their average total monthly credit card payment is 52% less. Overall, BNPL users are taking on almost as much in BNPL payments as they shell out on a single credit card.
Alkami finds credit unions in a unique position to deliver value. “With credit unions having a track record of delivering competitive financial services to their members and strong customer support, there are several areas of opportunity for credit unions to empower members and differentiate themselves from megabanks and fintechs,” said Leher.
As the financial landscape keeps changing and evolving, the Alkami Data Telemetry Report recommends credit unions, and other RCFIs, “need to roll with those waves to provide account holders with solid, foundational support.” These financial institutions should look to:
Optimize the digital banking channel with both sales and service in mind. The report suggests account holders continue to self-serve through the digital banking channel but also look to buy products. “Convenient alternatives from other purveyors are readily available when consumers need them. These options may not always be in the consumers’ best interest. RCFIs can be the convenient choice consumers want — and the confident source consumers need. Doing so requires the digital banking channel to become equal parts sales and service.
Start a conversation with the right people within your institution to consider a data-driven strategy. Financial institutions (FIs) are in a strong position to leverage transactional data about their account holders, assuming it is converted into actionable insights. “Anticipating consumer needs before they are conscious thoughts will be the next phase of digital transformation for FIs to separate market leaders from laggards.” Analyze trends to understand and predict consumer behavior as a strategy to better serve account holder needs.
Build a financial wellness program. “Credit card and BNPL usage is up. Confidence is down. The inflationary economy is not helping,” observes the Alkami data telemetry report. “Financial institutions can play the role of advisor and mentor, the account holders' port in the storm. Helping account holders wrangle their finances is essential,” e.g., offering savings calculators and more analytical tools to track and manage their financial situation.
Develop education, guidance and advice on the market trends surrounding BNPL, crypto, P2P and EWA. Because these trends are fluid, consumers are looking for clarity. FIs may be, too. “Becoming an expert and offering advice to account holders is one key strategy to build loyalty. FIs should strategically evaluate product offerings and innovate based on their strategic goals to meet demand and capture share of wallet.”