- Jeffery Kendall, CEO, Nymbus
Niche Banking: What New Growth Looks Like for Credit Unions in the Digital Age
By Jeffery Kendall, CEO, Nymbus
The events of 2020 were a digital accelerant for banking, and now is the time to transform the momentum into growth. As a matter of pandemic survival, credit unions answered the most basic call to digital by quickly enabling people and legacy systems to pivot from physical transactions to digital channels. They met the immediate needs of their members and communities amid global crisis. But as we enter the new digital age, innovation to survive and maintain is not enough.
It is time for a new growth model, one in which any size credit union can compete with digital challengers. With a digital-as-default mindset and the right tools, processes and technology partners, any size credit union can grow its reach, revenue and profitability.
Niche Is the New Local (and the Next Growth Engine)
Given the range of options for storing and accessing their money—from PayPal to online mobile payment apps from brands like Starbucks to new financing programs by major players like Google and Amazon—consumers are seeking out value. They no longer feel tied to one financial institution to meet all their banking needs, and this presents an added loyalty challenge for traditional financial institutions. Fortunately, the same advantages that gave birth to the alternatives are available to credit unions. And now is the time to leverage them for growth.
To compete with challengers, credit unions must expand their missions to serve niche
communities that share common causes, affinities, identities or goals and deliver differentiated digital experiences. Niche banking is a brand affinity approach that has worked for decades with programs like airline credit cards that earn users points for travel and keep people loyal. It’s about finding deep affinities and connecting them with brand products, services and experiences. Most credit unions serve natural affinity groups based on geography. In a digital-as-default world, opportunities for growth can extend beyond local zip codes when analytics and insights are used to understand consumers and deliver value based on the data.
The concept of identifying a digital niche can be especially successful for credit unions in markets that are traditionally underbanked and unbanked. Challengers have begun to make serious waves in these areas, providing flexible application and onboarding, low-cost products and supportive services that improve financial well-being.
There is no reason credit unions cannot do this, and do it better. Some credit unions have
already taken on the opportunity to serve niche markets such as undocumented immigrants
and gig workers . As the world remains increasingly digital, these niche communities will look to credit unions to support digital banking with the same compassionate and personal experiences they have always provided in their physical branches.
Speed Is Critical
To grow, credit unions must break the cycle of making huge investments in technology,
watching it become obsolete, then requiring additional heavy investments to sustain. Success will come for credit unions that innovate quickly and launch digital-bank brands with niche offerings at unprecedented speed to market.
Launching a digital-bank brand separately from a brick-and-mortar one can help credit unions access more people, experiment with products and grow. But it costs money and takes a degree of risk. With an eye toward cost efficiency, niche-focused digital banks can be folded into existing businesses and operate as parallel brands. This avoids redundant expenses but allows distinct tracking to analyze results, test products and adjust as necessary at the speed of digital. To accomplish this, credit unions must partner with vendors that share risk and empower them to adopt the new growth model with Banking-as-a-Service solutions—focusing on increasing revenue and minimizing risk.
Growth in the Next Decade
To achieve next-generation growth, credit unions must leverage the power of digital for new,
differentiated products, services, delivery and business models focused on niche groups and their specific needs. It will require delivering personalized solutions and dynamic member
experiences. This new growth model is rooted in the strong member relationships that have
always guided credit unions.
As it relates to credit unions’ relationships with technology partners, vendors have the
responsibility to lead them to business models that create sustainable growth and loyal
members, while sharing in the risk. Challengers don’t own digital. In the new digital era, growth opportunities exist for credit unions willing to traverse new paths using flexible technology and innovative new approaches.
Nymbus prioritizes this accountable partnership in our relationships with credit unions. We
provide the people, processes and technology needed to amplify the capabilities of credit
unions and extend their reach to new niche segments. By aligning mutual outcomes instead of simply distributing software, we move past traditional vendor thinking to create supportive structures for credit unions that are ready to grow.
Digital alone is not a growth strategy; It must be paired with people, processes, technology and go-to-market segmentation strategies. As credit unions face intensified competition from progressive challengers—from fintechs to global brands—they must create better digital experiences, not simply more digital transactions.