Credit cards are setting the stage for digital lending from CUs

As stimulus checks and tax breaks were sent out to individuals and families during the pandemic, consumers wired the payments.

And that caused credit union deposits to swell.

Denise Stevens, SVP, chief product and digital officer at PSCU, told Karen Webster, CEO of PYMNTS that CUs are increasingly looking to get into lending to compete with their larger, traditional bank brethren and all-digital newcomers, and use those deposits as a stepping stone to digital innovations.

The desire is there, but the implementation is more difficult. For CUs, delivering optimized, technology-enabled offerings to end users is hampered by a fragmented landscape.

Simply put, CUs are challenged when it comes to competing with larger, well-funded financial service providers — especially when it comes to digital lending, underwriting, and brand new capabilities that would allow cross-selling to current members and potentially allow them to grow.

“It’s very difficult to replicate these types of experiences when credit unions have multiple partners to deal with,” she said.

In order to offer their members as many financial service options as possible, these CUs may have separate partnerships with third-party lending, card processing, and online banking providers. As a result, it has become almost impossible for a CU to pull everything together at speed. The credit unions of PSCU owners said they continue to struggle to compete with digital-only offerings like the Apple Card — and time is of the essence or risk losing members.

As a joint research by PYMNTS and PSCU has found, about a quarter of consumers would change financial institution (FI) if they received innovative services.

Also Read: 24% of Credit Union Members Would Switch FIs for Digital Innovation

“We had to find a way for credit unions to compete with these larger banks — on a large scale,” Stevens said.

With that in mind, PSCU announced last week that it had partnered with FinTech Amount to bring new lending capabilities to CUs. This relationship starts with credit cards and will branch out from there, including instant credit approvals. The PSCU also invested an undisclosed amount in Amount.

“This partnership with Amount is about real lending,” Stevens said. “And it allows us to do ‘real’ account acquisitions.” CUs that take advantage of Amount’s digital credit card onboarding capabilities can keep these loans on their balance sheet – accelerating the acquisition of new memberships.

The lending, Stevens said, is a logical complement to the solutions the PSCU already offers to its CUs. Looking beyond credit cards, there will be a movement that expands into consumer credit and business credit.

“We pull together all of these credit components, integrate them into the PSCU ecosystem — and offer a full credit ‘suite,'” Stevens said.

The credit activity

Although lending would be enabled through PSCU/Amount, Stevens said CU would continue to underwrite and hold loans, and PSCU would help automate the back-office workflows associated with loan management.

“We’re just giving them more flexibility with newer technology to mix and match everything,” Stevens said. Along the way, these CUs will also be able to offer Buy Now Pay Later (BNPL) options via PSCU with varying installment terms as that product becomes more widely available.

CUs will be able to offer innovative products to their members – and grow their membership (partly due to the white-label nature of the relationship).

A new account opening would potentially pave the way to expand credit card offerings digitally and instantly across digital channels.

“As a new member,” she said, “you applied for a credit card and got approval in seconds,” where the card can be instantly provisioned in the holder’s digital wallet — Google and Apple Pay wallets, among others. she said.

“You can start spending and transacting quickly,” Stevens said, “and that seamless experience is what we’re aiming for.”

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NEW PAYMENT DETAILS: THE TRUTH ABOUT BNPL AND STORE CARDS – APRIL 2022

Above: Shoppers who have loyalty cards use them for 87% of all eligible purchases — but that doesn’t mean retailers should launch “buy now, pay later” (BNPL) options at checkout. The Truth About BNPL And Store Cards, a collaboration between PYMNTS and PayPal, surveyed 2,161 consumers to find out why providing BNPL and store cards is key to helping merchants maximize conversion.

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