By Bruce Dragt, Chief Product Officer
This article previously appeared on CUinsight.com
While not a single one of us has been insulated from the effects of COVID-19, the financial impact has been very different for large segments of the population. 40 million Americans have filed for unemployment in the last ten weeks;1 and while many expect to be re-employed when the economy recovers, some may not.
As the Primary Financial Relationship (PFR), credit unions are there to help their members navigate financial uncertainty, as many have done throughout COVID-19. Now as we enter the slow recovery phase, credit unions can continue to help their members by visualizing how their financial lives are being reshaped, and helping them plan accordingly.
To do that, let us consider three typical members: “Amanda”, “Barry” and “Carol”. Each represents a different COVID-era experience and a unique set of needs:
Lifestyle impact: Light. Spending and credit/debit mix remains steady. Online spending is up.
What she’s paying for: Regular essentials, COVID-inspired sales and deals, charitable giving.
Helpful now: Contactless cards, digital wallets. New preference for cash-back rewards over travel.
Amanda’s financial picture hasn’t changed substantially during COVID-19. Although her work and home lives may be different, she is employed full-time with no disruption in income. However, her spending patterns are different. She, like many Americans, has significantly increased her online spending, and she perhaps may be one of the 38 percent who has begun using contactless payment methods.
As her credit union, you’ll want to ensure that contactless payments, both in-store and online, are available to her and that she is incentivized to use your contactless card or digital wallet. Amanda will also be more susceptible to card-not-present fraud, which is why arming her with card controls and fraud alerts will be key to helping her feel safe during her digital payments experience.
Furloughed/Expects to be re-employed
Lifestyle impact: Getting through it. Spending has shifted to essentials and family-important needs.
What he’s paying for: Just the basics, plus unavoidable expenses like medical costs.
Helpful now: Increased credit lines, reduced interest rates.
Barry has had a more difficult time during COVID-19. As a furloughed worker, he likely has significantly reduced his spend, focusing on essential purchases rather than discretionary items. Barry likely has been leaning on credit to help him get by and hopefully he’s been able to take advantage of a skip-a-payment or interest relief program when needed.
Despite the fact that many furloughed workers expect to be re-employed, continuing to offer low-rate credit cards, increased credit lines and personal loans will be vital to supporting members like Barry.
Lifestyle impact: High.
What she’s paying for: Essentials only.
Helpful now: Smooth/fast access to DDA funds for debit; will maintain credit balances and is sensitive to fees.
Carol is really feeling the hit of COVID-19. With her job gone and economic prospects uncertain, she is spending on essentials only. Her credit union is more important to her than ever. While larger institutions and lending providers will likely show no lenience, her credit union will continue to support her by keeping fees to a minimum, helping her utilize credit wisely and ensuring that she has access to the loans she needs to keep her going.
Credit unions should also consider the fact that members like Carol are likely carrying increased credit card balances or have missed payments due to COVID-19. This can adversely impact lending opportunities available to them, in which case it may be worth reevaluating your lending criteria or relaxing penalties on delinquent cardholders.
Responding to Ongoing Change
As the economy opens up – state by state, city by city – members like Amanda, Barry and Carol are facing uncertainty with regards to their financial lifestyle. “Normal” spending habits will continue to be upended by COVID-19, and the role of their PFR will be more important than ever.
For credit unions, the core challenge remains the same. Understanding your members’ experiences and responding thoughtfully with products and services that help them adapt to a constantly-changing reality is the singular goal. Now is the time to be the stabilizing force in your members’ lives, while also ensuring that you are placing the right strategic bets to serve their evolving needs.
The Credit Union Strategic Investment Assessment, powered by CO-OP and backed by EY NextWaveTM, is designed to help credit unions figure out where to place those strategic bets. The Assessment takes unique data inputs from your credit union and provides you with a strategic blueprint for growth. The Assessment closes on July 2nd – learn exactly where to place the right strategic bets now and after COVID-19: http://visit.coop/wisnd5