BOSTON — Loyalty and rewards programs top consumers’ priorities for financial institution innovation, presenting credit unions with an opportunity to increase card use and attract primary account relationships, according to a new report from PYMNTS Intelligence and Velera.
The report, “Credit Union Innovation Readiness: The Rewards Opportunity Credit Unions Can No Longer Ignore,” produced in collaboration with Velera, found in August that 27% of consumers who want their financial institution to innovate identified loyalty or rewards programs as their top investment priority over the next three years.
Rewards ranked ahead of account fraud protection, at 23%; mobile banking capabilities, at 19%; and online banking capabilities and data security innovations, each at 18%. The survey examined 25 banking features.
Among small and midsize businesses, 24% identified loyalty or rewards programs as their top innovation priority.
Participation Trails Banks
Despite that interest, just 14% of credit union members used a loyalty or rewards program at their primary financial institution during the previous year, compared with 25% of national bank customers, according to the report.
Rewards also influenced card selection. Among consumers with multiple cards, 40% cited better incentives, including cash back, as a factor in deciding which card to use — more than any of the other 17 factors examined. Among credit union members, that figure was 44%.
The findings suggest credit unions’ technology investments should include systems that make rewards more useful to members, alongside fraud prevention, security and digital banking capabilities, according to PYMNTS Intelligence.
Opportunity To Attract Primary Accounts
Among consumers whose primary financial institution was not a credit union, 32% said better rewards or cash back would make them prefer a credit union for their primary account. Only lower rates or fees ranked higher, at 34%.
Better online or mobile banking followed at 26%, while better data security was cited by 20%.
Among consumers who belonged to a credit union but maintained their primary account elsewhere, 39% said better rewards would make them prefer the credit union as their primary institution. Better rewards also were cited by 37% of Generation Z consumers and 36% of millennials.
More Programs Planned
According to the report, 47% of credit unions offer a rewards program, while another 31% plan to launch one by 2029.
More than half of credit unions open to outside support expect to use a partner for loyalty and member engagement programs, PYMNTS Intelligence said.
