Credit Unions VS Neobanks: Taking Down the New Contender in the Financial Ring

Credit unions have competed against traditional banks for a long time. It hasn’t been easy, but credit unions have been able to create a niche for themselves with plenty of room to grow. However, a new contender has entered the financial services ring: Neobanks. They have begun making moves, and American consumers are taking notice, so credit unions will need step up their game to take on these new competitors.

What Is A Neobank?

A neobank, according to NerdWallet, is a tech company that provides banking services through a mobile app or website. They provide services such as money transfers, direct and mobile check deposits, and transaction and savings accounts, but they usually don’t offer much else. They are also strictly digital, so consumers can manage their banking on their phone, tablet or laptop with ease. Additionally, fees are often lower, unless the consumer chooses to use the neobank’s premium offerings at very competitive rates. Some consumers may see joining a neobank as a way to save more money than they would at a traditional financial institution.

How Do Credit Unions Compete?

In some ways, neobanks are borrowing tricks from the same playbook as credit unions. Like credit unions, they reach out to certain people to create specialized member bases, and some of them refer to users as “members.” Because neobanks are purely digital, they have been able to get ahead of credit unions in the online banking space technologically speaking, and the COVID-19 pandemic has given them a tremendous boost.

If credit unions are to give neobanks a run for their money, up your digital game. It’s not just about the rates and fees; offer a solid, streamlined and user-friendly digital experience that engages members and builds trust. While more than 100 million members trust their banking to credit unions, they must also trust credit unions will have the tech chops to keep up with members when and where they are.

While more than 100 million members trust their banking to credit unions, they must also trust credit unions will have the tech chops to keep up with members when and where they are.

Competing on rates is a real problem – these neobanks can easily outprice credit unions because of their lower cost structures. Credit unions also must inform people of their value as a socially responsible, not-for-profit financial institution that works with people just like them and doesn’t treat members as just another number.

There’s one more thing credit unions have that neobanks don’t: Credit unions are not nameless faces hidden behind a screen. They are not just an app or a website. Credit unions comprise real, empathetic human beings who want to help people with their financial needs, so don’t be afraid to put an emphasis on that human connection!