Earlier this year, Walmart filed a trademark for “Hazel” – its proposed new fintech brand. Little is known about Hazel’s complete capabilities, but it appears the solution is tailored toward consumers who are looking for quality, digital and affordable financial services. This move underscores the emergence of large brands – particularly retailers – entering into the financial services space.
The burden is heavy upon financial institutions, particularly credit unions. Not only is there increased pressure and competition among credit unions, but retailers such as Walmart present new challenges. Today’s credit union is forced to arm itself against these larger entities and keep its members loyal, often with less resources.
A Real Threat or Fool’s Gold?
Retail giants such asWalmart have almost universal brand recognition. Add to this, Walmart’s target socioeconomic demographic favors those who also tend tohold membership with credit unions.
However, what Walmart, and other retail and tech giants are doing is not new. Many years ago, Sears& Roebuck attempted to enter the wealth management space to no avail. However, unlike Sears from yesteryear, today’s players have just as much, if not more, access to the consumer via smartphones, online shopping, etc. Yet,the credit union still has one advantage over the retailers – access to member data.
The Credit Union’s Advantage
Credit unions have credibility, access to member insights and a reputation of quality service. While Walmart has scale, credit unions can build better experiences. Credit union leaders are able to form relationships with individuals and provide more tailored and personalized service that is not attainable on Walmart’s large scale.
Take robo-advising for example. There is speculation that Hazel will include an offering that enables members access to wealth management services. This is traditionally a weakness for credit unions as the threshold for wealth management services usually far surpasses the deposits a member may have in the institution. Also, it is costly to hire and staff a full-service wealth management program within the credit union. However, credit union leaders can deploy their own robo-advising product that leverages the insights they already know about the member and create unique, personalized experiences about the member with a low dollar amount required for entry. This can be executed without the need to hire and staff an additional departmentor manage the portfolios of interested members. Services such as robo-advising empower the credit union to remain as competitive, and strategically advantaged, as it can now deliver a digital-first resource members are looking for while also leveraging the data it has for members to create a far superior experience.
The credit union should be a “one-stop shop” for members. Implementing products such as a robo-advising in into existing digital banking eliminates the need to log into a separate platform or link it with any deposit accounts. This direct integration contributes to the convenience today’s member expects.
In The End, The Credit Union Wins
Though Walmart appears to posea threat to traditionalfinancial institutions, particularly credit unions, many of the company’s perceived advantages are disadvantages. Walmart lacks trust when it comes to financial services. The retailer is known as a destination for those looking for a pair of jeans or a grocery run, but not when it comes to their finances. The retailer is also not known for having positive customer experience and, many times, a trip to Walmart leaves much to be desired.
Credit unions are the exact opposite. Credit unions are trusted community institutions. Credit unions are non-profits, unlike retailers, and actively seek to create positive interactions between member and credit union leader. Sure, Walmart can scale faster, but credit unions can build better overall experiences centered around supporting the financial well-being of the members.Bigger does not always mean better. With the right solutions, credit unions can stand up to giants like Walmart and win.
Chris Doner is founder and CEO of Access Softek, a digital banking platform provider.