Credit unions are going old school by increasing the use of text messaging to keep up with members.
While the feature isn’t new, many U.S. businesses are behind the curve in terms of using short message services, or SMS, to communicate to customers. But that is changing, and credit unions are getting in on the action, largely to confirm members’ identities when they look to log into an account.
"Who wants to get a phone call to remind them that their loan payment is overdue when they could get a text that even includes a link to quickly and efficiently resolve the situation?" said Tom Sheahan, CEO of Red Oxygen, a San Francisco company that provides SMS solutions.
Most consumers are already used to getting texts with messages informing them that deliveries are on the way or that a car is ready to be picked up from the mechanic.
"They aren’t always conversational, sometimes only informational, but business SMS can cut through the clutter," Sheahan said.
A few years ago, there was concern among financial firms that consumers didn’t want companies reaching out to them via text — phone calls and emails seemed to be more professional. But as people are getting busier, and the world moves faster, texting has become more acceptable because of its speed and response rate.
People are more likely to read the message quickly — within moments in most cases — and respond.
According to research from OpenMarket, 83% of millennials open SMS messages within 90 seconds of receiving them. Previous research from Gartner indicated that 90% of all people read texts within three minutes of receiving them, and that SMS boasts a 98% open rate, much higher than email.
Text and voice are really gaining traction because of the advancement of digital channels that occurred during the pandemic, said Anne Legg, founder of THRIVE, a data education and consulting firm. Many new digital bankers are using mobile banking for the first time and are really enjoying it.
Texts and chatbots are becoming convenient ways for credit unions to connect with a variety of members.
"I see it commonly used inside of the mobile banking app,” Legg said. “Voice is really going to be a game-changer. Just think about banking using Alexa or Siri connected to your credit union mobile app."
From a marketing standpoint, Sheahan said texting is clearly effective, which is why more businesses are deciding to use it. Credit unions can use texting to inform customers of loan offers, branch openings and customer referral bonuses.
Some are even using texting as an alternative to, or supplement for, online chat or a customer service phone line, Sheahan said. Using texting as a customer support tool can offer members another touchpoint for communication that is often faster than alternatives.
Jason Rochefort, assistant vice president of customer advocacy for Connex Credit Union in North Haven, Connecticut, said texting is a communication mode that members expect.
The $788 million-asset credit union uses text messaging primarily for new account opening — thanking members for their business and giving out a number to call or text if they need help.
Connex also uses text for problem resolution. Rochefort said it is a convenient way for members to communicate with the credit union and vice versa, and to resolve an issue for a member who may be busy at work and can’t take a call.
"At Connex, we wanted to make it as convenient as possible for our members to interact with us. In addition, text messaging has a read-rate that is extremely high,” Rochefort said. “As such, it is much more effective with actually reaching our members compared to phone calls, emails and hard copy mailings.”
Bob Morgan, CEO of the $838 million-asset North Country Federal Credit Union in South Burlington, Vermont, said the credit union does not yet have a texting solution, but only because it has been focused on other priorities.
"We have lots of projects in flight at the moment, but [SMS] is a real thing with member services and collections implications," Morgan said. "Many members will engage with text rather than email."
Red Oxygen has worked with more than 100 credit unions in some capacity. It has 17 active credit unions clients, with an additional 20 in trial phase.
Sheahan said credit union clients tend to be small and midsize and they often have less hoops to jump through to get new software and processes implemented compared to bigger counterparts.
"We know that some of our software programing clients resell our API service to implement SMS capabilities in larger credit unions’ existing software," Sheahan said.
Sheahan said one midsize credit union client with 19 branches is sending out 450 codes each day. A smaller credit union with only four branches is sending out around 9,600 messages annually.
Most credit unions utilize texts only with current members rather than to bringing in new members due to opt-in permissions that are required for texting, Sheahan said.
But how those credit unions are utilizing the messages can vary greatly.
"There’s significant usage of text messaging for security purposes, like verifying your identity through a text message code when attempting to login to your account," he said.
