Credit unions are seeing 12% yearly increases on new borrowers.
In times of economic and financial turmoil, it can be easy to frame banks as the bad guys, especially when many traditional financial institutions are sometimes linked with environmental harm and high rates of interest. With great power comes great responsibility, after all.
But not all financial institutions are out to make things harder for their customers –credit unions, in particular, are helping Britons to survive these troubling times.
How are credit unions helping people through the cost of living crisis?
For hundreds of thousands of households in the UK and beyond, this winter is looking especially bleak. From struggling to pay for heating to worrying about Christmas debt and paying for basics like food and clothing, individuals are being stretched to their financial limits. In response, credit unions have been stepping in to offer solutions, including zero-interest loans and prize-draw savings accounts.
Though tightening purse strings can be a way for households to prevent falling into debt, for others there will be little choice. So by offering zero and low-interest alternatives to that on offer from several big banks, credit unions are giving those struggling an opportunity to afford essentials without damaging their financial wellbeing in the long term.
As a result, credit unions have seen a 12% year-on-year increase in new borrowers opting for this financing option thanks to the affordable consumer credit on offer. The Bank of England’s quarterly statistics for Q2 2022 back up this trend, showing that adult credit union membership across the UK has continued to increase, climbing to a record 1.94m members. This shows that low-cost finance options with decent saving rates are helping people to avoid the cycle of debt.
The rise of sustainable finance
Another factor in the popularity of credit unions is the surge in sustainable finance as a viable option for people looking to save. Like many financial institutions, credit unions have taken steps towards greener finance to support the battle against climate change and promoting other sustainability issues that are seeing consumers turn away from big banks and seek out alternatives that are more in line with their personal values.
At one time, this seemed like an option that was only available to those without ‘money worries,’ who could easily research and switch banks when they found a more sustainable option. Now, this is becoming the norm. In fact, in 2021, there was a 300% rise in sustainability-linked loans, and the market for sustainable finance has surpassed $1 trillion globally.
Credit unions aren’t just helping consumers afford daily essentials like school uniforms and petrol. They’re also helping those who can think long-term about ways to make their homes and lifestyles more energy efficient and in turn more affordable to run.
While not all households will be able to afford to think this way, those that can are seeking green lending options from credit unions. These loans help to cover the cost of upgrades and retrofitting, like purchasing electric cars, investing in reuse and recycling options, and installing solar panels and sustainable heat sources in their homes.
And though credit unions have not overtaken banks as the main source of financial support for the majority of consumers, they are paving the way for green finance – which is a key growth opportunity that banks should take note of in 2023.
How fintech can help
One of the reasons why some credit unions have fallen behind banks in the race for customers has been the failure to modernise and adapt to the fintech-driven future of banking that users were well ready for.
Now, with many high street bank branches closing, it’s more important than ever that credit unions are able to adapt and offer their customers the same level of online financial management that big banking competitors have been delivering for years.
Research points to 85% of people actively preferring to use a mobile banking app than visit a branch or even use phone services. So providing quick and easy access to money, loans, and managing transactions will be a major win for credit unions, on top of their low-interest and green financing capabilities.
What Great Western Credit Union is doing
Great Western Credit Union (GWCU) has already adopted a number of fintech and sustainability offerings that are supporting existing customers and helping to attract new borrowers that will avoid long-term debt cycles. In 2021, this saw GWCU’s membership increase by 12.5% – in line with the recent reports of a surge in new credit union members.
We have helped our borrowers to save £431,000 across the year and £700,000 was reinvested into the local economy, through interest from services. We are also dedicated to the continued investment in our app and other online banking tools that make it easier for members to take control of their own finances.
In 2023, this is more important than ever as we help members across Dorset, Gloucestershire, Somerset and Wiltshire as well as our home in Bristol and Bath.