A paradox haunts me, and it probably haunts you too.
People love credit unions. They rave about the care and the service and the honesty and the people and … well, you get it.
But satisfying existing members is a very different proposition from attracting new members. That’s the dynamic we examined in one of my favorite Filene Research Institute reports, “Big, Small, or Online? Young Adults’ Evolving Financial Preferences.”
Rather than pretending that credit unions are very different from community banks in the eyes of most consumers, author Rob Rubin aims at a more telling segmentation among the largest banks, small institutions (like credit unions), and increasingly attractive online providers such as USAA and INGDirect (recently gobbled by Capital One).
The findings force us to come to terms with the idea that for young consumers convenience, whether geographical or electronic, is king. Big bank customers may hate fees, but they don’t defect en masse because the branch structure, ATM network, and mobile services work so well.
More than two-thirds of big and regional bank customers originally chose their bank because of the proximity to branches and ATMs. Only 7% of them stay for rates, and less than a quarter stay because of their bank’s reputation.
Convenience is king.
And what about electronic convenience? Online bank customers say they believe they have the best combination of features and fees (68%) and that online services suit them best (68%).
These opinions far surpass those offered by credit union members and big bank customers, and the strength of these opinions shows that “personal” service really means “suitable” service. Often, that service is best given online.
It’s a different kind of convenience, but for simple savings, checking, and credit cards, remote delivery is extremely convenient.
In the face of the convenience competition, what’s a credit union to do? Fight back.
Good digital channels are not cheap, but they’re a lot cheaper than chasing the “convenient” badge by seeding your market with branches and branded ATMs. And this research suggests that you’re not going to entice many big bank customers just because you offer better rates.
Getting good at digital convenience is a strategic project, not just a tactical one. But Rubin offers some ways to start:
►Develop technology products internally instead of relying solely on third-person solutions.
Applications that mash data from in-house resources are more doable than applications requiring you to develop and maintain new data. If this focus requires hiring a great technologist, it’s money strategically spent.
►Scrap plans for the new branch and create a virtual branch instead. Gen Y consumers will be more likely to join (and stay at) your credit union on the basis of the features of your accounts and the electronic services you provide.
What if you thought about your online presence as a virtual branch and invested accordingly? This approach doesn’t have the same kind of return on investment as a branch build, but digital channels should receive just as much attention in this brave new world. Maybe more.
►Fix your online storefront and then dive into social media. Too many credit unions insist on chasing Facebook fame now, even if their online storefront needs work.
Make sure you can accept applications and open accounts, and that you’re generally presentable before trying to snare elusive digital users.
The paradox will only resolve when credit unions catch membership growth and a new generation of satisfied members with a value proposition that matches fast-growing online banks.