CUs Serve Only One Master

Their exclusive focus on member needs is still CUs’ best competitive edge.

July 1, 2011

What’s the single most enduring factor giving credit unions a competitive edge? Is it low fees and competitive rates? Their not-for-profit, tax-exempt status? Member service skills?

While all these factors play into the equation, if credit union CEOs had to boil it down to one thing, many say credit unions’ biggest competitive edge is their singular focus on members.

Build your brand

“With every decision we make, we try to do what’s best for members,” says Bob Bruns, president/CEO of $260 million asset Charlotte (N.C.) Metro Federal Credit Union. “With the myriad things we’ve implemented, we always keep members’ interests at the forefront.

“We serve only one master—where our competitors serve both shareholders and customers, whose interests can be at odds,” he adds.

Market forces influence strategies, he acknowledges, especially in bank-heavy Charlotte, home of Bank of America.

“About a third of our market is bank employees or their relatives, so we have to be keenly aware of offering better rates than local banks, or we’ll lose members—what’s the point of belonging if we don’t offer a better deal?

“We do our best to cross-sell and build awareness of the value we provide,” he continues. “And we do more TV advertising (including Super Bowl ads) than most other area credit unions, to attract new members.”

His goal is to build the credit union’s brand in greater Charlotte, so consumers know anyone can join. “The first hurdle is to get them in here. Then we can cross-sell and educate them as to our advantages.”

Charlotte Metro Federal’s tagline, which appears on its marketing materials, is “Like a bank, only better.”

“People in this banking town need to understand we have everything banks do, with better prices and service,” Bruns explains. Often this sparks conversation. “They want to know how we can be better, and it’s an opportunity to educate them.”

Credit unions’ tax-exempt status isn’t their biggest advantage, he emphasizes. “It’s an advantage, but quite often it limits us politically as to how we can raise capital. The only way is through net earnings, and in light of the corporate credit union assessments, it’s somewhat of a hamstring.

“Most banks aren’t paying taxes anyway,” he adds. “They’re using loopholes and writing off losses. Bank of America paid zero taxes last year.

“So credit unions are stuck with slow growth. But earnings will get better as the economy improves, and that’s what drives our capital.”

Listen and respond

“Even though there are some large credit unions, we’re small enough as an industry to listen and respond to members,” says Bob Harvey Jr., president/CEO of $561 million asset Seattle Metropolitan Credit Union.

Credit unions can’t compete with big banks on price, he says. “Products are commodities, and now financial services are, too. It’s about how you treat members, overall.”

That’s even more important as charters expand to serve communities. “We can learn about our communities and their needs and meet those needs,” he says. “It’s still the one-on-one service that matters.”

Each community has its own culture and values. “We have to keep track of those and talk to employees about the Seattle-area culture, what we do and why we do it, and why residents would want to choose a credit union,” he notes.

Seattle Metropolitan reaches out to the community by inviting business development groups to the credit union to learn about its mission and message, conducting lunch sessions at select employee group locations, and extensive involvement in community initiatives.

“We tell people to stop banking and start believing,” says Harvey. The message to potential members: “You, as a consumer, can do better with the credit union to help you prepare for your financial future.”

Many new members are referrals, he says, and it can be a challenge for credit union staff to make them aware of what’s available and convince them to move all their accounts to Seattle Metropolitan. “We hear horror stories about members still dealing with horrific fees or onerous account terms at other financial institutions,” says Harvey.

The solution isn’t to com­pare credit unions to banks, but to talk about what credit unions stand for, he says. “People can get checks any­where, but we’re the ones out in the community learning about people’s needs and how to meet them.”

Credit unions have to remember their roots—who they take care of and why, he says. “As soon as we become too profit-oriented, we become another faceless financial institution.”

Be sincere

It’s not enough to say you focus on members; you have to be sincere, says David Doss, president/CEO of $1.3 billion asset Arizona State Credit Union, Phoenix.

“During an economic crisis, we try to make sure we focus as much on helping members get through it as finding our own way through as a financial institution,” he says. “We’ve been here for members in need when other financial institutions turned a cold shoulder.”

During the recent recession, Arizona State renegotiated loan terms with members—including roughly 250 mortgages—and had default rates less than half the national average. “We’ve tried to be proactive and approachable, and we’ve helped members through everything from lost jobs to threats of losing homes,” he says.

Since employees set the tone with members, Doss tries to meet individually with all new associates. “I talk about our culture, and that our whole purpose is to serve members,” he says.

Since Arizona faced an especially challenging economy, credit union leaders looked at improving efficiency and retaining the member value proposition, rather than increasing rates or fees.

“At the executive level, we shifted our focus from day-to-day issues to more of a concentration on stra­tegic planning,” Doss explains. “We’re becoming more nimble at product development and spending more time on growing our business.”

The credit union redesigned its organization to a member relationship management structure. “All member contact services—ATMs, home banking, our call center, lending, and sales—are now aligned with our retail banking group,” Doss explains. “It’s like the tip of a spear, with the rest of the organization aligned to support the group and fulfill its goals.”

With a consultant’s help, the credit union ran staffing models to improve efficiency and decrease costs. “We identified areas of the organization not meeting expectations, eliminated or reduced some areas, and put our focus back to where it would benefit members more,” says Doss. “We added technologies such as remote deposit capture to benefit members.”

The credit union aims to deepen member relationships, communicating to them, “If they have their accounts with us instead of at multiple financial institutions, we can help them add hundreds of dollars back into their wallets.”

Many credit unions are undertaking similar initiatives, he notes. “It becomes a matter of focus, priority, and execution. It’s easy to get distracted by the economic crisis, but we have to stay focused on members and ensure we’re adding value that attracts the members of tomorrow.”