"Credit Unions: Where Membership Matters." Great slogan; too bad we cannot prove it. Many members refer to their credit union as their bank and themselves as customers.
Most members could not care less about the credit union organizational structure. In the post-Internet world there are many large, well-financed financial service competitors that beat credit unions on price and convenience. If we want to grow membership in a meaningful way, credit unions have to make the case that membership matters in ways that are important to potential members.
Building A Stronger Case
The credit union industry can make its case if it does four things. First, credit unions must be great financial institutions with a wide array of financial services, conveniently provided at competitive prices. This is the goal of most credit unions, but I believe it's the foundation from which you build a stronger case for the membership difference.
Secondly, credit unions need to innovate to provide unique, value-added services as a member privilege. For example, one credit union provides an electronic swap sheet to its members. Members can place classified ads, which other members can access, to buy and sell products and services. Some transactions lead to credit union lending opportunities.
Another credit union permits members to make deposits by filling out a deposit slip online with immediate credit to their account and mailing in the deposit. The credit union has policies to limit the risk to the credit union but reports few problems and extremely high member satisfaction.
Banks in England have popular non-interest-bearing accounts that qualify customers to receive prizes. Banks in Sweden are giving $200 unsecured loans to young borrowers. This creates very loyal customers at the beginning of their financial lives. If the loan is not paid back, the bank writes off the loan as a customer acquisition cost.
Many credit unions enter into relationships with third parties that offer members a deal on financial products and services in the form of rebates, reduced prices or greater convenience. Imagine if members did not think of their credit union as just an alternative to a bank but thought of their credit union as a dynamic cooperative that provided a selection of valuable, everyday products and services, including first-rate financial services. The credit union is seen as a trusted member buying service, with financial services but a portion of the total membership value.
A credit union could provide opportunities to its business members to market their products and services to other members on a favorable basis. If credit unions can deliver customers to businesses with little or no advertising cost to the businesses, there is great incentive to provide discounts to members and some non-interest income to credit unions. Some of these sales to members will lead to lending opportunities. It is a dynamic model full of great potential.
Thirdly, credit unions must make the member experience unique. There must be processes and people in place that makes the member feel good about their experience with the credit union. For some members, the friendly and familiar staff in the branches is enough. For others, it might be a great home banking service. At First Tech Credit Union, the members have raved about Experion Systems' Web based interactive decision making tools that the credit union makes available through its website. The system educates members on the advantages and disadvantages of financial products and guides them through the decision making process on their terms.
Unbiased Financial Advice
Finally, credit unions must be perceived as a trusted advisor and advocate. Members must have a high confidence level that their credit union will provide unbiased financial advice. How does a credit union do this? The advice must be (1) competent, (2) convenient to access, and (3) totally unbiased to the degree that a member will be referred to another financial service provider if that is in the best interest of the member. This is not a new idea. Remember in the movie "Miracle on 34th Street" when Santa Claus, who was working at Macy's, sent a customer to Macy's arch rival Gimbels for a product that better met the needs of the customer? Macy's stodgy old president was going to fire Santa Claus until he realized that the effect of customers believing Macy's put their interests first created a tidal wave of customer loyalty to Macy's.
How do you deliver competent and unbiased financial advice conveniently and efficiently? A web-based interactive decision making tool is one answer. The credit union could also provide information on both its products and competitors' products. Members will comparison shop anyway, so why not make it convenient so they come to the credit union first for information? Sometimes a member will go to a competitor for a particular product, but the member would likely have done so anyway. In some cases, the "competitor" may be a CUSO or an affiliated third party that provides alternative products not offered by the credit union. The credit union's frank and honest approach to providing financial information will bring the member back again and again for other financial advice. If credit unions want loyalty from their members, they better find ways of demonstrating loyalty to their members in ways that will excite both current and potential members.
Credit unions have limited resources and many credit unions may not have the people, the money or the market power to implement some of these recommendations on their own. This is where credit union collaboration through a commonly owned CUSO can aggregate credit union resources to help credit unions deliver real membership value.
It is time to walk our talk. If membership truly matters, we must be ready to prove it. If we do prove it, new members will come.
Guy Messick is an attorney with the law firm of Messick & Weber P.C. in Media, Pa., and is NACUSO's General Counsel. He can be reached at www.cusolaw.com, 610-891-9000 or gmessick<at>cusolaw.com.