1. Ignore Customers at Your Own Peril - Credit
Published on January 13, 2017
Ironically, with over 20 million Americans that are considered "unbankable or underbanked" the
number of credit unions has fallen by over HALF in the past decade or so. The reasons are many.
One critical fracture is between credit unions sluggishness to evolve and adapt to the vast amount
of access to data and avenues to reach consumers.
One example, Credit Unions have their best member hikes in the first quarter of every
year...driven by gifts, bonuses and such. The average credit union member is 47 years of age and
female. And yet, the beginning of the year for credit union campaigns rarely changes! The
mantra to drive LOANS! LOANS! and yet... lending is highest in age groups between 25 and 45.
Members are less likely to deposit their bonus and Christmas checks and immediately try to
figure out about a loan. Where are the offers around savings? Retirement Planning? Effective
Budgeting? Vacation Funds? etc.
Credit Unions sprang out from the need to provide community banking in areas where banks
were either underserving these markets or traditional banks inadequately addressed localized
needs. As “Special Employee Groups” (SEG) grew, these groups represented significant markets
and many had unique needs. Today, there are over $1.1 trillion in assets being held by a little
over 6,300 credit unions.
2. In the late 1990’s, there were over 15,000 credit unions across America. Less than half of those
still exist today. Active consolidation helped smaller credit unions to operate more efficiently
and offer more services. Others simply shuttered their doors under pressures they could not rise
In this millennium, the challenges have grown significantly. Some relevant data points:
· 75% of the U.S. wealth is in the hands of a population averaging 67 years of age.
· Lending is the key and most vital source of traditional credit union income.
· The average credit union member is a female age 47 years of age. This is important since
the demographic that actively borrow are between 25 and 45 years old.
· The average credit union member takes advantage of 2.5 products of the credit union
· Lower interest rates have brought a double edged sword to the equation – as interest rates
begin to ratchet upward…many credit lenders may be over extended in low interest rate loans.
· Non-interest income sources have grown – good for the credit union but reflects too much
mimicking of traditional banks and members could be seen to resent it.
· Over 65% of credit unions have under $35 million in assets
· The key demographic has dramatically changed. Many are delaying age to marry to much
later (many closer to 30); where only 9% used tom come from single parent homes, today this
number is over 34%; many choose to avoid a consistent income source and steady job (freelance
more); have no healthcare; savings is very low on their list of priorities; very few have any
financial awareness about simple things like managing a check book and/or how to differentiate
between APR and quoted interest rates; few value the meaningfulness of a strong credit score.
· For an “all digital” generation that expects to bank anywhere – anytime – by a multitude of
devices – many smaller credit unions struggle to even meet the lowest sets of digital
As if this challenging market landscape weren’t enough, credit unions are plagued by numerous
other drivers. Some of these include: (Priorities not in a particular order)
3. PAIN POINTS:
Member Acquisition and Retention: The first quarter of each year is the most active
as the period when most folks receive business bonuses; tax returns; and holiday gifts. Credit
Unions are viewed as places to “park money out of the way.” Due to a number of things, a credit
union is a secondary consideration well after a retail bank. (Convenience of locations; digital
services; ATM access; branding & awareness and more)
Regulatory Compliance: In the past few years there have been over 190 new regulations
that while directed at the retail banking sector impact credit unions. Dodd Frank created
numerous new rules and a great number of them are still being defined and awaiting execution.
All of these new rules are covered in over 6,000 pages. Some of the rules include compliance
with TRID; CFPB; SOC1; HMDA; NAFCU; NCUA and many others. IRA rollovers have been
impacted and the “Know Before You Owe” places a great deal of impetus on the lender to meet
certain requirements. Many credit unions, even those with a staff of as few as 15 to 20 are being
driven to hire 1 or two full time staff people simply to manage compliance. This places a
significant impact on a credit union since these are not, typically, customer servicing employees
and represent pure cost. Additionally, loan document convergence and closing costs have risen
over 250% due to many of the new rules…adding as much as $1,000 to loan closing costs in
Digital Transformation: As mentioned above – the target market wants to bank
anywhere – anytime. This represents investments in technologies; integration costs into existing
systems; new support costs; and introduces new cyber risks. Where many credit unions believed
that online services would cut down on in branch traffic, they have since discovered that this did
not happen. These are two very different user groups – it is more likely that some digital users
may use the branch, from time to time, but not likely a great number of existing members, happy
to enter a branch, will migrate to online services. As of 2015, only 58% of credit unions offered
mobile and/or online services. Of all credit unions, 69% of credit unions report that IT
investments are a top priority (expecting service efficiencies; regulatory assistance; retention;
opportunities to cross sell) What many are not ready for is the amount of user information that
will be available for relationship building that an online presence can deliver to the credit union.
4. Social Media alone is a key to the primary demographic. In a great majority of the cases
surveyed, credit unions will either assign social presence as a part effort for a marketing
coordinator or promote someone from within (up from teller or member events) to be in charge
of social media. Without experience and training, and senior executives who don’t appreciate or
understand this area, this means most are satisfied to post member recipes; update the latest
member promotions and car sales events. .. merely 1-3% of the actual potential in a digital
world! (It should be noted that Social Media has created a NEW TRUST – a well-respected CEO
could post a paragraph on any subject but several postings from total strangers that contradict
him can carry more weight with the reader!)
New Competition: FinTech firms that are online ONLY banks and financial services firms
and peer to peer lenders are growing rapidly.
Less regulated in some cases and very simply communicated terms are their differentiator.
Payday lenders are also growing exponentially despite the fact that their fees are ridiculously
usurious – this market doesn’t care about long term – they have immediate short term needs and
shrug off the cost in exchange for convenience. The younger market has proven that loans are
considered primarily on the monthly payment with little consideration for the length of the loan
payback and even the APR! The common attitude is that if circumstances change – they will deal
with it then.
The point? For example…too many consider social media strategies as "a hobby" and resource it
with talent that treats it as such. Where’s the detailed schedule? Messaging? Target profiles? Call
to Action? Campaigns? User Stories? Interactivity? – and it isn’t just Social Media – the
evolution in Mobility. Security. Big Data. Flexible campaigns. A greater diversity of
offers...personal budget controls; financial planning; ... how about reviving the old "lay away"
idea and Christmas Club? - with something more like “Your Vacation Club Account?”...set aside
monthly monies to ensure that by May - your trip to the Cabo San Lucas is covered! How easy
would it be to set up the online account and every deposit sends a new email about things
happening – places to see- places to eat – where you are going? Your credit union is actively
supporting your individual goals by reinforcing your decision to save for the trip?
Perhaps, there are opportunities to support Credit Bureaus with the onslaught of new regulations?
Today’s Credit Unions need to be more creative and innovative with their go to market tactics.
NOT more “business as usual” - but assistance in managing their risk of becoming irrelevant.
While credit unions were slated to grow at 3% per annum pre pandemic, truth is they
shrank, on average, 7% during the pandemic. Growth initiatives have been replaced with
retention campaigns. With branches closed, new points had to be created to include
video tellers. Classic credit union members focus on convenience and customer service.
A “person” to ask questions of and get advice from. “Going Digital” has meant hosting
web chats; nurturing emails; testing campaigns; social media (active – not as a sideline
5. for a teller with left over time!) and ongoing educational resources to enrich member
knowledge and awareness.
Additionally, a greater focus on core systems has created a growing need for impactful
data through analytics. Targeting and creating value are now critical to retention and
cross selling, as well as, expanding the member field. Building active personas is critical
to knowing “WHOM” you seek and knowing where and how to reach them. New
services are being added to include digital signatures; mobile banking; credit restoration
services; and increasing indirect channel relationships.
The critical key is to evolve beyond brochureware presentation of your offers to benefit
led and driven content. With 72% of banking now being digital, be prepared to meet the
member needs to access services anywhere,…any time… easily.
Acquisition cost for new members can run between $150- $200 per new member – so,
why not offer incentives to people to bring new members for a bounty of, say, $100!?
Promote a “skip-a-payment” up to $XXX amount once per year for a new member and
There is so much more to a community banking resource – highlight, unlike the major
banks, you are non profit and thus can pay more for deposits and charge less fees and
There is so much more unrealized potential…..