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Bancography | Branch Planning, Marketing Research, Brand Strategy

Credit Unions' Achilles Heel?

If you work in financial services — and like market research data — check out Prime Performance’s 2011 Bank and Credit Union Satisfaction.

If you work for one of a handful of large banks, you probably won’t like what you see, and will probably stop reading half way through. If you work for a credit union, then enjoy this cup of kool-aid.

I’m not disparaging the study with that last statement. The study is well executed, the sample size is more than adequate. But as with much of the market research in financial services — and I am as guilty of this as anybody — data about credit unions is reported at the overall level, which obscures the differences in individual institutions.

Instead, I’m taking a playful swipe at the credit union folks who will see that credit unions are rated highest in every category tracked except for one, and pat themselves on the back, as they do every time a survey comes out that shows that they’re superior to the big banks.

There are, however, two things credit union people should take away from the survey results:

1. There is some halo effect going on here. I’m not surprised in the least to see higher satisfaction and higher advocacy (“Doing What is in Your Best Interest”) scores for credit unions. But significantly higher scores for “reps offer higher quality advice”, “reps have the expertise to handle your financial needs”, and “satisfaction with Internet banking”? OK, maybe I can give in a little on the first two of those criteria, but there are a lot of credit unions out there whose public Web sites are atrocities and whose authenticated site design and functionality is serious lacking. I suspect that many respondents are just giving their credit union a high score across the board regardless of their actual experience, as well as the opposite for some of the large banks.

2. Mobile banking scores. In the scheme of things, credit unions’ scores on mobile banking are hardly a cause for concern — 68% of respondents are satisfied, 12% dissatisfied. But in comparison to the scores on the criteria — where the percentage dissatisfied average between 2% and 3%, and the percentage are often in the mid- to high-80s — mobile banking might be a cause for concern.

Is mobile banking credit unions’ Achilles heel?

I’m coming to the conclusion that channels are segmentation tools. Sure, Seniors may use the Internet, but they still rely on branches — and the branch is probably the most influential channel impacting their satisfaction. Boomers are big users of the call center (as well as the Internet), and Gen Xers are big users of their banks’ and CUs’ web sites.

Gen Yers? Well, the mobile channel is becoming — if it isn’t already — their primary access channel. As (pretty much) every credit union in the US goes about trying to lower the average age of their member base by attracting Gen Yers, the mobile channel will likely be — if it isn’t already — the competitive battleground and point of differentiation. 

The challenge for credit unions is to look beyond mobile banking. Looking up account balances, transferring money between accounts, an even getting alerts are basic features. Every institution will have those capabilities before too long. 

What credit unions should be exploring and experimenting with are what I like to call “purely mobile” apps — capabilities like location awareness, augmented reality, and mobile payments that are available only through the mobile channel.

Public villains come and go. You don’t see too many articles about BP anymore. With time, banks won’t be the whipping boys they are today. 

Developing innovative mobile capabilities may very well be one way in which they get back into their customers’ — and the public’s — good graces. Not to mention a way for start-ups like Movenbank and Simple, or even firms like Google and Facebook , to offer banking-like products that compete with established banks and credit unions. 

—————

I hope the mobile banking scores in the Prime Performance study raise some discussions in credit unionland. In the meantime, congrats to CUs for kicking bank butt on the Prime Performance satisfaction survey.

JAN 10 UPDATE: Well, at least I now know that CUs aren’t ignoring the mobile opportunity. Check out this article titled Credit Unions Gear Up for Mobile Banking Explosion on the Credit Unions Online site. 


Ron ShevlinRon Shevlin is a senior analyst at Aite Group, a Boston-based research and advisory firm serving the financial services industry. Ron is a frequent speaker at industry events and bank and credit union strategic planning sessions. His soon-to-be released book, Smarter Bank: Why Money Management is More Important than Money Movement to Banks and Credit Unions will be published in January 2015. Ron's popular blog, Snarketing 2.0, is now a permanent fixture here at The Financial Brand. You can follow Ron on Twitter.

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Comments

  1. There is no doubt that Credit Unions (as a group; as if 7,500 Credit Unions were a single organization) score must better on virtually every Customer Satisfaction and Customer Loyalty survey. Yet, evidence clearly shows that Credit Unions (as a group) continue to lose market share in terms of Assets, Loans, Deposits and Membership (especially if the dozen or so mega-Credit Unions are excluded).

    Few Credit Unions have bothered to assess the correlation between Satisfaction survey results and wallet-share, which we believe is the truest measure of satisfaction / loyalty. We believe that ‘actions speak louder than words’ – Credit Unions should thank their members for high praise; but Credit Unions must recognize that the praise is hollow if it is not reinforced with a disproportionate share of the members’ financial business.

    Growth & profitability (a mechanism to pay for mobile banking, exploding regulatory oversight, real member dividends, etc.) are nowhere to be seen given the check-the-box member acquisition tactics. Unfortunately, the reality is that Credit Unions appear to be falling further and further behind. Most Credit Unions have been shrinking (read: http://bankblog.optirate.com/q1-2011-credit-union-performance-update-are-cus-performing) and it hard to see the catalysts that will change this trend.

  2. Beth Zimmerman says:

    You can take all of the swipes you want at us, but we got Denise Wymoe and the banks dont. Denise is the smartest credit union person in the world and she works for the Del Norte Credit Union where she is getting the loyalty of the New Mexicans and the Old Mexicans too. The newspaper Credit Union Times said that she is a Women to Watch so you’d better watch her. Some people would rather watch paint dry but not me. Someday Denise will be in charge of a credit union and then the banks better watch out on account of Denise has lots of good ideas but her bosses dont always listen to her.

  3. BZ: Just curious… how much does Denise pay you to post comments like this one?

  4. Beth Zimmerman says:

    Denise dont pay me to post comments on the blog. I do it for free. We are all lucky to get advice from Denise Wymoe on account of she knows a lot about credit unions and she likes to share what she knows with other credit union people. Denise says that credit union people have to share their ideas with other credit union people. She hasnt asked me for any of my ideas though on account of she doesnt know who I am personally.

  5. Denise should pay you — to use proper grammar and punctuation. I get spam comments from Russia written in better English.

  6. Ron,

    Great post about mobile banking. I appreciate that you didn’t just drink the Kool-Aid, but rather dug deep to see a red flag for credit unions. The mobile banking and youth issue go hand in hand. If we are not careful, credit unions will die when our old members die. Measuring satisfaction is useless: loyalty is far more important. We can’t expect loyalty without the right products, of which mobile will soon be (if it isn’t already) primary.

    Mark

  7. Mark: Thanks for your comment. One reply, though: I don’t agree that “credit unions will die when our old members die” and I’ll tell you why: Because there is a meaningful (and I think, growing, although I have to way to measure it) number of young professionals involved with managing, leading, and running credit unions who won’t let it die. Few industries have that kind of commitment and support from young, emerging execs.

    To a certain extent, it’s this group that I think I’m often writing too. It’s great that they’re committed to credit unions. But I really want them to see that there are real management issues to deal with, and don’t want them simply drinking the kool-aid that some people in the CU blogosphere write about.

  8. Is Mobile the road to customer loyalty for Banks or Credit Unions? Did bill pay or direct deposit (for the minority of Credit Unions that offer these services) establish loyalty? At this point, offering mobile is not much more than playing catch up. I don’t mean to say that mobile is not important … it is a very important channel – but certainly not something that will drive loyalty. At this point, mobile is just ‘table stakes’ — it is required to have the right at the ‘table’, to be “competitive” which is to say, mobile is required to just be average Bank or Credit Union. Mobile will not drive loyalty much like the Branch does not drive loyalty (if it did, we wouldn’t be searching for loyalty through other channels).

    Loyalty is not a function of a feature, product or service. Loyalty is created over time, and especially after a challenging experience where the customer or member feels like they were treated appropriately. And loyalty is a two-way street that requires Banks and Credit Unions to be loyal to their customers. In other words, loyalty is earned — the challenge is that most Credit Unions (and Banks) have failed to EARN their customers’ loyalty.

    Pushing a product, a feature, or worse, patting yourself on the back just because you exist is not the most elegant or effective approach to winning loyalty. Credit Unions and Community Banks will be searching for loyalty to the next 100 years unless these simple truisms are incorporated into their corporate DNA.

  9. Serge: Couldn’t agree more with you regarding member loyalty. But, in contrast to online banking, bill pay, etc. before it, I do think that mobile “banking” will play a bigger role in customer (member) acquisition going forward. By the time OL banking/bill pay hit the scene, boomers and seniors were fairly entrenched in their ways, and even though many did change their behaviors, those technology-based capabilities never became the primary reason for selecting or switching providers.

    With mobile and Gen Yers, however, that might be very different. Mobile capabilities may become a more prominent — if not the most important — reason for selecting a financial provider.

    The other thing I would say here is, that while you’re absolutely correct about the things that a bank or CU needs to do to drive loyalty, increasingly they’re going to have to do those things using the mobile channel.

  10. Ron – Agree that mobile will become an important channel, although I believe that it will be a few years before that is the case (today, mobile functionality is limited and in many ways fails to offer a compelling value proposition. The exception to this is RDC.)

    Also agree that Gen Y is much more interested in mobile and may be tempted to switch (for example, 90k person wait list for @Simplify). The problem is that most Community Banks and Credit Unions are unable to generate a profit from this consumer base today and for the foreseeable future. Which then begs the question – why bother?

    Community Banks and Credit Unions should be entirely focused on consumer segments (hint: not GenY) that are capable of driving growth and profitability today and for the next 5-10 years.

  11. At $53 million in assets we are considered a small credit union by many. Don’t be so snarky about multiple platforms. Not everyone has an iPhone. There are many areas where text-based information flows better than data. We offer mobile access (text, WAP and iPhone app) plus a shortened URL to online access because some phones handle that UI better. A black and white world would be easy…we work really well with shades of grey.

  12. Fred: Thanks for the comment. I’ll make you a deal: I won’t be snarky about multiple platforms if you (and especially other CU people) quit patting yourselves on your back telling yourselves how wonderful you are every time some firm desperate for publicity publishes the results of a survey showing CUs with higher member (customer) satisfaction than the big banks.

    And while I don’t want to appear to be picking a fight or argument (or sounding disrespectful), I don’t buy the “we’re small, so we can’t do [fill-in-the-blank]. Look no further than Mt. Lehman Credit Union in [G*d-knows-where western] Canada to disprove the “small can’t do ___” excuse.

    I know full well that not everyone has an iPhone. I don’t have one. I don’t even have a smartphone. But “mobile” is a lot more than just providing account balances and basic information. It’s about using the inherently unique capabilities of the technology to develop new services and member service capabilities.

  13. Hap Landies says:

    Ron, I’ve been working in credit unions for more than 30 years. I know hundreds of C-level officials, and I disagree that there is a “meaningful number of young professionals involved with managing, leading, and running credit unions…..” There is indeed a cadre of outspoken young people on the blogosphere and around the watercooler, but from what I’ve observed, they are more junior level people from credit union marketing and training departments, and the numerous marketing agencies that want to sell them stuff. They are indeed a rah rah bunch, but they aren’t leading their organizations now, nor will they be leading them in the future. The path to the corner offices doesn’t go through the marketing departments of credit unions. Never has and never will.

    I should add……..thankfully for us.

  14. Ron,

    I really like the guys at Mt. Lehman. Even though they’re in BC, they are well situated demographically…location, location, location helps in the real world and cyberspace.

    The only thing I can’t do is build it and wait for folks to come.

    Therefore I rely on our partners. For example eventually our P2P provider will offer a mobile platform one day.

    Plus a lot of mobile devices handle web-based services well. Not perfect but pretty well.

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