Are Credit Unions Falling Short Of New Member Expectations?

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Consider the two following pieces of news that crossed my desk yesterday:

  1. The December 2012 ACSI Customer Satisfaction scores for financial services revealed that credit unions scored higher than banks (as a whole) for the fifth straight year. However, credit unions’ score dropped from 87 to 82, a 6% drop, from the previous year. This comes was after a seven point gain in 2011 over the 2010 score.
  2. NerdWallet analyzed data published by the NCUA and found that half of all federally insured credit unions experienced an increase in membership from June 2011 to June 2012. According to the NCUA, credit union membership ranks grew by 2.1 million from October 2011 through September 2011.

My take: This raises some interesting questions. What caused the drop in credit unions’ satisfaction ratings in 2012? And, for that matter, what caused the huge jump in 2011?  Why would membership ranks continue to grow in the face of declining satisfaction? Would membership have grown even faster if satisfaction levels had remained at its 2011 level?

I can come up with two competing schools of thought to explain what’s going on:

1. Satisfaction rankings are worthless. Did credit union member service levels fall off a cliff (pun intended) over the past year? Did credit unions look back at their perceived Bank Transfer Day success and say “Great! We’re done. Don’t have to try anymore!”? Doubtful.

The more likely explanation is that the satisfaction scores don’t reflect just members’ satisfaction with their credit unions, but incorporate broader perceptions about banks and the financial services industry as a whole.

There is insufficient statistical history to draw on, but it appears that there may be an inverse relationship between CU and banks’ scores.

In 2009, CUs and banks’ satisfaction scores remained unchanged from their 2008 levels. In 2010, as banks went up a point, CUs went down four points. In 2011, however, banks declined a point, and CUs wen up seven points. This year, banks went up two points, and CUs lost five points.

The drop in credit unions’ scores in 2012 make no sense. As banks were eliminating free checking and imposing fees, credit unions held their ground. Based on the research done by Aite Group and Filene Research, credit unions significantly increased their investments in online and mobile offerings in 2012.

So how do you explain the drop in satisfaction score? Either customer satisfaction scores are useless, or….

2. New member expectations aren’t being met. Tom Glatt likes to argue that tCU membership gains aren’t exactly evenly distributed across CUs, and the NCUA data, which shows that only half of CUs experienced gains, bears that out. But that doesn’t negate the fact that over the past 18 months, a lot of Americans have become new credit union members.

Why? I’d argue that in many cases it was less about the superiority of a particular credit union, and more about the inferiority of the bank they were fleeing.

And what did they find when they started interacting with their new credit union?

They found really really friendly, helpful people — but people who weren’t that good at helping them make financial decisions. They found an online and mobile experience that, although the CUs were investing in them, were inferior to what they had at their big bank. And they found that, despite all the hype, credit unions still charged overdraft fees, inactivity fees, and a host of other fees.

In other words: Their expectations weren’t met. And the result was lower satisfaction scores in the ACSI study.

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Bottom line: If you’ve got more theories to explain the drop in satisfaction scores, I’d love to hear them. As for my two competing theories, I strongly lean to one of them as the right explanation. But I’ll play Fox News here — I’ll report, you decide. 

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