5 Competitive Lessons Credit Unions Can Teach Banks

Putting greater stress on the personal approach can still count for something even as more consumers bank digitally. More emphasis on customers as people can pay dividends.

Looking for new insights into increasing your bank’s share of wallet and customer satisfaction? It might be worth taking a good look at the way many credit unions operate.

Mid-to-large sized banks usually can’t compete with credit unions’ tax advantages and they have investors who expect returns, versus credit unions’ membership structure. However, there are some areas where banks can take a lesson from the credit union playbook. These lessons may even pay for themselves over time in the form of greater customer acquisition, cross-selling success and customer retention.

1. Put Customers First

Because the credit union credo is “people helping people,” many credit union policies are more member friendly, rules and policies are often more forgiving, and service is a top priority. Banks can become more customer-centric by bringing customers’ needs to the forefront:

  • Learn your customers’ needs. Begin by polling your existing base – the answers you receive may help determine a strategy for moving forward.
  • Break the silos. Many front-line bankers still lack deep product knowledge across different lines of business at their institutions. This results in customers needing to talk to different people in various areas of the bank in order to get their questions answered. If you focus not on only on deepening your bankers’ knowledge but also broadening it, staff will be better qualified to answer questions, more knowledgeable about all of your businesses, and better able to engage customers.
  • Focus on the customer experience. Survey front-line staff and analyze and review call center complaints to uncover common issues that might be able to be addressed through training or the implementation of new processes, policies or systems.

2. Increase Financial Literacy

Many credit unions build upon personal connections with their members to truly become a trusted financial partner. Banks can help customers become educated about financial products and services to improve their ability to cross sell.

Banks often have substantial resources readily available to establish and implement financial literacy programs. They can provide online educational materials through their website or mobile app, host educational workshops and fairs and even partner with local schools and colleges to develop financial literacy curriculums for classrooms.

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3. Encourage Personal Connections

Credit union staff are known to have deep relationships with their customers that span years and sometimes even generations. The trust that is built up over time means customers seek out their credit unions for all their financial needs.

Banks need to make a cultural investment in training their staff in the importance of connecting with their customers. Standard training programs should convey the significance of even “the small things”: getting to know customers by name (and not just face), and even learning the names of their spouses or children. Branch staff should make every attempt to invest themselves in their customers’ financial success, learning customers’ professions, their likes and dislikes and, above all, their financial goals.

4. Make Lending Personal and Data-Driven

In the case of applicants with poor or no credit, credit unions may be more willing to work with their members than a bank would with customers. Credit unions also tend to have local expertise and flat organizations, which can mean quicker decision-making; banks with a centralized loan department in a different part of the country may not be as flexible.

Although banks may not be able to compete with credit unions on interest rates charged, they can work towards decentralizing the decision-making model. Additionally, data and technology are making it possible to base decisionmaking on the basis of unconventional criteria.

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Banks should consider integrating some of the latest non-traditional data and technology in making evaluations of potential borrowers — it could help level the playing field without increasing risk of default.

5. Develop a Long-Term Strategy

Because credit unions don’t have to respond to investor expectations, they may have a greater ability to set long-term strategies and implement programs that aim to make three-year, not three-month, improvements. Banks could focus more on investment in their people and processes, and in some cases in community involvement, which can help them gradually build up a loyal, lifelong customer base.

This one may be a bit harder for banks to emulate as they still need to balance the short-term reality of delivering profit to shareholders. However, banks can absolutely begin to develop long-term strategies and position these steps to shareholders as investments that will pay dividends over time.

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