Overwhelming Majority of Americans Would Break Up With TheirCredit Union After a Crisis
Financial Institution Crises Could Mean Massive Loss When It Comes ToMember Retention
For any organization, experiencing a crisis is inevitable. It will happen. But for a financial institution, the consequences may be extreme – even detrimental.
According to a recent consumer survey, an overwhelming majority of Americans (84%) say that they would leave a financial institution if it experienced certain crises, with the number one deterrent being FDIC/government violations.
Data breaches or cybersecurity fraud are also a top crisis, ranking as the second biggest organizational emergency that could cause credit unions to lose members. In fact, more than 2 in 5 Americans say they would leave a bank if it experienced this.
Other crises that would impact member retention, but perhaps less so, include:
- FI was part of a discrimination lawsuit - 27%
- FI employee was involved in an organizational misdeed – 22%
- Bank did layoffs/closed branches – 21%
- FI received negative reviews/comments on social media – 17%
- Local branch experienced a robbery – 11%
- Other – 5%
The survey was conducted online in October 2020 by The Harris Poll on behalf of York Public Relations, garnering responses from 2,053 U.S. adults age 18 and older.
Over Half Of U.S. Consumers Would Leave Credit Union After A Compliance Violation Cited By Government
As the number one deterrent, over half of U.S. consumers (56%) would end a relationship with a credit unionif itwas cited by a government regulatory agency for non-compliance.
Older generations seem to be turned off more by FI’s committing government violations more so than younger generations, who are more likely to be concerned with social violations. Baby Boomers (ages 56-74) are more likely than Gen Z (ages 18-23), Millennials (ages 24-39) and Gen X (ages 40-55) to say they would leave a financial institution if it hadgovernment violations (66% vs. 44%, 46% and 58%, respectively).
Conversely, younger generations are more likely than Boomers to say they’d leave a financial institution if an employee was involved in an organizational misdeed (26% each of Gen Z & Millennials, 23% of Gen X vs. 16% of Boomers) or if the FI received negative reviews/comments on social media (25% of Gen Z, 23% of Millennials, 17% of Gen X vs. 9% of Boomers).
Additionally, Gen Z and Millennials are more likely than Boomers to say they would drop their credit union if it was part of a discrimination lawsuit (39% & 30% vs. 21%).
Government Violations & Fines Continue to Surge
How likely is it for FIs to be cited for violations? Well, it’s increasing.
Since 2008, regulators have imposed more than $253 billion in fines, creating severe strain for many institutions. In the 15-month period through 2019, regulators fined financial institutions a record $10 billion from anti-money laundering violations alone, according to a report from Fenergo, a European startup that makes software to help financial institutions detect illegal transactions. Compare this to the total of $26 billion from 2008 to 2018 – an entire decade. Fenergo expects these numbers to be higher for 2020.
In extreme cases, regulators will shut down financial institutions completely. During the Great Recession, this was the fate of more than 500 banks and 100 credit unions. Since 2010, 213 banks have closed, however, most were through acquisitions. For credit unions, 113 have closed or merged over the last ten years.
In addition to 56% of U.S. consumers citing they would end a banking relationship following non-compliance citations from regulators, credit unions also risk losing members following a merger, regardless of it being a “business as usual” acquisition or sold with government assistance.
According to a Gallup poll, FIaccountholders leave at a much higher rate following an acquisition at 8% compared to other non-banking organizations at 5%. However, that rate is higher (10%) if the acquiring institution has lower member engagement – twice....-->
Financial Institution Crises Could Mean Massive Loss When It Comes ToMember Retention
For any organization, experiencing a crisis is inevitable. It will happen. But for a financial institution, the consequences may be extreme – even detrimental.
According...