The “Order Taker” Service Culture is Killing the Credit Union Industry
Credit unions lost 25% of their primary financial relationships in 2020. Here is how to fix it.
2020 was an extremely challenging year for everyone. Never have the lines of professional and personal life been so blurred. In March, we all got a rude awakening of the reality of the pandemic and its impacts on business. Everyone’s world was flipped on it head as we struggled to keep the credit unions open with closed branches, quarantined employees, and a remote workforce, all while trying to be the daycare and schoolteacher too. It’s a wonder we made it through.
While the craziness of 2020 still lingers, I think it is safe to say we all watched the new year come in with optimism and a feeling that better days are ahead of us. And they are. America is powerful and resilient. As we hold fast to the foundational principles of freedom, respect, service, and a willingness to come together to do hard things, we will emerge stronger than ever.
As challenging as this year was for individuals, it has been equally challenging for the credit union industry. Yes, credit unions that were positioned and prepared benefited greatly from the mortgage refinance boom and from PPP loans. However, a concerning shift in primary financial relationships is taking place of which credit unions need to be aware and take seriously.
A recent report published by Raddon Research titled, “The 2020 Challenge: Primary Status and Demographics in the New Decade” shows that the primary financial relationship is on the move away from credit unions and community banks to the mega-banks.
Raddon reports that in 2018, 21% of consumers identified a credit union as their primary financial institution. That is a slight slip from its highest point in 2013 when it peaked at 23%. Considering that only 33% of Americans are credit union members, a number in the twenties is quite acceptable. However, since 2018 the percentage has dropped significantly and appears to still be falling.
Raddon reports that in 2020 only 12% of consumers identified a credit union as their primary financial institution. That is a 25% drop each year since 2018. Where are these consumers going? They are going to Mega-banks like Bank of America, Chase, and PNC which have increased their primary financial relationships from 40% to 59% in that same timeframe.
This migration of primary financial relationships away from credit unions isn’t happening only from attrition, but is rather due to a combination of attrition as well as the trend of new Millennial and Generation Z consumers entering the financial services world and choosing Mega-banks over credit unions. Either way, this is not a good sign for an industry that has worked hard to appeal to younger adults.
Why are credit unions losing Primary Financial Relationships?
The data indicates four possible areas of needed improvement for credit unions to regain lost ground. Credit unions are:
- falling short in the use of data to identify existing, new, and upcoming member needs.
- not properly onboarding new members to ensure adoption of all products and services.
- sidestepping cross-sell opportunities that deepen and expand their member relationships.
- failing to build awareness and confidence in their online and mobile offerings.
Bottom line, a credit union’s inability to proactively engage members and effectively communicate a value proposition stifles its ability to attract and retain primary financial relationships.
These problems have been brewing in the industry for decades and have been pointed out as a primary concern for long term growth and success by research companies like Raddon. While many have migrated their cultures to include sales with service, the majority are simply too entrenched in the “Order Taker” approach to member service and this entrenchment is now manifesting in startling ways. The days where credit unions can simply wait for their members to come to them with product and service needs are over.
What can be done to reverse it?
While many of these short....-->
Credit unions lost 25% of their primary financial relationships in 2020. Here is how to fix it.
2020 was an extremely challenging year for everyone. Never have the lines of professional and personal life been so blurred. In March, we all got a rude awakening of the r...