BY CYNDIE MARTINI
Credit unions are fundamentally different from most other financial institutions. For many years, they have served the unique role of serving local communities, returning profits to members, offering competitive loans and financial products, and supporting local businesses, non-profit institutions and community asset development.
Times have been good for credit unions. There has been widespread growth against banks, as new generations have grown to distrust the banking industry. At the same time, there is a growing trend among consumers, particularly millennials, to support companies that have strong corporate social responsibility programs, an area where credit unions, with their strong support of local communities, are clearly in line with consumer desires.
Most importantly, credit unions have always offered superior customer service. In an age when customer service has largely disappeared from American commerce, credit unions stand alone in their ability to treat members with respect.
However, in 2018, credit unions are facing a critical crossroads between changing demographics, rapidly evolving technological innovations, and the traditional mandate that credit unions must serve their local communities. The collision of these issues, and the tension they create, will continue to challenge credit union leadership and growth potential.
As is always true in any changing times, those credit unions that find ways to evolve in parallel to new developments and technologies will be the ones that survive and thrive.
Currently, the entire financial services industry is facing a new type of consumer, one that grew up with technology and views its relationship with managing money as an online affair. Make no mistake, this is a radical change.
Millennials, the largest demographic of consumers since the baby boom, have a completely different relationship with their bank or credit union. In short, their loyalty is to their debit card, credit card or mobile app. This demographic rarely enters the bank branch. And that’s a problem for credit unions. It’s also an opportunity.
The problem is credit unions in the small to medium size range likely find it hard to have a robust card service. Keeping up with radical changes in debit and credit card technology, and digital issuance, is expensive. Servicing those cards with 24/7 support, issuance, and troubleshooting, requires more staff. These increases in operational expenditures take away funds from the credit union’s mandate to serve local communities.
However, keeping up with those changes is not negotiable if a credit union wants to remain competitive and relevant. It is imperative to have strong debit, credit and digital card services.
In the past, credit unions have taken one of two roads when it came to card services. They either didn’t offer a credit card, or they passed off the credit card servicing to a national brand.
I have spent nearly 30 years in the credit union industry. I have seen these two mistakes far too often. And I have seen potential revenue and member growth walk out the door.
The irony is that credit unions used to be the leaders in card services, and in some ways still are. Since most credit unions had fewer branches than national banks, credit union debit cards had to work harder than debit cards. Credit unions pioneered the surcharge-free option at the ATM. In fact, surcharge-free ATM use is still a prime mover of credit union membership.
Right now, card service is the most important touch point credit unions have with members. That relationship can’t be underestimated. If members increasingly become loyal to a card, or an app, then that relationship must be managed with the same care, compassion and service that the member at the teller window.
If a credit union cedes its card servicing to a national brand, the danger to member loyalty is immense. Since national brands service thousands of financial institutions, it’s almost certain that a credit union member isn’t getting great customer service.
Nearly everyone who has dealt with a credit card company on the phone, painfully navigating endless phone trees, can see the problem for the credit unions. Your brand and your member are out of your hands. You, the credit union CEO, are relying on someone else’s customer service. In the most important transaction with a huge part of your membership, you have dealt yourself out. And with a new generation loyal to the card, not the credit union, credit unions are open to changing.
It’s my belief that credit unions would be very wise to fully reconsider their relationship with debit cards, credit cards and digital transactions. If credit unions can do that, then they are open to new opportunities.
With a strong card service program, credit unions will be adding a new, important source of revenue, which can be used to enhance community-focused programs. They will attract new members, even members from outside their local service area, since new members often search for the best deals and service online. And credit unions will be recapturing control of the relationship with the member, ensuring that customer service, the traditional hallmark of credit unions, remains at a level that inspires brand loyalty.
Changing times call for changing strategies. If credit unions want to evolve and maintain relevance, they must focus on what made them unique in the first place, focusing on community and being dedicated to member service.
Consider ways to bring stronger card services to your credit union. If you bring it in house, make sure that it is properly staffed. If you choose an outside vendor to run your card member services, make sure they have knowledge of the credit union space and are focused on the unique needs of credit unions.
Take advantage of the credit union’s ability to tailor credit card reward programs specifically for credit union members, including everything from bumps in CD rates to donations to local arts programs, or reward programs that huge national bands can’t or won’t make.
I’m not advocating a radical change. I’m suggesting that credit unions recognize the needs of a changing demographic. If the new or future member wishes to use a smart phone to access their account, then the credit union needs to meet them where they are and want to be.
Times are changing, but human connections are only getting more meaningful. Credit unions have thrived for years by being dedicated to customer service and community development. Now, it’s time to adapt those same values to the new technologies and new touch points favored by new generations.
Cyndie Martini is the President and CEO of Member Access Pacific, the largest aggregator of card services for credit unions. She has managed and directed successful credit union card and ATM portfolios, marketing programs and business strategies for nearly 30 years. In 1999, Martini spearheaded Member Access Pacific’s entry into the card payment and ATM processing arena – the first and only credit union league (Washington Credit Union League) nationally to resell Visa Debit Processing Services (DPS) as a “collectively” priced card processing solution. Martini has propelled this business model into one of the nation’s leading CUSOs while fostering MAP’s relationship with Visa, Inc. into a premier and exclusive partnership.