Did you know that 39 percent of current megabank customers would actually prefer the community-mindedness that credit unions provide? These four tips will help your CU increase its appeal and better attract and retain members who desire what your institution has to offer.
If all things were equal, two out of three U.S. adults (66 percent) – including 59 percent of megabank customers* – say they would rather bank at a community bank or credit union than at one of the big national banks. Yet only 20 percent of Americans use a credit union as their primary financial institution.
Why the discrepancy? Feedback from credit union executives as well as results from the 2015 Consumer Banking Insights Study, commissioned by BancVue and conducted online in January by Harris Poll among more than 1,000 U.S. adults, offer a few insights. The following steps could help credit unions increase their appeal and better attract and retain members.
1. Boost Your Brand.
Unfortunately, many consumers* still don’t know much about credit unions and community banks. Among consumers who don’t have an account with a community financial institution, more than one-third (34 percent) said it was because they haven’t thought about it and/or are unaware of their options.
In today’s competitive environment, name recognition and awareness are more important than ever. Fully 71 percent of consumers say a recognizable brand name is at least somewhat important when it comes to choosing a financial institution.
Yet credit unions often don’t have megabank marketing resources to draw on. “Our primary challenge when it comes to brand awareness is marketing budget,” said Lanet McCrary, vice president of marketing and business development with Mississippi’s Magnolia Federal Credit Union. “Compared to our for-profit counterparts, our marketing budget is much smaller, which makes it harder to develop brand awareness.”
There are many ways to boost an institution’s profile without spending billions, though. Getting involved in the local community can help, McCrary said. “To boost brand awareness in our community, we do several things: sponsor youth sports teams, purchase ads in school and church program booklets, volunteer as ambassadors for chambers of commerce in our market area and participate in local events, such as charity walks and programs that support financial literacy.”
Offering nationally branded products, available through third-party providers, can also draw consumers.
2. Offer Better Products.
Consumers today look at products first, institution second. When choosing a bank, 71 percent of adults say that features like free checking, ATM fee refunds and access to the latest banking products are more important than the banking institution that provides them.
Yet the products and services offered through community banks and credit unions are sometimes seen as lacking, especially among Millennial consumers (18- to 34-yearolds). The study found that 38 percent of non-CFI Millennial consumers would like to use a community financial institution but feel that such institutions lack the products they need.
So what products do these younger consumers want? Millennials care more about rewards when choosing a bank than other age groups. In fact, 67 percent of Millennial consumers cited rewards as a very important or important factor when it comes to choosing their bank (compared to 54 percent of consumers between the ages of 35 and 54 and 37 percent of consumers who are age 55+). Additionally, 62 percent of Millennial consumers say cashback options are very important or important when asked the same question (compared to 51 percent of consumers between the ages of 35 and 54 and 33 percent of consumers who are age 55+).
“Consumers these days have a ‘what’s in it for me?’ mindset,” said Thad Angelle, president and CEO of MCT Credit Union in Texas. “The products we offer must be compelling enough to get their attention and give them a reason to take action.” But not all credit unions have the resources to offer these products. These institutions should look for partners who can not only help credit unions provide their members with mobile banking and money management products but also offer marketing and advertising expertise, training support, and analytics and compliance support.
3. Increase Your Presence.
Despite the rise in online and mobile banking over the last several years, many consumers, including the vast majority of Millennials, still want to bank in person. Among Millennials, 88 percent say they would prefer to do at least some banking in person rather than over the phone, online or via mobile app. And more than four in 10 U.S. adults (44 percent) say it’s not at all likely that they will no longer need to go to a physical bank location five
years from now.
That means branch convenience is still a factor when it comes to choosing a bank, despite forecasts that routinely predict the branch’s demise. In fact, 86 percent of Millennials say it is valuable to bank at an institution with a local branch nearby.
Credit unions have long held an advantage when it comes to customer service. Fully 64 percent of consumers believe credit unions and community banks have better personal service (any interaction with another person face to face, over the phone or online) when compared to big national banks.
However, while many credit unions are part of a co-op network, many others don’t have a bank-like web of nationwide branch locations. Fortunately, working with a thirdparty provider can enable credit unions to offer things like ATM fee refunds and mobile banking tools to their customers, thereby boosting convenience and increasing the number of opportunities they have to engage with the institution.
4. Make Switching Easier.
Many consumers overestimate the difficulty of switching where they bank. According to the study, six in 10 U.S. adults who have never switched financial institutions (61 percent) believe it would be at least somewhat difficult to do so. In reality, only 19 percent of consumers who have switched say it was at least somewhat difficult.
“Switching checking accounts seems to still have that stigma of being cumbersome and difficult,” said Sarah Ermatinger, vice president of marketing with CP Federal Credit Union in Michigan. “It takes a very upset customer to move since they also believe checking accounts are pretty much all the same.” Credit unions can entice more consumers to switch by educating them on how easy it really is. Institutions can also create internal processes that make opening a new account and transferring old ones faster and easier for customers.
“Consumers don’t want the ‘hassle’ of switching direct deposits and automated electronic payments,” Magnolia Federal Credit Union’s McCrary said. “We have lessened the burden by offering an online ‘Switch Kit’ that provides them [with] all the tools they need to switch everything over.”
It’s clear that credit unions and community banks are popular among consumers. Fully 64 percent of U.S. adults
think community banks and credit unions have better personal service than the big national banks. But mere likeability isn’t enough to get people to switch. According to adults who don’t have a checking account with a community financial institution, 38 percent have thought about getting one, but only five percent of consumers say they’re likely or very likely to switch in 2015.
By improving marketing efforts, offering in-demand products, becoming more accessible to consumers and easing the switching process, credit unions will have a better shot at changing the mindset of the consumer and increasing market share. *Throughout this article “consumers” are defined as U.S. adults ages 18 and up who have a checking account at a financial institution. “Megabank customers” are checking accountholders who consider one of the big national banks to be their primary banking institution.
The Consumer Banking Insights Study was executed online by Harris Poll from January 5–9, 2015. The study polled 1,002 U.S. adults ages 18 and up to gauge their banking and checking preferences, feelings and behaviors. Figures for age, sex, race/ethnicity, education, region and household income were weighted where necessary to bring them into line with their actual proportions in the population. Propensity score weighting was also used to adjust for respondents’ propensity to be online.
Gabe Krajicek is CEO of BancVue in Austin, Texas.