Article published by : Bikash Mohanty on Friday, March 31, 2017 - Viewed 240 times

Category : Credit

How Should Member Experience Be Modelled In Credit Unions? Part 1



Credit unions have a unique business model in the banking and financial services industry. In fact, some might argue that they aren’t even part of the BFSI because they are nonprofit organizations. While they are different in certain respects, credit unions still face similar challenges as other organizations in the financial industry, including when it comes to customer experience, or in this case, member experience. In this article, we’ll be looking at whether credit unions should be modeling member experience differently, considering that their customers are also stakeholders in the organization.

The Credit Union Member Experience Paradox

Before we delve into the topic, it’s worth noting that credit unions are already doing a pretty good job when it comes to the member experience, at least when compared to banks and other financial organizations. In fact, the 2015 Temkin Experience Ratings report for banks shows that credit unions have achieved the highest-ranking in the banking and financial services industry over the past four years. It should be noted that credit unions were rated as a group, rather than by individual organization.

Despite clearly doing a better job at keeping their members happy than banks, credit unions still have a problem expanding their member base and with retention rates. For example, a study conducted by FICO revealed that 20% of millennials between the ages of 18 and 24 use a credit union as their main financial institution, but as they age, this figure drops to 10% in the 25 to 34 age bracket.

Furthermore, of the almost 79.5 million millennials in the United States, only 27% of them use credit unions in any capacity, compared to almost 50% of adults aged 36 and over. Now, the latter figures could be blamed on the fact that millennials might not be as aware of credit unions and their benefits as the older section of the population. This could indicate that, in time, adoption rates could increase. However, it might involve a long wait and a significant loss of business.

So, clearly, something is going wrong somewhere. After all, considering that credit unions are only answerable to their members and don’t have a board or shareholders pushing for higher profits, they should be leading the pack in terms of market share. So, why isn’t it happening? Are credit unions taking the wrong approach to modeling the member experience? Or is something else going on?

The fact is that there are two distinct problems that need to be tackled differently, namely the lagging adoption rate and falling retention rates.

The Lagging Adoption Rate

The lagging adoption rate can be attributed to lack of knowledge and information. A study conducted by Google Consumer Surveys at the beginning of 2015 found that 34.4% of millennial’s between the ages of 18 and 24 didn’t use credit unions because they didn’t know much about them. Other responses included the fact that they believed credit unions to be inconvenient, they couldn’t be bothered, or that banks are more sophisticated.

Clearly, these issues need to be addressed through more aggressive marketing. Though credit unions have limited resources, the Internet has made marketing much more cost effective and is, most often, much more effective than any other marketing channel, especially when targeting the younger generation.

Credit unions need to not only educate the population as to the benefits of becoming a member, but they must also address various misconceptions that present obstacles to adoption. One example is that many people believe credit unions aren’t as technologically evolved as banks in terms of online and mobile banking. The problem isn’t as much that credit unions don’t offer these platforms, as most do, it’s more a matter of lack of promotion.

“Credit unions have been slow to jump on the bandwagon to aggressively promote their online and mobile offerings. This applies to both recruiting new members and in promoting the features and benefits to their existing members,” Terry Redding, a vice president at CFI group, a consumer sentiment research company, explains.

It’s misconceptions like these that harm member acquisition rates and these need to be addressed. No matter how great the member experience is, consumers will never know because they don’t sit down to read customer experience rating reports.

An interesting example of how credit unions managed to connect with millennials and gain a significant number of new customers is in Ireland. A group of credit unions came together and developed a new financial product, namely fast-track Facebook loans. The loans are designed for tech-savvy consumers, who can apply online in less than 30 seconds, and are guaranteed to receive a quick response.

The result of the campaign was that 10% of the total new loan volume was generated by these fast-track Facebook loans, a figure which they expect to reach 20% over the next two years. Interestingly enough, nearly half of the new members who receive loans had never worked with the credit unions before.


Member Retention Rates

The second issue that needs to be addressed is member retention rates. While the overall figures show that more people use Credit Unions as they age, the fact is that fewer of them actually use CUs as their primary financial institution.

One significant issue is that many credit unions believe they can compete solely on price. Yes, as the Credit Union you have a lot of advantages over traditional banks in terms of lower fees, and even how nimble and agile your organization is, but lower prices are no longer enough to differentiate you.

Studies have shown repeatedly that people are more than happy to pay extra for a great customer experience. In fact, many consumers rank customer experience far above the price in importance when it comes to choosing a company to do business with. And if you think that differs in the banking and financial sector, you are sorely mistaken.

And herein lies the main problem, and that is you have to learn about the people you are trying to market to. You have to understand what makes them tick, what’s important to them, and what determines them to jump from one financial institution to another.

What Credit Unions Should Be Doing Differently

If you boil down any customer experience strategy to the basics, all of them pretty much reflect the same thing, namely the goal of offering a delightful experience for the customer at every touch point and throughout their journey with the organization. The tools and specific actions might differ, but the goal is the same.

Please See Part 2 Of this Article For Rest.

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Keywords: What Credit Unions Should Be Doing Differently, Member Experience, customer experience

By: Bikash Mohanty

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