The Power Of Seven

It’s time for credit unions to take a hard look at how they are communicating the value of their cooperative

 
 

The roots of modern cooperatives stretch back more than 150 years, but it wasn't until 1995 that the International Co-operative Alliance adopted seven core values around which all cooperatives should operate. When the United Nations declared 2012 the International Year of Cooperatives, these principles renewed an important conversation about what it means to be a credit union, specifically why they exist and how they are different by design. But these principles are more than just a collection of feel-good notions, they offer credit unions a way to compete against and differentiate from for-profit financial services providers.

Although the International Year of Cooperatives served as a catalyst for celebrating and feeling renewed pride in those shared values, it's important to pause and ask ourselves if we've effectively communicated them to the broader marketplace? Would members be able to name all seven principles? Would they be able to name any of them?

The progression of most of my conversations about my profession are likely similar to what each of you face when you are off the clock. Whether I am at a doctor's appointment, watching a child's soccer game, or waiting for an oil change, when people hear I work with credit unions, certain questions tend to follow. Some of them relate to whether credit unions are the same as labor unions, although those questions are occurring less frequently since Bank Transfer Day, and recently people are asking more questions that involve our core values as cooperative financial institutions:

  • How are credit unions different from banks?
  • Do they offer mortgages?
  • Do they offer student loans or business financing?
  • Is customers' money safe? Is it insured?
  • What is the long-term outlook for credit unions?
  • What does it mean to be a financial cooperative?

Focused Questions Deserve Focused Answers

 

The Seven Cooperative Principles

  1. Voluntary & Open Membership
    Membership is open to all.
  2. Democratic Member Control
    Members actively participate in setting policies and making decisions.
  3. Member Economic Participation
    Member participation leads to rates, fees, and services that benefit the entire credit union./li>
  4. Autonomy and Independence
    Controlled by the members not by outside shareholders.
  5. Education, Training, & Information
    Financial education should be free and available to all.
  6. Cooperation Among Cooperatives
    Cooperation among cooperatives is vital.
  7. Concern For Community
    Cooperatives work for the sustainability of their communities.

Although it is easy to default to credit union platitudes such as we're "people helping people" and "not for charity, not for profit, but for service," the questions above indicate people are searching for a higher level of understanding. The short answers are still useful, but we also need to fully communicate the value credit unions deliver. Even if consumers don't realize the seven cooperative principles exist, as industry professionals we can all agree that they matter. And the way we communicate these principles makes all the difference.

The country is coming out of the biggest financial crisis since the Great Depression. Unemployment is high, salary growth is stagnant, and home prices are low. Consumers need help as the country recovers, and credit unions have stepped in where other financial institutions have stepped out. They've refinanced more than $308 billion between 2007 and 2012, giving consumers breathing room and lower rates to repay their debt obligations. During that time frame, they've also made $67.9 billion available to small business owners who were struggling amid decreased and called lines of credit. And over the past seven years alone, they've returned $10.2 billion in patronage dividends and interest refunds to the members of the communities they were established to protect.

Conversely, satisfaction with banks is near an all-time low. Public perception prompted Congress to create the Consumer Protection Financial Bureau in 2010 to protect consumers from the abuse of, largely, for-profit financial services providers. The most active members of the population organized a grass-roots campaign to encourage consumers to move their money to nonprofit credit unions from for-profit banks.

These events have increased consumer awareness about credit union options, but the industry still finds itself with an aging membership base and an average membership growth rate of only 2.1% as of third quarter 2013. Some credit unions are achieving stronger member growth rates and are dominant financial institutions within their marketplace. But how can we get the entire industry on the average consumer's radar? What will it take to break through the misconception that credit unions aren't convenient, are too restrictive, or don't have the technological offerings of bigger banks? Why do young people still not know about credit unions? Why do many lifelong members fail to fully understand the benefits of the cooperative business model?

In many ways, credit unions are still America’s best-kept secret, as Ed Callahan observed more than a decade ago. 

America needs credit unions now more than ever. The population base has demonstrated it wants financial institutions it can trust to look out for its best interest; communities are trying — some struggling — to rebuild after the crisis; businesses need creditors they can rely on. Yet in many ways, credit unions are still America's best-kept secret, as Ed Callahan observed more than a decade ago.

Keep It Simple And Let the Members Tell The Story

In November 2006, Bank of America announced a move into affinity banking wherein it would offer, according to a press release, a broad complement of financial services to partner organizations whose members share a common interest. Sound familiar? Credit unions were founded on a similar premise yet still sometimes struggle to convey the benefit of the membership bond. Credit unions have a distinctive way of operating. They connect with members rather than just providing a product or service. And they adhere to a single set of ideals that guides the industry. But credit unions must be proactive in finding interesting new ways to demonstrate why they are different and better.

"Collectively we need to be thinking of how we can do bold new things to create value. Price and service alone are not going to see us through!" This is a reader comment from a CreditUnions.com article that is more than six years old. And here we are today, still struggling with boldness, still looking for a way to succinctly and effectively communicate our value.

Regardless of whether you publicly display the seven cooperative principles for all members to see, there are a few key messages you should infuse into all of your communications:

  1. We are member-owned and member-controlled.
  2. Our interests are directly aligned with those of our members; we have no silent partners to insist we focus on quarterly earnings or return on equity.
  3. We are predominately community based, which means our heritage helped form the communities we serve; we are as much a part of our communities as our members are a part of us.

Some of the most powerful and effective communications I have seen from credit unions are ones that convey a simple message and let the members take center stage. Testimonials about how the credit union has made a difference in members' lives, examples of how much members have saved by refinancing loans, and word-of-mouth marketing are effective ways to demonstrate how you are different.

For example, North Carolina-based SECU relies on its 3,000+ volunteer ambassadors to relay the credit union's story throughout the state. These dedicated members serve on local branch advisory boards, look for opportunities for the credit union to become more involved in their own workplaces, and share credit union information with their family, friends, and co-workers. When I first learned about the volunteer ambassadors, I wondered why more credit unions aren't doing this. Yes, SECU is a large institution, but I firmly believe the loyalty of its members has directly contributed to its growth.

The Value is There, Now Take The Credit!

Most of my conversations about how credit unions are different from banks and why a consumer might want to join one generally end the same way. After I talk with someone one-on-one and have answered their questions in detail, they respond with statements like: "Wow, I'll have to join one." "Thanks, I've been considering where to go for my next loan." "Oh, I didn't realize I could use a credit union for that."

Our core values are important. Let's not rely on one-on-one conversations or outside influences like Bank Transfer Day to communicate our values and help our cause. The time has come for what I rarely see credit union professionals doing — taking credit for the value they have created.

It's time for America to see credit unions are the model of how financial institutions should be built.

 

 

 

March 20, 2014


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