A recurring theme emerged during the couple dozen strategy sessions Callahan & Associates facilitated at credit unions across the country this past fall: These financial institutions didn’t know, in some fundamental ways, why they were growing.
These are progressive, savvy institutions led by managers plugged in to their own communities, their own operations, and the movement itself. They could point to the metrics, of course, and the demographics. But the discussion kept coming around to the “why?”
A new branch here. Why?
A rate promotion there. Why?
An expanded FOM. Why?
Again and again, like my 4-year-old son.
These are all reasons, but I’m not sure they answer the overarching question: Why are people choosing to do business with your credit union?
Sure, the credit union can compete on price. But only to a certain extent. It can’t always offer the highest savings rates, which are still so low that for most people the difference is negligible.
Card rewards? Perhaps.
An indirect auto loan? Maybe, for some.
There’s something else in a growing credit union’s value proposition that’s attracting new business. That credit union has figured out a way to articulate its value proposition in terms that consumers care about. It might not even realize what it’s doing, or how, but viewing growth through that lens is a terrific way to learn how to pivot to the next product or service before others recognize the environment has changed.
And that’s how a credit union can sustain its growth.
Rocket Mortgage Rocked It
To a great extent, I’m talking about perception. Consider one major success story of the past few years: Rocket Mortgage. Rocket Mortgage might not be that different from any number of credit union lending apps, but people sure think Rocket Mortgage, well, rocks.
There’s no doubt consumers have the strong impression that Quicken Loans, to the exclusion of others, has the latest and greatest technology to make the onerous process of getting a mortgage simply soar.
But really, all that slick front end does is take a photo of an applicant’s driver’s license and pay stub. The rest is pretty much pro forma for how everyone else handles mortgages. It’s a routinized process, and it’s getting increasingly automated for every kind of loan.
So, to compete, credit unions must keep up. To win, they must make it look like theirs is the most convenient, easy-to- use, hassle-free experience there is. Fintechs are great at this, and they also add the cache’ of being new and different. Fintechs talk the walk.
Credit unions walk the walk, they’re just not always the best at talking about it. But today, perception matters. So, give some solid strategic thought about how members and the market perceive the credit union. Then, how can the cooperative change or capitalize on that?
Rocket Mortgage might not be that different from any number of credit union lending apps, but people sure think it rocks.
Competing On Perception
Credit unions are not competing on price. They’re competing on perception.
Credit unions have a pretty good name thanks to the current environment in the financial services world as well their past track record of supporting members.
The credit union movement was birthed a century ago to give the unbanked a break, it gained steam during the Great Depression with the passage of the Federal Credit Union Act, and it exploded after the Credit Union Membership Access Act unleashed the bonds of membership eligibility as the century turned.
The financial crisis then took hold and big banks took it on the chin, with an exclamation point of Bank Transfer Day in 2011 set off by public reaction to a planned $5 monthly checking fee by Bank of America. It was bad optics for the big banks, as was the revelation of somewhat epic sleazy account opening and management tactics by Wells Fargo.
Credit unions have benefited from that fallout, and financial cooperatives across the country have found one of their most powerful marketing tools is simply being a fair-dealing, generous, and active member of their communities.
There’s ample evidence that more and more people, especially the younger sets, care about that. They’re coming of age in a commoditized financial services market where perception matters. They consider more than just their own bottom line — they have plenty jobs to be done — and they want their financial institution to do the same.
Strategy Lab by Callahan & Associates helps credit union leadership teams focus on issues of strategic importance, such as what's next in the financial services space. Find out if this program is a fit for your credit union. Learn more.
Jobs To Be Done
Ultimately, a consumer becomes a member of a credit union because they have a job to be done. How well the credit union does that job depends on how well it knows its members. And that means asking questions.
Consider this, it’s not just an auto loan for a member. It’s a reliable form of transportation for work and family. Or, maybe it’s a strived-for status symbol. Is it a used pickup truck or a new Escalade? The credit union won’t know unless it asks.
What about savings? Does this member use savings to cover the unexpected home repair, for instance, or a couple months’ rent? Or maybe the member is saving for a college education. Or a down payment on a home. Or retirement.
Every one of these imperatives, these jobs, require different products and a different response from the credit union. Data analytics are getting better at spotting what different people might want or need, but it still comes down to asking the right questions.
Understanding members’ jobs to be done can bring to light needs the credit union has never considered and, in turn, identify new ways to help members accomplish their needs and meet their aspirations.
That means asking questions. Again and again. Beginning with “Why?”
Credit unions have made significant gains since the Great Recession started 10 years ago. Third quarter credit union growth trends surged past that of community banks and the overall banking industry. Measures such as loans, shares, capital, and membership have all reached new levels. These gains are all notable and meaningful; however, they are backward-looking. The important question to ask is: Where will credit unions be in the next 10 years? In this issue of Strategy & Performance, learn why now is the time for credit unions to challenge themselves.