3 Member Myths That Credit Union Leaders Believe

Trends analysis from Gallup reveals surprising truths about the member experience, especially during the coronavirus pandemic.

 
 

Leaders, even good ones, who are leading on the wrong premise are going to get the wrong results.

In its work, Gallup helps organizations understand which leadership assumptions are right and which ones are wrong. Armed with this information, leaders can make better decisions that lead to better results.

But how do leaders learn which premises are right and which are wrong? Which drive positive outcomes and which don’t? In its presentations to credit unions, Gallup has identified three common leadership premise myths it sees credit union leaders follow. By challenging these oft-held assumptions, credit union leaders can rethink business practices to better serve existing and potential members.

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Myth No. 1: Credit Unions Are Positioned To Win In The Current Banking Climate

According to Daniel Kahneman, Gallup senior scientist and Nobel laureate notable for his work on the psychology of judgement and decision-making, consumers make 30% of their decisions based on rationality and 70% based on emotion.

As it relates to credit unions, rational factors include products, rates, and technology, whereas emotional factors are less tangible and include feelings toward the organization, says Anson Vuong, managing partner at Gallup. By assessing those feelings, Gallup can characterize a member’s engagement as fully engaged, indifferent, or actively disengaged. Fully engaged members are the most emotionally attached to the credit union. They are more likely to add additional products, use more services, promote the institution, and remain loyal; thus, they are the institution’s most valuable members.

According to internal data from Gallup, credit unions have a higher percentage of engaged members when compared to the financial services industry as a whole. Per the data, credit unions outperform the average financial institution by 12% when it comes to fully engaged members. For context, national banks sit 12% below average in the same metric.

“That’s not surprising given the credit union mission,” Vuong says.

However, that lead is shrinking. In 2014, credit unions had 21% more fully engaged members than average. NPS also has dwindled, from 29% above average in 2014 to 18% today. These trends are concerning, so, what have credit unions been doing with their engagement advantage?

According to second quarter data available from Callahan & Associates, credit union market share has increased in the past 10 years across revolving consumer, first mortgage, and auto loans to the following degrees:

  • Revolving consumer rose 2.2 percentage points to 6.4%.
  • First mortgage rose 4.5 percentage points to 8.6%.
  • Auto rose 2.8 percentage points to 17.8%.

In the same period, total membership at credit unions has grown from 84.2 million to 123.4 million.

But Vuong asks, why in a period directly after the financial crisis, when sentiment toward big banks was uniformly negative, did people not flock to credit unions?

Vuong points to the differences between local and national perspectives on banks. When asked to rate their satisfaction with the banking industry as a whole versus their satisfaction with their primary bank, 53% of respondents to a Gallup poll said they approved of their primary bank but not the banking industry. That national perspectives do not necessarily equate to individual decisions illustrates a challenge for credit unions, according to Vuong.

“Given that, how do we win?” Vuong asks. “How can we drive engagement?”

The answer many leaders would give is service.

Myth No. 2: Great Service Is The Best Way To Drive Engagement

When asked by Gallup what they are looking for in a financial institution, 29% of respondents replied, “provide exceptional service;” 21% said, “rewards me for the business I do with them,” and 14% said, “is a strong, stable financial institution.”

Service ranks at the top of what a potential member is looking for in a financial institution, but common notions of warm, caring, and friendly service is no longer enough to drive engagement.

Gallup studied the top behaviors that drive engagement, and organized the top 10 into three tiers: financial vision, holistic focus, and basic assistance. Here are the top 10 behaviors, organized by category:

Financial Vision
1. Helped you see your financial needs differently.
2. Discussed how products fit within your lifecycle.
3. Was interested in your financial wellbeing.

Holistic Focus
4. Provided solutions aligned with your needs.
5. Discussed how your needs may change over time.
6. Asked questions to understand your needs.

Basic Assistance
7. Clearly explained the benefits of the company.
8. Took into account all your financial products.
9. Clearly explained the product benefit features.
10. Was knowledgeable about products.

Comparing to bottom of the list to the top of the list, individuals most engaged with their financial institutions feel that way not because of products offered or subject-matter expertise, but because the financial institution looks out for an individual’s financial wellbeing, defined by Gallup as one’s emotional relationship with money.

“That’s the strongest attribute we’ve seen that predicts long-term member engagement,” Vuong says. “It’s a popular topic on which to market, but who can actually execute on financial wellbeing as a brand promise most effectively?”

Myth No. 3: Financial Wellbeing Has Crashed During The Pandemic

In the beginning of April, Gallup began interviewing 500 Americans every day to understand the financial impacts from COVID-19.

In April, 43% had the impression that the coronavirus pandemic was getting worse in the United States, 56% said they were experiencing “a lot” of stress, and 75% felt their life had been disrupted by the coronavirus pandemic. By July, 67% believed the coronavirus pandemic was getting worse, 52% were experiencing “a lot” of stress, and 72% felt like their life had been disrupted. According to Vuong, both stress and disruption numbers are unprecedented.

Gallup categorizes wellbeing into three emotional states: thriving, struggling, and suffering. Using information from the eight credit unions included in Callahan and Gallup’s member engagement and market differentiation pilot, Vuong was able to illustrate the member impact of COVID-19 from February to July 2020.

In February, 40.3% of the consortium credit union’s members were thriving, as defined by Gallup; 39.0% were struggling, and 20.7% were suffering. In April, which represented the first full month of data after the pandemic began, not surprisingly thriving populations had decreased 6.5 percentage points, struggling populations had rose by 1.1 percentage points, and suffering had increased by 5.4 percentage points.

However, at the onset of summer in June, the thriving population grew significantly to 42.5% before returning to pre-pandemic level of 40.3% in July — still 6.5 percentage points higher than the COVID-19 onset month of April. Similarly, the credit union’s struggling population decreased to 38.2% in June, but has maintained such levels through July. In April, the suffering population rose to 26.1%, 5.3 percentage points lower than July.

Although it’s not necessarily the fault of the credit union that financial wellbeing has dropped — outside social, economic, and health forces contribute to financial wellbeing — that drop does present an opportunity.

Today’s credit union leaders who know that financial wellbeing is a crucial area create better outcomes. The coronavirus pandemic and its fallout are far from over, but the industry now has a place to start.

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