Sheep Stealing: Wooing Bank Customers

Credit unions need to be stealth in capitalizing on the movement toward smaller institutions.


It’s amazing how often ideas get recycled under a new label. In a FastCompany blog post yesterday, How Great Entrepreneurs Lure Their Competitors' Sheep Away, Kaihan Krippendorff makes a case that strategies like “Blue Ocean strategy” and “disruptive innovation” both hark back to an old Chinese fable on how to steal sheep.

Krippendorff describes a fable in which a thief wonders how he can steal sheep with a watchful shepherd on guard. His solution? Simply take one. The shepherd will be forced to decide whether to leave his flock and chase down the one stolen sheep or let that sheep go. And his likely decision is pretty clear.

In the fable, the point is that the thief seized on the opportunity and forced his competitor to rethink the value of his assets. Credit unions should be using the same technique as they secure loyalty of former bank customers.

The FastCompany blog gives an example of how iGate, one of the fastest growing IT firms, convinced a large West Coast bank to take a chance on their company, a new one to the banking industry. It did so by making a commitment that aligned the developers’ interests with the banks — it agreed to build a new loan processing system at its own expense and then only charge the bank a per-loan fee that was much lower than their current fess. It had essentially “stolen a sheep” (the bank) from another shepherd (a large IT firm).

Then iGate helped the bank go out and steal sheep, or customers, of its own:

Accepted dogma held that a lender’s pull-through rate – the percentage of customers that accept the loan after it is approved – depended on the loan specifications (rate, term, etc.). iGATE had a different hypothesis: none of that really mattered; all that mattered was how quickly the lender turned around the approval. Again, since the client had nothing to lose, they gave iGATE the go-ahead to prove their hypothesis. iGATE invested in reducing the turn-around time to 17 days from over 40 days on average. As a result the client’s pull-through rate jumped to 75% from 42%.

While I don’t mean to imply that Americans are sheep, looking to be fooled to follow the next shepherd to come along (in fact, sheep may be far more intelligent than they’re given credit for), some credit unions have found this sheep-stealing strategy invaluable.

In 2008, Educators Credit Union ($1.4B, Rancine, WI) launched its ongoing Fast Lane Financing program with the goal of saving its members $1 million in interest payments if they would refinance loans from other institutions with the credit union. It made a commitment to the member – “We can save you money” – and has successfully “stolen sheep” (loans) from other institutions.

What started as a single auto loan recapture program has turned into a four-year campaign with annual growth – well past when the pundits were claiming that the “refinance boom” was over. This year, Educators Credit Union’s goal is $20 million and as of the beginning of May it’s already saved members more than $19 million. So, they’ll likely surpass that goal and perhaps raise it.

Other credit unions have launched similar programs. Wright-Patt developed a “Retire Your Mortgage” product that made a commitment to help members get out of debt earlier so they could enjoy their retirement years.

And Seven Seventeen Credit Union ($816.3M, Warren, OH) created “Simplify & Save,” designed to take the transaction friction out of refinancing and debt consolidation. The credit union made a commitment to members to save them money and time by providing a better loan product than other options. In the process, Seven Seventeen saved members $1 million in interest payments in the first seven weeks of the program.


May 17, 2012


  • I just visited Educators They have saved members over $16 million in mid-May on a $20 million annual goal. The total over the past 4 1/2 years is in excess of $50 million. Their key is to establish a relationship with members; their whole culture promotes this goal.

    Overall Educators is growing almost double the rate of their overall market.

    chip filson
  • Great article and great insights in building a credit union. The Huffington, Move Your Money program is immature and social grand standing.
    David Proffitt