To gain market share, find a winning mission.
In his work with credit unions developing strategic plans and identifying growth strategies, Scott Butterfield of Your Credit Union Partner, Seattle, has come across plenty of mission and vision statements. He uses a single word to characterize many of them:
“We know what we do—we provide financial services. We know how we do it—we provide members-first service and multiple channels. But very few organizations know why we do it,” Butterfield says. “To differentiate ourselves, we need to do more than hang our hat on great service, tout our technology, and write big checks for community partners. Those are all very important, but what we really need to do is change the perception that we’re not all that different from banks.”
Some argue for the movement’s not-for-profit, cooperative structure as a great differentiator, but that doesn’t seem to matter to most consumers, he notes. Some tout the commitment to member service, lower fees and favorable rates, but big banks have the scale to match credit unions on rates and invest in superior technology, and community banks have closed the gap on service surveys. Credit unions haven’t even been able to make a persuasive case that they are better for consumers than payday lenders and check-cashing services, notes Butterfield, referring to Lisa Servon’s book The Unbanking of America, which addresses why many people have embraced those alternative financial services.
A failure to clearly define the “credit union difference” may be reflected in flagging membership gains. Three percent annual growth is nothing to get excited about, he suggests—especially for credit unions signing on most of their new members through indirect lending, who move on as soon as their loans are paid off.
“You have to have a winning mission and vision in this hypercompetitive market to stand out,” he insists, citing the example of Bank Australia presented at the World Council of Credit Unions conference in 2017. When Bank Australia (the equivalent of a credit union down under) asked young consumers what mattered to them, they said they want to do business with socially responsible corporate citizens that exhibit integrity and transparency and support equality. The financial institution responded with bold stands on the environment (“our car loans offset your car’s carbon emissions for the life of the loan”), on social issues (supporting marriage equality), and on enhancing transparency on reporting on executive compensation at a time when other Australian financial institutions were under fire for what many consider excessive bonuses.
As a result of its willingness to clearly define a distinctive mission, Bank Australia “has been growing like crazy,” Butterfield notes. American credit unions might apply this example to look beyond ubiquitous promises of great rates, great service and great apps to find a mission that stands out in their market.
“Credit unions need to challenge themselves to answer the question: ‘When people have all these choices of banks and new fintech alternatives, why us?’ If they can’t come up with a better reason than great service and low rates, I think they’re sunk,” he says. “The message of social responsibility may not work in all markets, but they need to find a mission that will resonate with their board, employees and members.”
For many credit unions, a start on answering that question could lie in their low-income designations and commitment to serve the financial needs of working-class Americans, Butterfield suggests. That message reflects a return to credit unions’ original mission to provide affordable access to credit and to promote thrift among consumers who were turned away from banks.
Of course, the financial services landscape is vastly different than it was in 1934 and even from the 1970s when U.S. credit unions numbered 23,000. “Now we’re down to 5,600 because we started acting more and more like other financial institutions” and lost the advantage of serving a clear and distinctive purpose, he says.
Reconnecting with a strong mission will take different forms that lie in the needs of the communities credit unions serve, he suggests. A credit union in Flint, Mich., is thriving in serving the needs of its members for access to auto loans and small mortgages (“Yes, you can buy a home in Flint for $10,000,” Butterfield notes) that other financial institutions won’t make.
Other credit unions may grow their membership by designing services to meet the needs of Hispanics and Latinos or offering a solution to millennials who want to buy a home but are burdened with student loan debt.
“Who are your borrowers going to be 20 years from now? Millennials and Gen Z in one of the most ethnically diverse populations in our history,” he says. “And yet boardrooms today are dominated by older white guys making decisions on what they think they know about what members need.”
Credit unions are faced with other obstacles, including regulatory oversight that limits the growth potential of small to mid-sized credit unions, he acknowledges. “But as challenging as regulatory limitations are—and they are significant—I don’t think that is the primary reason why so many credit unions continue to merge. If you don’t have a meaningful value proposition, if you don’t clearly stand out, you’re not going to win over the people you need to grow your business.”
Karen Bankston is a long-time contributor to Credit Union Management and writes about credit unions, membership growth, marketing, operations and technology. She is the proprietor of Precision Prose, Eugene, Ore.