Your Vital Credit Union: Creating a Legacy Credit Union in a Fintech Marketplace
If your credit union didn’t exist, what would your members do?
Where would they go in a world of increasing options, in a marketplace that is louder and more confusing with the entry of FinTechs like Chime, Robinhood, and Digit? What keeps your members coming back to your credit union?
Part of my contribution to our credit union movement is facilitating planning sessions and speaking at credit union gatherings. During that time, I’ve learned a lot, but here are key points I realized from my peers.
Understand what makes your credit union better for your community
Your credit union serves your community. Your charter may define this by a SEG (Select Employee Group) or geography. In the reality of 2022, is this meaningful? In your strategic planning, how are you thinking about your members’ needs in this rapidly changing world? What are you currently offering that helps your members say, “Yes, that credit union is the best option for me!” regardless of where they live or work?
Different members expect different options. It’s all about the value members derive through participating in your cooperative. Does your credit union support its multiple communities with offerings that genuinely resonate? Are you moving them closer to their goals, or to the goals of your credit union’s vision statement?
Vision statements often say things like, “To be the best financial services provider for our community.” What about your strategic objective? “To grow our financial cooperative XX% by delivering financial services to our member community, as measured by X, Y, and Z”.
Okay, that’s great, but how do you define “our community”? What are your metrics for success? Are they based purely on the financial performance of your credit union or are you measuring your contribution as it is reflected back by your actual membership community?
Understand the members who already love your credit union by understanding your data
There are members for whom your credit union is already a perfect fit. They carry your credit union’s checks and debit cards, their paychecks are direct-deposited, and your credit union is the first place they think of for their next loan. The credit union is wired into their life. You’d love to have more members just like them, but where do you find them?
Within your credit union’s data system lies a wealth of information about these members: where they live, where they transact business, where they borrow, how old they are, and a wealth of other demographic information; even what return they bring to your credit union relative to the cost of serving them. The challenge for many credit unions is to transform individual data elements that describe your ideal members’ financial lives into a clear picture. One that makes it easy to position your products and services in a way that speaks to them of value and convenience.
Positioning is the key. How does your credit union present the products and services you offer using a vocabulary and stories that resonate with your ideal member community (your target member audience)?
Consider your positioning stories, and how they reach different segments
Positioning your credit union as “the best” in the eyes of members means tailoring the narrative about available services to meet members where they are, at all stages of life and financial expectations.
One such positioning story would fit a college-aged member who’s looking for their first debit card and an auto loan. They don’t care about “shares” and “drafts”, they want a great-looking mobile app with biometric authentication, remote deposit capture, and an easy way to transfer funds. They would love a program that offers some leniency on fees in exchange for doing things that contribute to the income statement of the credit union, like actively using their debit card to generate interchange income, paying interest (and an occasional skip-pay fee) on their auto loan, using e-statements, and generally interacting with their credit union digitally. They might never visit a branch or call your MSRs—even to open their account—and they prefer it that way. (Emily Claus further dives into what younger generations want from your credit union in her article “Cracking the Millennial and Gen Z Code”.)
A second story would fit the next generation: what happens when this member graduates, launches a career, gets married, and starts a family? The convenience they already love is still important to them, but now it’s a startup family package—two incomes, two cars, likely renting until they can save enough for their first mortgage. There’s enough stability in this story to offer a credit card or other unsecured loans, but maybe their credit scores aren’t up to industry standards. Fortunately, your credit union has access to character-based underwriting models that consider the stability of the household—same address, prompt payment of utility bills, etc.—those relationship-focused data points that distinguish credit unions from the rest of the market.
As members move through life, they change, and so should the positioning narrative used to describe the credit union’s relationship with them.
Create your positioning narrative based on what you know about these members
Using the two examples above, how would a credit union segment these ideal target members, develop the perfect story to describe each segment, and design the combination of products and services that create a best-fit positioning narrative to gain and retain these members?
Start by identifying the behaviors that generally define your core group of loyal members—active participation as defined by wallet share (products per member, services per member, income per member) then analyze this “super-segment” to break it down based on different common bonds these members might share. This might be age or shopping habits (for example, how many members have Amazon Prime memberships?). Can you find a correlation between loans per member, age range, and Prime accounts? In my experience, age range and paying for Amazon result in more than three times their average loans-per-membership.
If your credit union is running a data system that includes these analytics, it takes less than 2 minutes to test and validate these correlations. As my colleague in driving member data mastery, Anne Legg, points out in her terrific book Big Data/Big Climb, you have more information about your members than Amazon does. All Amazon knows is their online shopping habits, while your credit union has information about where your members are borrowing, where they’re shopping when they’re not shopping on Amazon, how much money they’re depositing into your credit union every month, when they’re late on loan payments, and thousands of other data points.
Build these data points into a data warehouse, run some correlations and trends, and you’re in a position to offer members a “One-Click” button to accept an increased credit limit on their card, or refinance that dealership auto loan they have with a bank where they’re paying 2% more than they should.
Extend your positioning narrative to grow your community
Once you’ve developed a compelling narrative that resonates with your biggest fans, it’s time to consider the rest of your membership. Some members choose to be borrowers, but not transactors; they use a different PFI (primary financial institution) for their direct deposits, debit cards, and bill pay. Others will open transaction accounts with you but keep their loans elsewhere. How might your positioning narratives help you gain market share with these segments?
The better your understanding of these members’ behaviors, the easier it is for them to trust your credit union as their PFI. Consider how reward programs build lifetime loyalty by making it easy to reach “Gold” or “Platinum” levels by sharing a clear roadmap of progress towards each tier; points for opening a new account, for signing up for direct deposit, or for refinancing a loan. As each reward tier is achieved, celebrate that with your member by making them feel that special connection with their cooperative. How about a monthly rebate on an auto loan rate that continues each month they remain at the Gold level? How about bringing the entire family into it, sharing the Gold benefits with all of the members of the household?
Your vital credit union creates a sense of abundance in the community it serves. Sometimes that abundance is expressed in the most fundamental way: helping those who live paycheck to paycheck know that they have the resources of the credit union behind them. For those who are more fortunate, you are part of their narrative as they buy their first car, save for the down payment on their first home, or invest in their dreams.
You define your community through your awareness of each individual and each household. Listen to what they tell you, both through their words and through their actions, and you will build a legacy of membership.