Conversations With Credit Union CEOs
16 Feb
Having spent the better part of last week in Arizona, staring at cactuses in the desert, I have this inexplicable urge to flip somebody the middle finger. I also have a more explicable desire to share some of the things I’ve learned and gleaned from spending the better part of a week with a bunch of credit union CEOs and their board chairs at the CUES CEO Symposium.
It was my job to lead the CEOs/Board Chairs through a 3-hour session on What’s Next For Credit Unions? (Piece of cake, right? Yeah, right). The session was repeated three times, as the total set of attendees was split into three groups representing small, medium, and large credit unions.
One of the key ideas I tried to get across to the CEOs/BCs was that their biggest challenge looking ahead wasn’t competition from big banks, nor any set of regulations that may come about. For the most part, I think they agreed with me on this.
What I did assert was their biggest challenge was consumers’ lack of interest in managing their financial lives (the apathy I wrote about in a previous post). This point didn’t garner universal acceptance. Let me try to summarize the way the discussion (typically) went:
Me: People don’t care enough about their managing their financial lives to make more informed choices. Consumer apathy is credit union’s biggest challenge to overcome.
Them: No way. People don’t care that much about managing their financial lives and never will. We simply have to be the most convenient, most easy-to-do-business-with financial institution.
Me: So how do you get that message — that you’re more convenient and easier to do business with — out to more people?
Them: We have to educate people on the credit union difference.
Me: Why hasn’t that education effort been more successful in the past?
Them: Because people don’t care enough about managing their financial lives to make more informed choices.
Me: [SILENCE]
Gotta give them credit, though. They did something you probably couldn’t get me to do: Shut up.
So then I’d ask them to raise their hand if their credit union was looking to lower the average age of its member base by attracting Gen Yers. Most (if not all) raised their hands.
Me: Gen Yers are so overrated. It takes about 15 of them to bring you the money I (as a Baby Boomer) could bring you, and if you get me, guess what? You get my Gen Yer’s business, because she puts her money where I tell her to.
Them: But the younger generation isn’t locked into relationships already, and if we can get them now, we can hopefully make them members for life.
Me: Were the members you attracted 10, 20, 30 years members for life?
Them: Some, not all. Not enough.
Me: Then why will this generation be members for life when previous ones weren’t?
Them: [SILENCE]
Me: By the way, know why my Gen Yer puts her money where I tell her to?
Them: Why?
Me: Because — like many others in her generation — she doesn’t care enough about choosing between financial providers, so she’s more than happy to let me (or, to be more specific, her mother) tell her who to choose.
[Some of] Them: Yeah, actually I have a couple of kids in there 20s, and they wouldn’t be with a credit union if it weren’t for me.
Me: Yep. According to research I’ve done, more than four in ten Gen Yers won’t consider a credit union for future financial services needs because they either don’t know what a CU is, or they say they don’t belong to one now, and don’t anticipate doing so. So how are you going to fix that?
Them: Gen Yers want to do business with firms that want to do business with Gen Yers, and give them good service. The big banks have the attitude you described (i.e., “it takes 15 Gen Yers to bring the assets of 1 Baby Boomer”). We’re going to target them and show we’re different.
Me: That’ll work — with some Gen Yers. The 25% who care enough about their financial lives to make an informed choice. Which really isn’t a whole lot different situation, when you think about, than when you went after the 25% of Gen Xers who cared about managing their financial lives, or the 25% of the Boomers who cared, or the 25% of Seniors who cared. What’s going to be different this time around?
Them: [SILENCE]
Me: [SILENCE] [END OF CONVERSATION]
If I’m not mistaken, somebody once defined insanity as doing the same over and over again, but expecting different results.
I would estimate that about one-third of the CEOs at the conference believe that their future success is tied to their ability to develop and sell competitive or superior financial products. The other two-thirds have the mindset that it’s all about educating more people about the “credit union difference.”
Credit unions’ marketing to Gen Yers is certainly different than the marketing efforts of the past targeted at Gen Xers, Boomers, and Seniors.
But the marketing always changes.
What fundamentally isn’t changing is the product and the business model. Oh sure, a few more bells and whistles are added to the checking account, and new channels to access those accounts are created. But everybody catches up pretty quick to any advance in products and channels, so the end result is: Checkmate.
There was a lot more to the conversation. But I’m not sure you want to hear how uninterested many of the CEOs were in discussing marketing, in general, or building new marketing capabilities, more specifically.
“She puts her money where I tell her to”
I’ll never forget the focus group I attended, hosted by the Washington Credit Union League and our friend, Denise Wymore.
I remember watching the row of 15, 16, and 17 year olds and thinking how foreign they were to me (if you don’t have kids of your own, they can feel like a different species). Anyway…
When asked where they did their banking and why, they ALL said they bank (and will bank) where their parents do.
Then they advised another fascinating thing – give out stickers and suckers to teenagers, not just little kids.
Ron, I’ll give you ten bucks if you tell your next group of CEO’s that stickers and suckers are their key to the next generation.
Love your post.
Shari: Your $10 is probably safe in your wallet. Not that I’d hesitate telling a bunch of CU CEOs to hand out stickers and suckers. Just not sure anybody is going to let me loose in a room full of CU CEOs ever again.
Well said. More of these type of conversations need to occur and action taken. I’m the mother of a college freshman. I was taken back by the financial strong hold Wells Fargo had on the college campus. To make it easier for our son, against my heart and soul, we opened “a bank account”. Credit unions are my passion.
Then we set about to open a credit card for him – a credit union account. Or so we thought. The credit unions that we looked at made the process difficult or did not seem interested, including where he had a checking account since age 16. All they had to do was look at account relationships – parents would have been willing co-signers. Yet, if “we” chose to open a student credit card at Well’s Fargo – it would have been easy. Still assessing what “we’ll” do.
On a different note – whether it’s because people are busy, apathetic, confused, fear (back to the under the mattress mentality”, or some other reason they are not paying attention to their finances, might credit union’s have a golden opportunity to figure out how to come along side members to help them know if their financial decisions (or lack of) are positioning them for their future goals/dreams? What if credit unions considered providing CUSO type services designed to help small businesses succeed (strategic planning, marketing, legal, hr, etc.)?
Janine: Thanks for commenting. You make a bunch of great points here. One — that I fear too many CUs will fail to grasp — is that for the majority (i.e., not those for whom “credit unions are a passion”), when they have a less-than-stellar experience with one CU, they figure the rest are all the same. It’s why the “we’re so different” message just doesn’t resonate with a lot of people.
Another key idea you’ve got there is about the CUSO. I’ve talked with a number of FIs (banks and CUs) who are exploring ways to “add more value” to the small business relationship. The firms I’ve been talking with are realizing that doing what you’re suggesting is a big, strategic commitment.
Ron, good article, as always.
I was surprised to read the following mission statement from the CU CEOs: <>
Now, outside of a hand fold of supersized CUs, who in their right mind would position a CU as a convenient institution to do banking with? Not too many people. Convenience is a service attribute that the BofAs and the Well Fargos of the world have invested a lot of capital in it, and they are very good and entrenched in it. Hence, they have, and will always have, deeper branch penetration, ATM networks, superior online banking platforms, sales capacity etc. CUs will lose that battle 10 out of 10 times.
And then the comment on financial education made me chuckle (as I am sure it did that to you as well), as if customers, who are mostly pretty darn busy as it is, want to take the time to peruse financial information after working hours and educate themselves on their financial mishaps or shortfalls.
Those CEOs did not come across (at least from the way I interpreted your blog) as leaders with vision and courage. What about going after small businesses (most large banks would not touch a SB with $500,000 or less in revenue), or using the lower overhead that CUs have and differentiate yourself on the fee side (# 1 cause in checking attrition with large banks), or pick some niche products with heavy referrals w/in business community – HSAs for instance – and become the number 1 provider of that product in your market. Those examples would give you true proof points to support a CU marketing strategy: the rest (like convenience and education, for instance) is just a regurgitation of what the big boys with deeper marketing budgets are already doing.
Chris del Balzo
Chris: I’m sure you know as well anybody, having worked at SunTrust and Wachovia, that banks’ definition of what “convenience” is varies greatly. There’s a bank here in the Boston area that claims to be the “most convenient bank” (they’ve even painted the sides of MBTA trains). Their definition: Longer branch hours. I think many of the large banks think of convenience more along the lines of tools and features that reduce the amount of time someone needs to spend managing their finances (hence the focus on online banking, online bill pay, ebills, etc.). In the credit union world, I think their use of the word convenience is more oriented towards “service”. And I definitely think that’s what they mean when they use the term “ease of doing business” — providing superior customer service.
I also want to apologize and correct any impression I might have given that the CEOs in the sessions lack “vision and courage”. Hardly the case. Most of them have been competing with the large banks for a long time, and have survived if not thrived. I think you’ve nailed it, though, regarding what’s missing, in your example re: marketing strategy. The lack of a cohesive marketing strategy is missing in many cases, but I’m not sure the blame for that falls only on the CEOs’ shoulders.
For some reason the quoted comment from the CEOs did not make my post. Here it is:
We simply have to be the most convenient, most easy-to-do-business-with financial institution.
Curious about your own prognostications of “what’s next” for CUs. It seems like the CEOs you talked to were mostly repeating what they’d heard in the CU press… at least it’s exactly what I’ve been hearing ad nauseum. There must be something more. Sounds like your diagnosis of the future challenge is consumer apathy – and I wonder what’s your prescription. What can we do as CUs to engage with that? Does it make more sense to find ways to intersect with this “generation” relationally or is it better to try and reform their mindset?
Thanks for commenting, Ken. I do think apathy is a big hurdle for CUs. If people don’t care enough about something, they won’t make an informed choice. The key to overcoming apathy is engagement — CUs must engage people in managing their finances. It’s not easy, but it’s not rocket science: You do it through education, by providing tools (i.e. PFM), by making it fun, by “bribing” them (reward them for the right behavior), and whatever other tricks you have up your sleeve.
Even if CUs are successful at doing this, it will take years before the effects will really be seen. It’s too late to convert the Boomers, and the Gen Xers are slipping away. Gen Y is the greenfield opportunity, but they don’t have the money or the needs just yet (beyond checking accts/debit cards and car loans).
So for the next 5-10 years, what’s next? Pretty much,, more of the same. CUs will pick up a few percentage points of market share, but the “I hate banks” movement will die down (these things ALWAYS peter out), and things will revert towards the old normal.
The underlying problem for CUs is the business model. For all the yelling and screaming that CUs do about how they’re “different” from banks, the business model is the same. They make money from account fees and interest spread. Unfortunately, consumers don’t seem willing to pay for advice/guidance (like they could get from PFM-type tools), but I’d love to see some firm turn the model on the head, and charge for advice/guidance and give away the accounts.