CU2.0 Podcast Episode 112 Steve Bruyn on the Huge Opportunity For Credit Unions to Win Bank Customers Today
Bank Transfer Day 2020, Bigger and Better?
By Robert McGarvey
You remember Bank Transfer day, that 2011 movement that brought in perhaps one million new credit union members, possibly more.
Something a lot bigger may be about to happen.
That’s the opinion of Steve Bruyn, CEO of Foresight Research who, writing in The Financial Brand, said that its extensive polling had found nearly a doubling of the number of consumers who say they intend to change financial institutions. Now 22% say they are heading to the exit of their present financial institution, per Foresight Research.
Foresight Research elaborated: “We have surveyed almost 11,000 banking customers and credit union members in 44 markets to find out what is really going on in the world of banking from the customer/member’s point of view. Then we added another survey of almost 700 customers and members to find out what the pandemic had changed in the banking industry. We found a hot spot of churn. Churn increased from 12% (over two years) to 22% expected churn in the next year or two.”
The news gets sweeter still: “Of the people who intend to leave their financial institution almost 3 out of 4 are Gen Z or Millennials – the very block of business that drives the future of your financial institution,” said Foresight Research.
Foresight Research added: “So, what drove the high churn? Even though satisfaction declined greatly (except at credit unions) that was not the culprit. Customers and members were generally empathetic, likely thinking ‘we are all in this together’. It was all about financial issues like interest rates and fees. The switchers while forgiving also are looking to reduce cost or increase interest on items like money market accounts, CDs, etc.”
This makes sense. The economy is the worst it has been since the Great Depression. Millions of us are unemployed and millions more are underemployed (working fewer hours). It’s tough to balance the household budget when less money is coming in so a shrewd step is to slash unnecessary outgo.
Bank fees are prime to be trimmed. And that is a potential bonanza for credit unions.
Ask yourself this: where can credit unions beat banks, consistently? The answer is and has long been on pricing of everything, from account fees to NSF fees and loan interest rates. Credit unions are member owned, they have no shareholders who demand dividends. Most have unpaid boards of directors. Most pay their employees fairly but rarely lavishly – and here’s a CNN round up of bank c-suite compensation and note that the CEO of Bank of America had total compensation of $24.8 million but he was by no means the highest paid in the group.
Big salaries, big dividends to shareholders, and bloated, inefficient branch networks add up to huge expenses on the books and that means customers have to pay through the nose for the privilege of having a bank account.
According to Bankrate.com, 72% of credit unions offer free checking accounts with no minimum balance requirement. Just 38% of banks do.
Want a checking account at Chase? The barebones Total Checking has a $12 monthly fee unless a $1500 minimum balance is maintained. That’s typical at most banks.
A free credit union sharedraft account offers every bit as much, for free.
When it comes to NSF charges, many credit unions charge around $25, per Nerdwallet. Banks generally charge upwards of $35. (Yes, NSF charges should be zero but that’s a different column.)
For auto loans, an institution that often is rated best is Consumers Credit Union. PenFed similarly scores high. Digital only banks (Ally for instance) are very competitive. But rarely making the rankings of best auto loan sources are mainstream banks. It’s just a fact. Any consumer shopping for a car loan is throwing money away if they don’t compare at a credit union.
Credit unions offer more consumer friendly terms across the board. That means they are well positioned to win in the coming financial institution reshuffle.
The credit union key: embark, now, on an aggressive marketing campaign, especially via Facebook and Instagram and possibly TikTok, that stresses the message: we are a financial institution owned by and designed for consumers. Better rates, lower fees, more money in your pocket.
The WalMart tagline is an allstar: “Save money. Live better.”
Similar messaging is what credit unions should aim for to win their share of consumers switching financial institutions in search of relationships that leave more money in their pockets.
Turn up the volume. And shout it out.
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