TAMPA, Fla.-What does it truly mean to be member-centric? The answer is likely going to be a key in determining which credit unions survive and prosper and which don't.
Credit union leaders got a deep dive into the critical issue of member centricity at the CUNA Mutual-sponsored "Battle for the American Consumer: A Symposium on Member Centricity," during which seven steps toward achieving that centricity were shared.
And while there are significant obstacles and competitors in the market, one person also sees a distinct credit union advantage.
Being member-centric is critical in very large part from evolving and growing competitors looking to get their fingers on members' wallets, observed John Lass, SVP-strategy and business development with CUNA Mutual Group. Lass used payments as a key potential threat to credit unions in the present and near future (see related story).
Lass posited that interchange income, which represents one-third of all income among credit unions, is going to shrink rapidly if not disappear as ACH grows. ACH, he added, will then be replaced by something else.
Regardless of what that replacement channel turns out to be, Lass said a credit union has no option but to be member-centric for two other reasons: it's nearly impossible to build a leadership position in product innovation in financial services, as well as in operational efficiencies, especially given competitors that don't have physical facilities.
"Most financial products are nothing more than a legal contract. It's very difficult to protect that kind of intellectual property and very difficult to build a real, sustainable competitive advantage. So we're going to face a ton of competition, and are. But there are things we can do."
Lass cited Boston Consulting Group, with which he has worked, which defines customer centricity in financial services as a "way of banking based on trust and fairness that uses knowledge of customers to meet their needs and achieve, sustainable, valuable and long-term relationships."
CUs Are Not Alone
Credit unions are hardly alone in seeking to focus more on their members/customers. "Why the need for customer centricity?," asked Lass. "Declining loyalty, shifting products needs, et cetera. The good news for credit unions is that we enjoy higher levels of trust, even more than local banks. However, even with the high trust scores we have, a CUNA survey shows that members who are 'highly loyal' have a higher loan balance with a bank than with their credit union, and among 'less loyal' members the disparity is even larger. So there is a long way to go."
Part of that distance that needs to be traveled, Lass observed, is an old bugaboo for many CUs: the product-centric nature of many legacy systems makes it very difficult to understand "every member across every product and every channel. The path to member centricity is a journey, not a destination."
Similarly, that path to member-centricity is a journey, the first step of which is deciding on which of three propositions a credit union will seek to excel: product innovation, operational efficiency or customer/member-focused leadership.
Lass cited a number of authors and business analysts who have pointed out that "the middle ground of mediocrity is trying to lead on all fronts." Those that excel lead on one of three propositions and noted that getting the customer/member-focused leadership right is the one that tends to boost loyalty the most.
Seven Steps To CMC
The most effective strategy for responding to these changes is what Lass and others have called "Cooperative Member Centricity." There are seven steps for getting there, according to Lass:
1. Implement a Data Strategy.
"The big buzzword is Big Data," said Lass. "As credit unions, you are sitting on a wealth of data. But the issue is you're not doing much with that data. How many of you are actively monitoring your outbound ACH transfers so that when someone is using PayPal are you tracking that? (One person in the room.) It's data you already own; you just have to query it. There are three basic concepts around big data: volume, variety and velocity. With velocity, it's estimated that by 2014 two-thirds of data analytics will be done in real time."
2. Understand Members Differentiated Needs and Behaviors.
"Members respond differently to different products. That can be a sensitive subject in credit unions; everyone has the same vote but they don't have the same product needs. Just using age and income we were able to determine 13 different member segments. But those two factors are not enough. And the need for segmentation grows as we move to community charters is more important."
3. Anticipate and Meet Member Needs.
Lass pointed to Wells Fargo, which has a good tool, online Cash Flow Monitor, that predicts how customers' financial situation will look 30 days out. It has deployed 500 predictive ATMs with touchscreens that have five customizable buttons based on customers' ATM usage and preferences.
4. Adhere to a Sustainable Financial Model.
"Your objective should be to ensure your financial model supports sustainable growth for the long-term. Being member-intimate doesn't come cheap. But if you really want to focus on being member-centric you must look at the long-term, lifetime value of the member. This has deep relationship potential."
5. Deliver Service Excellence.
"You can't be all things to all people. You can't be excellent everywhere."
6. Enliven Member Democratic Control.
"This is unique and distinctive to credit unions and, to me, this is the big one and a credit union advantage. All of these other points can be and are pursued by banks. The key driver at a bank is stock price. At a credit union, member value should be wired into the DNA. If we want to make this a true differentiator, we have go to walk the talk. How many of you are urging your members to vote? Why not?"
7. Don't Forget About Product & Price.
"We put a lot of emphasis on being member centric, but your members expect you to provide good products at a good price. We believe you have opportunity to move into a new space, we call Cooperative Member Centricity. You've got to be at least competitive across product and price," Lass suggested.
