NEW YORK CITY-Regardless of where a credit union is physically located, competing with big banks with numerous ATM and branch locations is a continual challenge. For those credit unions existing within blocks or miles of the world's financial center-Wall Street-increasing assets and adding members is only achieved by understanding New York's niche market.
"Operating in a financial hub such as New York City means that credit unions are operating in a highly competitive environment with some of the largest financial institutions in the country in close proximity," observed William Mellin, president and CEO of the Credit Union Association of New York in Albany. "And compared to the suburbs, the cost of doing business in New York City is certainly very high."
Many of the country's credit unions will be in town this week for CUNA's America's Credit Union Conference at the New York Hilton. It will be difficult to find CUs in the bank-dominated city, although CUNA will be advertising in Times Square. The $4.3 trillion in assets represented by just two New York City banks-JPMorgan Chase & Co. and Citigroup-are four times the asset size of America's 7,000 credit unions, combined. The largest credit union in town, Municipal CU, located adjacent to the World Trade Center, has $2 billion in assets.
As of June 2013, Mellin noted that there were 95 credit unions functioning in the five boroughs of the city. Mellin said the biggest changes he has observed in the New York market over the past few years has been "an increased focus on marketing. There is a lot of creativity in New York City and that shines through in credit union marketing."
Among those credit unions competing in the shadows of the money-center giants for marketshare is Actors Federal Credit Union. With 21,000 members, 51 employees and four branches, the $176-million credit union's main branch is located on the 14th floor at 165 West 46th street in the heart of New York's famed Theater district. The credit union also has a secondary branch in the Theatre District, a branch in Chicago and one in Los Angeles.
"Whenever I'm asked how we differentiate our services from big banks in New York, I offer a simple response: service, service, service," said Director of Marketing Steven Sobotta. "We can't control the economy, or disasters like last year's Hurricane Sandy. But service can always be controlled."
Located roughly five miles from the New York Stock Exchange, Sobotta explained that proximity to Wall Street-and all the financial talent it hosts-isn't a significant influence on operations.
A 'Great Broker'
"No benefit is derived because of the physical closeness to Wall Street. Wall Street is all electronic," said Sobotta. "We have a great broker who is available to meet with our members for their retirement needs, but the fact that we are so near Wall Street is a non-factor."
While service and talent is critical to the success of any credit union, operating in the Big Apple requires a different approach to business and time management. And for certain CEOs, it proves difficult to compare the New York City experience to any other.
"I've only operated a credit union in New York City, so I don't know what it's like in the suburbs," said Linda Levy, CEO of Lower East Side People's FCU. "Rent is high in New York City, so it's difficult to have a lot of brick and mortar branches. The big banks in NYC are the same as those everywhere else, such as Citibank, Chase, Wells Fargo, and Bank America. Like all credit unions, we differentiate from the banks because we are transparent and affordable."
The $35-million credit union serves 6,000 members with 21 employees. Operating even closer to Wall Street than Actors FCU, Levy said there is one indirect benefit to the her location. "The only advantage we have is that a lot of the banks on Wall Street make non-member deposits in our credit union to meet their CRA requirements."
While not a process of osmosis, the financial professionals that help to define Wall Street are in many cases a tangible benefit credit unions can tap. "Operating a credit union in New York City has its advantages, with increased access to financial industry knowledge and trends," said Mellin. "That also translates into CU professionals and board members who work or have worked on Wall Street."
The Branch Quandary
Despite the popularity and ease of use of mobile banking, having physical branch and ATM locations remains an attractive quality for financial institutions-both from a branding and service perspective. In Manhattan alone, for example, Bank of America has more than 40 branch and ATM locations.
"ATMs are very important," said Sobotta. "In New York City, we are the No. 2 ATM deployer, not just in CU Land, but across the board. Physical locations seem less so, however. Members like to know they have a branch to visit should the need arise. They may never visit, but they like having that assurance."
Sobotta noted that throughout the five boroughs members have access to some 300 ATMs. "We are hindered by having fewer brick-and-mortar locations, but members seem willing to try us out, despite having two locations in New York City."
The majority of New York credit unions access hundreds of surcharge-free machines through the CO-OP Network, noted Mellin. "Additional credit unions participate in our shared branching operation, UsNet, thereby giving them outstanding reach."
The Original Mobile
With two branches, Lower East Side People's FCU took a step in mid June when it redefined the mobile banking experience-quite literally.
"The mobile branch is our newest initiative. We'll be taking it to Staten Island, Red Hook and Sunset Park in Brooklyn, and Northwest Queens and the Rockaways," said Levy. "These communities have approached us to open branches in their neighborhoods and we hope this will be a way to serve them without building a branch. After Hurricane Sandy we realized how much need there is for a mobile branch."
Flood waters from the hurricane shut down its two branches for several days.
The mobile branch is tantamount to a "tour bus" and is equipped with all the components of a traditional branch, without the expensive real estate-related costs in this market. The new mobile facility is just one of several member-friendly options the credit union has implemented.
"ATMs are our biggest issue as New Yorkers are used to having access to their funds on every corner," said Levy. "We let our members use their cards at foreign ATMs for free eight times per month. We hope that our mobile branch will make it easier for our members to use our services."
The Message Challenge
While the CU will be opening a fifth branch in midtown at the end of 2013 or early 2014, conveying the value proposition remains a constant concern. "We do hear from time to time from our members about more convenient services, but when push comes to shove, we've got all the same services that a big bank offers," said Sobotta. "The challenge here lies in people's perception."
As is the case with many potential members, educating them on the inherent benefits of credit unions vs. big banks is always a trial. "For a myriad of reasons, people perceive a CU as lesser in services, lesser convenience. That perception seems to be lingering," said Sobotta. "With time, and as word gets around, that should go away completely. I always let our members and potential members know that we have all the same bells and whistles, just not the same marketing and advertising budget."
In April, CUNA announced a new advertising program using the CBS digital billboard located at 42nd and Seventh Avenue. The billboard campaign, which runs through July 4, implores onlookers to investigate the virtues and benefits of credit unions. The 15-second advertisement runs once per hour and directs people to www.aSmarterChoice.org.
"The feedback has been very positive and credit unions seem happy that CUNA is making a statement about credit unions as people in Times Square pass by," said CUNA spokesperson Pat Keefe.
While the campaign has been geared toward credit union education, Keefe said that when CUNA's America's Credit Union Conference kicks off in New York on June 30, a new campaign will run until July 4. The new message will focus on CUNA's "Don't Tax My CU" campaign.
Meanwhile, in a concerted effort to get the word out on services, Sobotta, along with talented members, penned a song "I Love ActorsFCU" and posted it to YouTube. The country-twanged song/video is juxtaposed against iconic Big Apple landmarks, including Wall Street. The lyrics read, in part, "I love my credit union and let me tell you why, they're not down on Wall Street making people cry. They always had free checking, debit cards and more, and they still believe in service when they meet you at the door."
Big Apple, Big Numbers
Mellin noted that despite the money-center competition in retail banking, New York credit unions have generally operated at a high level as asset and member growth are exceeding national averages. "New York City credit unions added nearly 90,000 new members in the past five years, and just last year alone, asset growth was nearly 8% and member growth exceeded 3%."
Some credit unions in the city have closed branch locations in Manhattan, opting for nearby Jersey City, Queens and Brooklyn. But there are positive signs too as Lower East Side People's experience supports Mellin' aforementioned statistics. "Our members are moving their money out of the big banks and into our credit union," said Levy.
ActorsFCU doesn't have plans for a mobile branch, but will be rolling out a mobile banking app.
"I know others are doing it, but one thing CUs are great at is watching the market and improving on existing ideas and making them work for their individual markets. And in that lies the beauty of CU's," said Sobotta. "We don't have a lot of bureaucracy. We can turn the ship pretty quickly if need be."
