Mich Study: Consumers Like CUs, But Think Banks Safer
Consumers think credit unions are better than banks in three areas -member service, low fees and loan rates. But a new study funded by the Michigan Credit Union Foundation has found that some consumers also think that banks are a safer place to keep their money.
The study was commissioned to record consumer perception of the various industry brands such as credit union, bank, thrift, mutual fund and insurance company. The growing number of name changes within the industry that don't include the CU brand triggered it, said MCUF Executive Director Alan Babcock.
"There are credit unions that are getting away from the SEGS and becoming more generic," he said, adding that in the process, they drop "credit union" from their names. "We believe there are differences between credit unions and banks and it gets much harder to rally together if they are not calling themselves credit unions."
Babcock's former employer, Dearborn Federal Credit Union, is among them. Its new name is Dearborn Financial.
Babcock said MCUF and MCUL officials wanted to collect research that shows that the CU brand "is actually worth something that is perceived by the member."
The results, for the most part, were pleasing.
"The research confirmed that the brand 'credit union' is distinct from a bank, and those characteristics that define a credit union are significantly more relevant to the consumer that those attributes that are identified with a bank," said MCUL President/CEO Dave Adams. "This is the most compelling portion of the research in that it illustrates the weakened position of banks in the areas of consumer importance."
Adams said that banks simply do not rank as highly as credit unions for most of the attributes that are important to purchase behavior.
Where Banks have Edge
That said, some consumers surveyed think that banks have the edge over credit unions in three areas-safety, array of products and services and convenience.
In fact, 39% of non-members said they did not know why they should use a credit union, a significant obstacle to growth.
It showed that in spite of the strength of the credit union brand, banks continue to be top-of-mind selection when looking to open a deposit account, personal loan or line of credit or mortgage. Thrifts, savings and loans and brokerages garnered a very small percentage of mentions-less than 5%- indicating that these brands are not significant players in the minds of consumers.
But, banks are vulnerable.
Of those respondents who stated that a bank is their primary financial institution, only 72% reported being "very satisfied" or "satisfied." By comparison, 89% of the respondents who reported a credit union as their PFI said they were "very satisfied" or "satisfied."
Ironically, credit unions and banks had the same score for "financial sophistication."
Babcock said the information is valuable in that it will allow industry officials to focus their marketing efforts to increase growth potential.
"I think our biggest hurdle is that banks are seen as far more convenient," said Babcock, formerly training and lending manager at Dearborn Financial. "The way we may be able to combat that best is through shared branching...I know that in my previous life at a credit union, we though that the Internet was going to change the way we do things. We thought brick and mortar wasn't going to be important."
That hasn't been the case, he said. When asked what credit unions could do to become a better option as a financial institution, one in eight, or 12%, suggested increasing the number of branch locations. "People like to know that branch is on the corner even if they never go inside," he said.
As far as the safety issue, Babcock said, consumers simply need to be educated about the safety and soundness of the industry, something that is included in MCUL's recent cooperative advertising efforts.
"One of the things that really jumped out at me was the concern (by consumers) about the safety of credit unions," Babcock said. "Some of the respondents felt that banks were a safer place to keep their money. It's perceived as a weakness for credit unions when it really isn't."