MADISON, Wis.-Credit unions far outpace community and national banks in consumer perception and satisfaction, but that doesn't necessarily bring growth or market share according to a new report.
The cooperative industry's strong position in consumer satisfaction leaves very little room for improvement and additional investment will likely deliver little or no benefits to the bottom line, suggests the report from McKinsey and the Filene Research Institute.
"Credit unions have said they are going to be best at service and guess what, they are. Credit unions have said they are going to be best in price and in most markets they are," said Filene Research CEO Mark Meyer. But he added the lack of focus on operational efficiency should have CUs now asking if their strategy is "a winning formula in this financial landscape."
In the past, credit unions were not forced to harness operational efficiency, but a continued harsh economic climate has now made it imperative. Meyer suggested CUs take a close look at their front-line staffers, backoffice employees, volunteer boards and even top-level executives to ensure the right people are in the right jobs. There may be cases where a credit union has outgrown its board or even its CEO and a change is needed to bring the needed efficiency to all levels of operation, the report states.
The report noted that credit unions that embrace member satisfaction at any cost would be better served to "maintain their preferred status but redirect management efforts and resources toward improving crucial functional areas," such as remote delivery channels, in-branch queue lines and problem resolution.
Credit unions are very strong in trustworthiness and member pride, far outpacing any of the nation's largest banks, but their advantage slips precipitously in functional categories such as online tools and convenience. Consumers aged 18 to 34 to actually trust banks more than credit unions because of banks' superior functional tools.
While CUs have linked member satisfaction to loyalty and greater walletshare for many years, that assumption appears to be unsupported by data as it is not turning into a market share advantage.
"Credit unions are winning on service - they emotionally resonate with members, however they are failing to transform that emotional relationship" into walletshare, Meyer pointed out. "Part of the challenge of building off that emotional resonation is that credit unions are not asking for the business. Now is the right time to ask for more from members."
"I have never found a specific industry so averse to selling," McKinsey's Kurt MacAlpine added in the report. "You're not selling tobacco. You're selling financial solutions for people and making their financial lives better. Don't shy away from sales."
While the study's results are not particularly groundbreaking, they do come at a critical time for credit unions.
"Here we sit in a very complex environment and CUs should be thinking about their strategies," said Meyer. "Service has gotten them to this point, but the question is are they over investing in it? Members are changing; who are you going to serve and how?"
