Credit unions are a unique and formidable segment of the financial services industry, but that alone doesn't guarantee them a permanent position in the marketplace alongside larger, stronger and more established commercial banks.
In fact, it seems as if CUs must try twice as hard just to compete with banks and financial institutions to attract and retain members.
Much of the change in the financial services industry is the result of technological advancements, regulatory changes, and a shift in consumer preferences, which on the one hand has resulted in some erosion but on the other has actually leveled the playing field somewhat. These changes in turn have altered the role of members, making them much more financially savvy and technologically sophisticated, and consequently, enabling them to be more personally involved and in control of their finances than ever before in history.
The changes have also expanded the roles of financial representatives, who are now capable of assisting with all manner of financial planning and investment services, and providing the necessary tools and guidance for their clients to construct a solid financial framework.
While changes in the landscape of the financial services industry sometimes can be considered disruptive, they can at the same time provide opportunities for credit unions to explore new horizons and untapped market segments. An approach that combines a member-first commitment, a true entrepreneurial spirit, sound business fundamentals, and a technology edge may very well result in the identification of niche businesses and customized services designed to fill unmet consumer demands and establish the CU as the trusted advisor for all of the members' financial needs. The key is discovering what those demands are, so that the programs the members want can be developed and implemented.
Ask Fundamental Questions
One of the best ways for credit unions to accomplish that is to ask some fundamental questions. Who are their members? What do the members need today and tomorrow? And most importantly, how do they deliver what their members need? The answers will likely provide the foundation for a strategy that requires part innovation, so that they can continue playing the game under new and existing rules, as well as a focus on tactics such as operational excellence, technological proficiency, and the formation of reliable partnerships and strategic alliances.
There is no single, sure-fire solution for maintaining an equal footing in this highly competitive environment, but a combination of approaches can certainly enhance prospects for success dramatically. Networking arrangements whereby CU's join together through a CUSO can allow CUs to offer a broader assortment of financial products and services to their members and non-members cost effectively. Delivering trust and investment services, insurance products and retirement planning can help fortify the relationship between the credit union and member, and can also provide incentives for new members to join. If they are not already, these non-traditional product offerings should become an essential core component in a credit union's overall strategic vision. Expansion of the product offering, as well as offerings through multiple delivery channels, will enable the CU to attract a greater number of members to use these services.
Don't Underestimate Marketing Value
The value of marketing and promotion to the livelihood of credit unions should never be underestimated. It simply is critical to a credit union's success to brand, position, and create top-of-mind awareness of its products and services among existing and prospective members. Today, being recognized as a leading-edge financial institution offering efficient and diverse delivery channels, featuring the latest in technology and member convenience makes a distinct impression in the members' minds in terms of attraction and retention.
Whenever possible, the credit union should integrate products and services so they complement one another, and utilize knowledgeable member service representatives who have been adequately cross trained to assure that every opportunity to meet a members' need is identified and properly addressed. But the CU also must have the technological capabilities to meet the members' expectation. For example, having the technological capability to link brokerage and banking transactions together, to accomplish automated or on-demand real-time transfers of money is essential to meet the members' expectation of a fully integrated product offering.
Sponsoring periodic seminars that link products and services together and provide valuable financial planning information is another way to market products to members. And even though it has been a significant factor in permanently altering the face of the industry, the Internet can be tremendously useful in providing additional links to related products and services through the credit union's website. The credit union may offer the products directly or through links to trusted sites, customized for their use. This type of a shared arrangement positions the CU as a financial portal in the member's mind. Also important is the vendors' ability to share data about the members' use of the product with the CU. Data integration provides valuable demographic information to better segment the membership for developing future programs and marketing strategies.
Since consumers tend to remain loyal to businesses with which they enjoy a certain familiarity and comfort level, building long-lasting multi-product relationships is essential. And that doesn't apply to members only. Sponsors, vendors and strategic partners are also part of the equation, for they are the spokes in the wheel of progress, and keep it turning as long as the member demand is there, and as long as the vendor is able to integrate their products into that of the CU.
And it should be if credit unions are diligent about creating and managing programs that simplify their members' lives. Easy member accessibility to such programs is an important and attractive element that affords them flexibility and freedom of choice, giving them the option of conducting their business online or face-to-face with full-service capabilities and qualified representatives.
A CUSO or strategic partner can't offer expanded products and services that members will find attractive if it doesn't have the support and endorsement of the credit union, the operational capacity to deliver, and the firm commitment to market those services effectively to justify its continued existence. A "we versus they" sentiment will never work but an "us" will.
Recognizing that there is strength in numbers, credit unions may want to consider partnering with a CUSO, or another CU, in order to take advantage of economies of scale, lower costs and improved efficiencies and to provide member value beyond the normal scope of product offerings. If they can identify where the bulk of their members' financial activities take place, and then tailor products and services in related business segments, they'll find themselves facing a much brighter future than those that don't.
What Else Can Be Done
Since some credit unions already have the technology in place for other services, they can engage in behind-the- scenes enterprises like web hosting, which can generate revenue and increase member awareness of their technological might and expertise. And when the time is right for the CU to implement new programs that may require systems flexibility, an open architecture will minimize operational glitches and maximize speed to market of new services like online and wireless banking.
For their members' sake, it's vitally important that credit unions continue facing off against their competitors in any way they see fit so they can maintain financial solvency and remain committed to the noble and ambitious goals they originally set for themselves: to promote thrift, expand service to the underserved, and provide affordable access to credit and savings programs. These are the reasons why credit unions were established in the first place and also why they need to remain viable and competitive so that they continue their mission of service well into the future. The cooperative nature of credit unions has served them well for many years and should continue to provide some much- needed insulation against an assortment of outside forces that at times can threaten their very existence.
Valerie Seyfert is president of CUSO Financial Services, San Diego. She can be reached at (800) 686-4724, or www.cusanet.com.