From the very beginning of their inception, community banks and credit unions (CB/CUs) have been loyal in their commitment to helping define our communities. Money deposited is lent out to people in the area…to build businesses, homes, schools…to build a community. Over the past few decades, however, this important role in the community has been left in the shadows of the big financial institutions.
Today, the five largest banks in the United States own nearly 50% of the total assets in the U.S. banking industry.1 In New Hampshire, almost 60% of the market share of deposits is held by the five biggest banks; in contrast, the smaller banks and credit unions have roughly 22% and 16% respectively.2 The bad news is that online-only financial institutions have been gaining market share.
Online banking is the dominant channel for frequency of use and preference, with 60% of customers using it at least weekly and 28% preferring to do their banking online. The good news is the branch is far from dead, coming in second with 24% of customers preferring the branch over all other channels.3 How are the CB/CUs supposed to change their approach to compete against the online banking frenzy and larger than life financial institutions, you ask? I wish I could tell you it was a simple and easy solution. I believe that the easy way out is usually not the best one. So here’s my take on it…
Satisfaction is not equal to loyalty. Even satisfied customers will change their primary financial institution for less expensive products and services. But consistently differentiating your CB/CU based solely on price and products is an endless game of trying to outdo one another…and some customers will always go after the deal. That’s not the game you want to play. Fortunately, other customers are willing to pay a little more for better service and ease of conducting business with value-added services such as assistance in the process of buying a car, making the home buying process simpler, and more personalized service. Here is where today’s CB/CUs have a tremendous opportunity to expand their relationship with customers.
Most customers view the relationship with their bank as purely transactional, not advice or educational-based. But consider this: 35% of customers don’t use their mobile phone to do their banking, even though mobile banking is a transaction tool perfect for making payments, depositing a check, or viewing recent activity.1 Interesting, right? So what can we take from that? One is that you might need to take a fresh look at your customers. Yes, there are the old-timers and the millennials, but there are so many types of customers within those groups. The younger generations tend to be a bit more savvy with the digital world, but not so savvy with finances; whereas the opposite may be the case for older generations. Of course, across generations, you’ll also find some that are savvy in both as well as those that don’t know much about either. This gives way for a perfect opportunity to provide your customers more value with customer education initiatives and becoming a go-to resource for financial questions.
Here’s another way to look at it. Online-only bank customers are driven by the simple and seamless transactions, ease of access, and lower fees. Big banks provide convenient online and branch access to customers and have been using technology to get data in front of their employees to provide better service for a few decades. These financial institutions understand the balance between technology/data and people, which is why they have gained such a large part of the market share. But what do CB/CUs have that these don’t? Well, the clear advantage over the virtual online banks is actual human facetime. And over the big banks? The advantage for the CB/CUs is relationships and service, service, service! Consider this: human interaction at a branch gives customers the perception of more trust in their bank as well as getting more value.1 So make sure you are taking full advantage of any facetime you get with your customers.
Big banks do this well. They have a plethora of accessible data on their customers and provide their employees with all the information they can to make the most of the human connection. CB/CUs, however, are often constrained by their legacy systems and technology, which keeps customer data locked away in silos of information and unavailable to employees. By using new data solutions and business intelligence, CB/CUs would gain invaluable insights about customer preferences in seeing data across all channels. (For more info on this topic, see our article “Bad Data = Bad Service.”) Sharing this kind of data with employees enables them to look for the customer stories hidden in the data, which is a great way to increase the relevance of conversations and facetime with customers and members.
The bottom line is that customers expect certain things from their bank or credit union today, like simple processes, 24/7 availability, and self-service. Ultimately, building trust with customers is the best thing a financial institution can do. And I don’t mean just with handling money. Showing customers that you can be their go-to resource for their life’s finances with unbiased advice helps to reinvent and cultivate loyalty. And finally, make sure you have superior service across all your channels.
Having a relationship with the people in a community and providing them with the best service possible has always been the heart of community banks and credit unions. And CB/CUs still play a vital role in our communities, so now is the time to get your technology in order and do what you do best…help people! And remember, by listening to your customers and having quality conversations with them, you are bound to build loyalty.
1 - SP Global, Market Intelligence (Sept. 2016) Creating Value from Data. marketintelligence.spglobal.com
2 - Credit Union National Association (2016) NH state facts sheets https://www.cuna.org/Research-And-Strategy/Credit-Union-Data-And-Statistics/State-Fact-Sheets/
3 - Accenture Consulting (2016) 2016 Consumer Banking Survey. https://www.accenture.com/us-en/insight-consumer-digital-banking-survey-2016