Getting the credit union mojo back

In the last century, credit unions were formed with the concept of “people helping people.” Credit unions filled a niche in the financial marketplace that banks did not serve well. Credit unions competed on price, service and convenience. With volunteers, simple financial services and donated space from sponsoring companies and churches, the cost savings were passed along to the members. Credit unions served small tight knit groups and offered highly personalized services. Credit unions were conveniently located at the members’ workplace and place of worship. Credit unions were more than just a service provider. Members had pride and an emotional attachment to the mission of their credit unions, a positive mojo.  

Today, technology and the internet have enabled other competitors to beat credit unions on price, service and convenience. It is the Amazon effect. The internet enables people to obtain any consumer financial service from their chair. Not only is the internet super convenient, it is often less expensive. In many cases, the service levels of internet competitors is also at a high level. If credit unions are not the leading competitor on price, service or convenience, what is their competitive niche? If all credit unions disappeared, would they be missed?

The winning mojo of credit unions remains, “people helping people. It is the power of collaboration. This concept resonates with both young and old but credit unions have a hard time communicating that concept. The money that members deposit in the credit union is used to make loans to other members to buy their homes, cars, education and start new businesses. Understanding the concept is not the same as hearing the personal stories that connect people emotionally to the essence of a credit union. With the permission of the members, tell their stories of how the credit union made a difference in their lives. The deposits of Bill, Mary and Ted, enabled the credit union to loan Nancy the funds to complete her nursing degree. When a member has a choice of where to deposit his or her money, the stories of how deposits have helped specific people realize their dream will be a compelling draw to the credit union.

We all like personal incentives too. The patronage dividend is the difference maker. The “profits” go back to the members and not shareholders. Last year, DFCU Financial Credit Union in Michigan paid out $30.5 million in patronage dividends to members based on the usage of services. DFCU has a calculator on its website that enables members to see what their patronage dividend will be if they use credit union services. The real time reinforcement of the benefit is a powerful draw to select the credit union for financial services.  Since implementing the patronage dividend calculator, DFCU has experienced substantial growth in membership, despite operating in a state with a declining economy.  

“People helping people” is a winning message but credit unions need to tell it in a way that will connect emotionally. The cooperative model offers an opportunity to incent usage through patronage dividends. The combination of the altruistic and self-interest incentives creates an emotional connection that will put credit unions top of mind when members are considering financial service providers. Credit unions will get their mojo back.

Guy Messick

Guy Messick

Guy was General Counsel to NACUSO from 1987 to 2020. In that position, Guy advocated for credit unions and CUSOs before NCUA and other regulatory agencies. He is retired from ... Web: Details

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