How Much is Your Credit Union Membership Worth?

It used to be an abstract question until the Wings – Continental matter where Wings offered the Continental members $200 or so in a dividend if Continental merged with Wings.  Apparently, the Continental members did not want to sell out for $200.  Well that begs the question, what would they have sold out for?

Suppose you have a credit union or bank making an offer of twenty-five cents on each dollar of deposit. If members had $10,000 in the credit union, they would walk away with $2500.  Would that be enough to have them give up their membership?  For many, the answer would be heck yeah.  They can get $2500 for free and if they are not happy with the new owners, the members can change to another credit union down the street, at least until an offer is made to their members.  Community charters make it easy to move around between credit unions.

Unlike shareholders in banks, the value of membership is not just on the amount of money you can put in your pocket from a deal.  Credit union membership is about the value of the service relationship too.  Does the credit union offer value on share and loan rates, convenience of branch locations, convenience of home banking and bill paying, and a wide variety of valuable financial services?  What does the credit union offer in service value?  Before we all start the CU wave around the stadium and say we are the champs in service, have you actually measured the value in your credit union?  Is your credit union really that much better than the competition?  Maybe your credit union is not measuring up against the competitive.  If your credit union comes out on top, great, don’t hide that fact.  Use it in your member communications and marketing.  The time to highlight the value of membership is long before a hostile offer is made not in the heat of battle.

Some credit union industry folks say that the one member one vote cooperative model has value.  My response is there is very little evidence that this is true for the vast majority of members.  Most members do not even bother to vote for directors.  Most members have no idea of the organizational differences between a bank and a credit union and do not care as long as they get the service they expect.  Many young people see membership as having responsibilities and thus is a negative.

At DFCU Financial Credit Union in Michigan, a patronage dividend of 50 basis points is paid on loan and deposit balances.  The more a member uses the Credit Union, the more value the member perceives and receives.  This is a game changer. In the first four years that the program has been in place in a state where the population is declining, membership has grown 5% and the average deposit balance per member has grown over 23%.  The members of DFCU Financial clearly understand the value or their membership.

So my admonition is for each credit union to measure the actual and perceived value of membership in your credit union.  Review the service offerings of other financial institutions and take surveys of your members to see what they perceive to be valuable about their membership.  What is important to them and how does your credit union measure up?  If you compete on price and service what are the unadorned facts about your competitive position?  You cannot be an effective marketer of your services and you cannot combat an offer to “buy” your members without knowing the value of membership in your credit union.

When you do your research and surveys, be prepared for surprises.  If your credit union is not measuring up, the time to fix that is now, not when the pressure of an offering is breathing down your necks.