Service Won’t Save Your Credit Union

by. Stephen Nelson, CUDE, Utah Credit Union Association

All the time in planning sessions with credit unions, I ask boards and management, “Why would someone use your credit union over THE BIG BOY IN TOWN? They’re more convenient than you and offer the same products and services—and probably better ones in some cases. Why would someone use your credit union over them?”

It’s a hard question, and it’s not very nice of me to ask, but someone needs to do it, because that’s what it boils down to. Why on earth would someone join your credit union over a seemingly more attractive, well-known, better equipped-for-competition option?

Almost every board concludes that SERVICE is the reason people would and should join their credit union. “We provide better service.” “It’s more personable.” “We know our members.”

Almost no one has data to prove his, but they have stories and so we accept it as fact (although my personal experience indicates that service at larger credit unions is usually entirely adequate for my needs, and in some cases excellent).

Whenever a credit union relies on SERVICE, I worry. I don’t think SERVICE is enough to keep business. The lure of low prices, more convenience, and better products combined with “adequate service” is simply too strong for a majority of consumers.

This isn’t just a credit union industry thing. It happens in every industry. Most people value low price more than good service, and low price is most easily provided by large companies with strong economies of scale.

So what can credit unions that can’t have 200 branches and all those economies of scale do?

Establish relationships.

Maybe that’s what boards mean when they say they have good service. “We establish strong relationships.” I’m sure in some cases that’s true. But they need to be deliberate about it. And they need to build the right relationships.

I’m not just talking about members—although that’s a great place to explore. From my 5,000-foot view, there is nothing more valuable to a credit union than a strong relationship with an excellent SEG. Close behind is a strong relationship with a community. Those kinds of relationships seem to be a good barometer of small- and mid-sized CUs health.

If your credit union has no such relationships, explore the possibility of establishing them. If you have relationships but they’re weak, take a look at strengthening them. Your only other options, as far as I can tell, are to have an alluring brand, or to compete on price.