SPOKANE, Wash.–Credit unions have every opportunity in the world to differentiate themselves from other providers, if they only use the data better.
That’s according to Kirk Drake, CEO of Ongoing Operations, who told credit unions here every company is wrestling with competing in the digital age, but CUs have an advantage if they just act on it.
Speaking to the Northwest Credit Union Association’s MAXX annual meeting here, Drake said the fundamental issue is building “digital trust” in a digital economy, as well as moving from a “service-first model to a technology-first model with service embedded.”
With fintechs and other providers doing much more than just nibbling around the edges of the market, every credit union needs to work on “delivering trust through the browser,” he said.
It’s trust, after all, that attracts new members and cements relationships with current members.
“Most credit unions believe doing data analytics is buying a credit file, appending it, and marketing to it,” Drake told the meeting. “But the fact is your members are doing all kinds of other things and that information is right there in your files. I think as we look at the use of data and the efficacy of that there is much more we can do.”
Drake said every credit union should be concerned with a fact that is often not recognized: 40% of members close their accounts in the first 100 days.
“You spent hundreds of dollars to attract them, they come in, try you out, and say, ‘Eh, this isn’t for me.’ And this is just the people who actually complete the enrollment process,” said Drake, noting that two-out-of-five consumers never even finish the process of joining a credit union.
“We just experienced the biggest financial crisis—the a-ha moment where the world discovers how great we are—but 10 years later we’ve gained a percentage point of marketshare. And at end of day the CUs represent about 8% of all marketshare,” said Drake. “We know we have better service than banks, better trust than banks. We offer more branches through shared branching and more ATMs through CO-OP than just about anyone else out there. And at end of day it’s not about rate. So this tells me it’s not about those things—they are table stakes—but I do believe at end of day we’re missing some of the data in there.”
Businesses outside financial services that have learned to best leverage data have all emerged as leading brands. Drake cited Amazon, Netflix, Best Buy, Uber and Zappos as the leaders, and pointed out, “The expectations are now being driven by other digital providers.”
“Customization is really key,” said Drake. “All of these companies use their data to customize the experience for all of us. They make sure the things they recommend we buy are highly relevant. The real time aspect is a huge strength for credit unions. We have all of the indicators, all of the data. Why aren’t we leveraging that? Why aren’t we making this in a real time way?”
As an example, Drake said a credit union should be able to recognize that a member who has no history of shopping at Home Depot suddenly has three purchases at the home improvement chain. Have they purchased a home? Maybe doing a kitchen remodel? A targeted message that the credit union offers home equity loans needs to be sent to that member, he said.
So how does a credit union differentiate? Repeat and reinforce, excite and educate, automate and motivate, recommended Drake.
“The number-one thing is to motivate,” said Drake. “Look like a credit union, not like a bank. Embrace local. The real message is be relevant to your constituency, your members.”
He noted that “local” can also apply to a profession or field of interest, not just to a geographic area.
Six Different Data Components
Drake said there are six different data components credit unions should be capturing:
1. Digital analytics. “If you’re not using Google analytics, put it on your site. People aren’t in the business of getting a car loan; they are in the market for a car. We have a unique opportunity in credit unions to be hyper relevant. You can be the authoritative source, educate the member and built trust.”
2. Profitability
3. Wallet Share
4. Transaction Triggers
5. Design Data
6. Execution
“A financial transaction is not the start of something; it’s almost always the end of something,” said Drake, stressing that it is data that can get a credit union ahead of the transaction.
Repeat and Reinforce
When building online trust, the repeatable process of telling people when things are coming and when it will occur addresses the human concern that something isn’t going to come or won’t happen, said Drake. It’s the reason companies such as Amazon send updates every day on delivery of a purchase. “Those pieces help quiet that inner demon of failure. Think of those things in everything you deliver in your credit union.”
Drake said credit unions should reinforce their message and offerings through social media to consistently inform and share stories. “We like to read stories about people like us.”
Excite and Educate
“It used to be we lived in a world where it was buyer beware. No more. Consumers don’t use our terminology, so you need to speak their language. Today, it’s ‘In Google We Trust.’ Today, it is seller beware. At end of day, Google has changed the dynamic. If someone is researching things and not stumbling on the content on your website, you missed the opportunity to build trust with that consumer.”
Automation, said Drake, can greatly enhance education, but he stressed it’s not about the tools.
“It’s about how to use the tools to make sure your message is delivered and consistent,” said Drake. “It’s how to make sure all employees hold your values near and dear and deliver them consistently across the member experience. Let your employees read your blog first and fix any mistakes. That way they are invested in it.”
Using his own company as an example, Drake said that five years ago Ongoing Operations put together 600 pieces of content on credit union technology, cutting about $250,000 out of its marketing budget in the process. Previously it responded to about 40 proposals a month, of which it typically won four.
“Today, we do 10 proposals and we win eight out of the 150 inquiries we get,” he said, adding, “For those who are shopping on price, give them the price and let them move on.”
Motivate
“As credit unions start to get bigger, I think they start to lose their way and begin to look more and more like banks,” said Drake. “We begin to lose that differentiation.”
He cited outdoor gear retailer REI as a great example of always stressing its differentiation—the company is a co-op—including its annual Patronage Dividend, which can only be used at REI. Drake said just 5% of credit unions do similar Patronage Dividends, even though he called them “a great differentiator.”
Overall, said Drake, if credit unions don’t better leverage the data they have while other competitors are doing more with less, the future isn’t promising.
“I really feel if we don’t address this as an industry, we’re not going to be here in 20 years,” he said.