LOMBARD, Ill.—Consumers have three primary misconceptions when it comes to credit union: They’re primarily for needy people, their technology is inferior to commercial banks, and they are hard to join.
David Irwin, president of Raddon here, is quick to debunk each of these. “Credit unions are for everybody. Their technology is just as good as any bank. Anyone can join.”
Irwin’s remarks are part of a CUToday series on “fake news” in the credit union business—myths and misconceptions that might require some strategic rethinking by the industry.
“Credit unions have a wonderful value proposition for members,” he says. “If you don’t have to divest money to shareholders or to taxing authorities, you have more to offer members.”
As far as the technology piece, some banks are market leaders, and others lag. “The same is true for credit unions,” he says. “Effective credit unions are trumpeting that fact, that you can get as many things done on mobile devices as at banks.”
It isn’t just in technology where credit unions have made investments to be competitive. Many CUs offer some of the most attractive branch networks in the country, as well, said Irwin, citing San Antonio-based Randolph Brooks FCU as one example. RBFCU is “on par with the top banks in America,” he said.
Many others, he added, are bright, technology-enabled, friendly, service-oriented, and modern.
An Old Strength
And while credit union marketing has become more professional and powerful, what still works best for CUs is an old strength, said Irwin: they have “cultivated word of mouth.”
This happens when “people share things that make them look smart and cool and in the know,” he observed. “Being a credit union member checks the box. It’s a smart thing to do.”
Strong word of mouth creates members who become ambassadors for their credit unions. “People tend to be prouder of being a member of something than merely being a customer,” he noted.
What the most successful credit unions are doing now, he said, is figuring out “how to use information to their advantage.” Those CUs figure out how to understand existing member needs, the segments they fall into, and additional products they may need.
'Needle Moving'
Data also can be used to figure out “what kinds of households are inclined to join credit unions,” he reminded, as new member growth remains critical.
Of course, some credit unions are now acquiring banks as they also continue to merge in other CUs, which he described as the “needle-moving way” to get new members. Acquisitions make credit unions more efficient, freeing up more money that can be deployed to their members’ benefit.
David Irwin
“Ultimately, credit unions can be a much larger fixture on the financial institution landscape,” he posited.
As an analogy, he points to the mutual funds sector, where the dominant player (Vanguard) is a not-for-profit.
Vanguard was modeled after a credit union, he said. “Some set of ambitious credit unions has the potential to become the Vanguard of the retail bank business.”
Raddon, a research and analytics company started in 1983 by Gary Raddon, was acquired by Fiserv in 2013.
“More fundamentally, we are about helping credit unions grow,” Irwin says.
Raddon provides analytics that a credit union can use to benchmark its performance, published research, an annual meeting for peer networking, and consulting on different growth strategies.
—Mark Fogarty