SEATTLE—The biggest new opportunity for credit unions to expand market share? It lies in underlining their traditional values to members and prospective members, according to one person.
And they will have some work to do, as other financial institutions crowd in on traditional credit union values of being member-centric and caring for the member’s financial health, according to John Lass, founder and president of Lass Advisory Services, LLC here.
John Lass
As an example, Lass pointed to a billboard he recently saw that read, “We treat your money like it’s actually yours.” Thinking that was a typical credit union message, Lass said he was startled to see that actually it was an ad for Ally Bank.
Lass’s remarks are being offered as part of a CUToday series on myths and misperceptions in the credit union industry.
Lass noted that during 2016, credit union membership jumped a healthy 4%, five times as much as the United States population grew (0.7%). But more than half that growth came from indirect lending through auto dealerships.
Lass has nothing against indirect car loans, but he notes that members gained through those loans don’t have a traditional bond with their credit unions as do members that are gained through traditional ways. Those new members may just be looking for a car loan, rather than a new primary financial institution.
“The credit union system has the opportunity to sustain strong growth” by “emphasizing the values of cooperative institutions,” he maintains. “The member does come first.”
How CUs Can Grow Share
Lass believes credit unions can advance from a current market share of 7% or so to 10%.
That’s because banks and other financial institutions such as brokerages and insurance companies are starting to look to expand into credit unions’ sweet spot. But the credit union community has the advantage of being there first, and being there for a long time, observed Lass.
But the financial cooperatives won’t be able to compete with the other financial firms on price, product, or technology, he said. “They won’t be able to stand out above the crowd on any of them,” according to Lass. “Very few credit unions have the structure to be a price leader.”
“The financial health of the member, that is what the credit union is all about,” he said.
It’s a strategy credit unions’ competitors are coming around to, even if it hasn’t been a traditional core value for those industries.
In response, advised Lass, credit unions need to develop “a clear marketing message that this is fundamental to what a credit union is.”
Taking Some of the Blame
Lass believes competitive pressure will become even more intense in the next several years.
Credit unions have to take some part of the blame for not educating members on the nature of their cooperative status, according to Lass. “The underlying fundamentals of fairness, transparency, and putting members first, these tend to get lost.”
“No two credit unions are the same,” he continued. But each should be letting members know who they are and what they believe, said Lass, adding it’s also critical to not just talk but listen. “Talk to members and understand what’s important to them,” he advises.
He noted that millennials as a group are the ones who respond most strongly to those fundamental values. “They are looking for transparency, not BS,” he says.
Lass advises a number of credit unions, including Twin Star Credit Union, Redwood Credit Union, Seattle Metropolitan Credit Union, and San Francisco Federal Credit Union.
—Mark Fogarty