By Ray Birch
LOMBARD, Ill.—The biggest challenge for members and would-be members in doing business with many credit unions is there is just too much “friction” in the process, says one expert, who noted that CUs not only must respond to banks that have been working and investing diligently to ensure seamless customer interactions, but also to a generational shift.
And that’s not all, the same expert is cautioning: credit unions are going to need to respond to market changes when it comes to mortgages in 2022, and also deal with an image issue among many consumers, that being CUs have no image for them.
But it’s that friction that is the primary reason credit unions have fallen behind banks in a well-respected national consumer satisfaction study, and it could lead to an even deeper slide for CUs when it comes to consumer satisfaction, said Bill Handel, who outlined for CUToday.info some key areas where he believes credit unions need to focus.
“It’s this notion of friction—how easy is it to use your organization?” said Handel, SVP-research with Raddon.
Handel emphasized consumers’ expectations for service have markedly changed in recent years with growth of digital banking. “This has caused credit unions to drop in the American Consumer Satisfaction Index (ACSI) study.”
As CUToday.info was first to report, for the third year in a row the nation’s credit unions have not only again fallen behind banks but also hit another “historic low” when it comes to consumer “satisfaction” with their financial institutions in the 2021 ACSI.
A Shock to Many
The findings were a shock to many in credit unions in 2019 when CUs first fell behind banks on what had long been considered a unassailable strength. The CU movement was disabused of any idea the finding was a one-off in 2020, when credit unions again finished behind the banking industry on satisfaction.
The 2021 survey revealed bank customers were once again more satisfied than CU members for a third year in a row.
Handel told CUToday.info he reviewed the ACSI data going back to 2018.
“During that time the number-one negative change in terms of credit union satisfaction is around website satisfaction, which the ACSI study shows has dropped by about 7%,” explained Handel. “The next biggest decline is ease of understanding information about accounts, that's down about 6.1%.”
A Generational Challenge
Handel emphasized the data show exactly where credit unions are failing, and that Raddon is seeing some of those same issues in its data.
Handel said part of the problem is generational.
“Millennials have really become the dominant generation, and their expectations are so different than previous generations,” said Handel. “Their view of credit unions is very different (from previous generations).”
Bill Handel
A key point stressed by Handel is digital offerings are just part of the challenge to credit unions. There are other friction points, as well.
“Digital, in the broad sense, and the mobile app, that is not the complete story,” he said. “I think the real issue when you look at the data long term, is how easy it is to use your organization. How easy is it to access information? How easy is it to get into my account? How easy is the entire experience with my credit union? I think this is the biggest challenge.”
Not only have banks been making significant investments into leading-edge digital services, they are also telling consumers they’re easy to use. Handel said major banks are doing a good job of persuading consumers they are high-tech and simple to work with.
“The big banks are spending a lot of money to promote themselves as organizations that make the experience simpler and better,” said Handel.
Making Mobile Easier
As to the challenges around the mobile app and where credit unions can improve, Handel outlined some steps.
“I think things like P2P should be native within your mobile app. It needs to be easy and apparent, as opposed to a secondary app, which in some cases is not in the right place,” Handel shared. “Another thing would be card controls, especially for your younger demographics. The notion that I can manage my card easily and that it’s almost second nature and you don’t have to fuss and work through a second app to get to your card tools. Those are two really simple and easy things you can point out. Even things like general navigation. How is your mobile app laid out and designed? Is it logical for your members to use and easy to find where to go? It's functionality, it's also design, both things are really critical.”
One More Caution
The issue of friction with credit union goes beyond just the digital app, according to Handel, who warned that credit unions must simplify their mortgage lending processes this year.
“We are going to see a dramatic change in this mortgage marketplace in 2022, as we move away from the refinance business,” said Handel. “As the Fed begins to raise rates relatively early in 2022, then you're going to see the refinance business dry up. The driver of the mortgage business this year will be purchases. And then, who are you competing with? You're competing with someone like Rocket Mortgage, which has done a fine job at perfecting this frictionless type of engagement—the way they facilitate the process and the way they keep engaged with the individual throughout the process, making it as easy as possible. If credit unions don't get this right they could slide (in the ACSI study) for a fourth straight year.”
Handel reiterated that credit unions cannot ignore the money banks are spending to promote themselves as frictionless organizations to work with.
The Image Issue? No Image
“At Raddon we just did some research around the Millennial generation, and what we found is that they don’t necessarily have a negative perception of credit unions, they have no perception of credit unions,” he said, adding that data also show the old notion of not being able to trust your bank is fading away. “That's a real challenge, because what's happening is the largest banks are spending very significant marketing dollars to build an image they make your financial life better and easier.”
Handel said Raddon data show Millennials are favoring big banks as their PFI.
“These big banks are using their massive marketing capabilities to present an image of who they are. I think that's a real important lesson for credit unions—to think about how they position and present themselves to the marketplace.”