ST. PETERSBURG, Fla.—Credit unions that are ignoring past practices and “blowing up” their business model are the ones that will succeed in the future, says Brian Scott.
Going to such an extreme, said Scott, chief growth officer at PSCU, is even more important as the majority of credit unions are losing members.
“Some credit unions are starting to really rethink and blow up that old model of what it means to be a credit union and how you service and support your members,” said Scott. “I use the phrase a lot, disrupt yourself. If you disrupt yourself you are doing it before someone else does it to you.”
Ignoring the past as the organization sets course for the future prepares the cooperative to compete in what has become the new normal of digital first financial services, Scott explained.
As CUToday.info has extensively reported, credit unions, vendors, and even regulators have all been wrestling with “new normal” when it comes to meeting member needs moving forward. For longer-term leaders of credit unions and their supplier partners, the new normal can be further complicated by old mindsets and approaches that can be difficult to overcome and are uncomfortable. This CUToday.info series looks at how credit unions are approaching their planning for 2023 and beyond.
“In the new normal the credit union is competing against all the fintechs, including Walmart,” said Scott. “Walmart is adding 9,000 checking accounts a day, and they have as many locations across the nation as U.S. Bank. Their model is built for low rates and fees. Walmart does one thing well—it's low pricing. Low rates and fees, that's a hard model not just for credit unions to compete with but for large banks, too.”
Where to Start
As wise credit unions shed some of their old habits, planning sessions should focus on what the organization has done best, and their advantage in the market, according to Scott.
“The first thing I'm starting with is what are the areas you truly want to compete in,” said Scott. “Credit unions are expanding into a lot of different things, such as trust services, investment services, insurance…in addition to the traditional savings and loans activities. They are diversifying their business model and trying to compete on everything. I think it's imperative for credit unions to really figure out what is it they’re really good at and how do they ensure that they’re the best at whatever that is.
“For example, I was at a credit union the other day and they said they’re better than anybody else in their market at sales, and the numbers prove it,” continued Scott. “They've created a sales culture, and their whole idea is if they can get a member on the phone who wants a loan they can cross sell them five other products. They are really good at that. That is their model, they’ve created a sales culture, and they know exactly what they're good at.”
The Need for Journey Mapping
Brian Scott
Scott emphasized that in the highly competitive digital marketplace knowing who the credit union is and what it is good at is imperative. But how do CUs identify those traits?
“One way to do that is journey mapping,” advised Scott. “In journey mapping you go through everything that you're doing today and figure it out, being honest with yourself. Are you creating a competitive advantage for yourself or providing a service that members can't get anywhere else? If you truly map every piece of what you do, and if you can't honestly say to yourself you do something better than others, you should really consider maybe this isn't a service you should offer.”
Additional Marketing Spend
Another issue for credit unions face is under-budgeting for marketing, according to Scott.
“There's a statistic that came from the NCUA that shows for every .1% of your assets that you spend on marketing you get a 288% return on asset growth,” said Scott. “That essentially says marketing is super-important, and we're not even talking about good marketing, we're just talking about spend on marketing. Too often when I go to a credit union I hear them say they are the best-kept secret in town, and they are proud of that. We’ll, that’s not a good thing. You should want everyone to know about you.”
The Final Challenge
On top of all that, there is one other big challenge, said Scott: Maintaining the personalized service.
Scott said those insights come at a time when credit union membership is declining among the majority of CUs, an issue on which CUToday.info has extensively reported.
“NCUA data show that 52% of credit unions lost members last year. And if you dive more deeply into those numbers 26% of credit unions over a billion in assets lost members,” he said. “So, it's not just small credit unions losing members. That's alarming and it's a bellwether for our industry, and we're not in a good spot.”