52% of Credit Union Members are Fully Engaged, Yet Lose Customers to the Banks

Banking Products by Banking category

In this article, we cover an interesting piece of research from Gallup about customer service, customer engagement and use of services in credit unions, community banks and national banks in the US.


Gallup found that community banks and credit unions have higher customer and member engagement than national banks, but miss out on providing services to members, who go to their banks where ‘deeper’ financial conversations are held.


Customer or member engagement


Gallup found that 52% of credit union members and 37% of community bank customers are fully engaged, and that figure drops to 17% for national banks.


Customer engagement by banking category

Halo of customer engagement


Gallup found that community banks and credit unions have a much larger “halo” of customer and member engagement around them than bigger banks.


This halo seems to come from the interpersonal bonds smaller banks build with their customers.


These organizations have worked very hard and very successfully, to help customers and members feel that they are valued and are getting personal attention. In turn, this helps them see the bank as part of the community and builds a sense of group identity and pride among customers and members.


Failing to meet Members’ Needs


However, despite their positive experiences, customers of community banks and credit unions go to bigger banks to meet their most significant financial needs.


Community banks and credit unions have done the hard work of building engagement, but their current definition of “good service” doesn’t meet their customers’ and members’ needs and goals.


In failing to deepen their relationships with customers, these financial institutions are also failing to reap the benefits that come with engagement, which is share of income, and they are failing their customers or members, too.


Going to Big-Money Banks for Big-Money Advice


Too often, it seems from the Gallup research, that those customers or members think of their community banks or credit unions as merely hospitable places to store money.


They do not consider them trusted financial advisers.


They go to big-money banks for big-money advice, such as credit, retirement, insurance and investment products.


National banks may have a smaller percentage of engaged customers, on average, than community banks and credit unions do. But they do just as well as, if not better than, community banks and credit unions in several product/service categories, and they have a significant edge for credit products.


Banking Products by Banking category

More Expansive Conversations


According to Gallup, one reason national banks have an edge is that they are having more expansive conversations — beyond deposit-related product discussions — with their customers than community banks and credit unions are.


For example, though all banks have conversations with their customers about new accounts,

8% of conversations with customers about new accounts at national banks involve credit products, compared with only 5% at community banks and less in credit unions.


Community banks and credit unions are having less-than-optimal numbers of conversations about key financial events and goals with their customers and members, in spite of their engagement advantage.

The Challenges for Credit Unions


Therefore, these are the challenges for community banks and credit unions:


  • How do they capitalize on their strong customer engagement to deepen relationships with their customers and members?
  • How do they move beyond conversations about deposits to include high-value financial advice?


Customers and Members Want Meaningful Consultative Conversations


Gallup research suggests that for the most part, community banks and credit unions do not prompt consultative sales conversations with their customers and members.


Failing to do so is a missed service opportunity for these institutions.


Sales Conversation Conversion is Highest in Credit Unions


According to Gallup, when credit unions do have a conversation with their members about a product, their members are far more likely to buy than customers of national banks, given credit union members’ engagement levels.


Gallup found that, where the conversations are held, there is a 57% conversion rate among credit unions, 52% among community banks and 47% among national banks.


Credit Union Members Seek Out Conversations


Gallup also found that 88% of credit union members and 86% of community bank customers and report that they initiated an account discussion, compared with 61% of customers of national banks.


These findings suggest that customers and members are more than willing to have meaningful consultative conversations with their community bank or credit union about their financial needs and goals — in fact, they actively seek them out.


Credit Unions must reach out more to meet their Members Needs


If a community bank or credit union does not fight to better serve its customers, and to meet their needs, those customers and members are willing to take that need to a bigger bank.


To gain that business, community banks and credit unions need to be proactive in capitalizing on their higher engagement levels by prompting consultative conversations.


The lesson for credit unions


Gallup research shows that in the US, community banks and credit unions have done the hard work of building trusting relationships with their members and customers. Nevertheless, to better serve them and expand their business with them, these institutions need to expand their definition of what constitutes good customer or member service.


Providing good service goes far beyond making sales or meeting customers and members’ basic needs; it requires financial institutions to look out for their customers and members’ financial well-being, particularly in key financial decisions.


Better People and Better Bankers


The irony is that customers may feel the folks at their community bank or credit union are better people — but not better bankers — than the folks at the national banks.


By proactively helping customers and members better understand their financial needs and providing solutions aligned with those needs, community banks and credit unions can earn income and earn a reputation as trusted financial advisers.


Under the definition of “good service” failing to do so means failing the customer or member.


Lesson for Irish Credit Unions


While the study is for the US, the results are highly relevant to Irish credit unions.


Credit unions would do well to initiate and deepen conversations with members related to their financial well-being. In doing so, they would continue to earn a reputation as nice people and trusted financial advisers, especially credit advisers.


Source: The Gallup study was completed by 19,354 national adults, aged 18 and older, and conducted July 29-Aug. 18, 2015. The sample for the study was weighted to be demographically representative of the U.S. adult population. See http://www.gallup.com/businessjournal/191357/credit-unions-community-banks-engage-yet-lose-customers.aspx?g_source=credit+unions&g_medium=search&g_campaign=tiles for more details.