Online Banking Key To Satisfaction and Growth at Credit Unions

According to recently released research, credit unions continue to score higher than banks in six key areas that have been found to drive customer satisfaction.

Interestingly, however, while lower rates and fees are still a significant component of a positive member experience, the impact of improvements in the online/mobile channel delivery will have the greatest impact on increased customer satisfaction in the future.

CFI Group, a customer satisfaction technology and analytics firm, in an inaugural study entitled "2013 Credit Union Satisfaction Index," measured six primary drivers of customer satisfaction on a 0-100 point scale and found that credit unions consistently scored high in all categories, with each driver scoring in excess of 80 points. This score was higher than many other industries including retail banking. 

CUSI Satisfaction Driver Scores

Of the six drivers of satisfaction measured, however, the 2013 CUSI found that only four play a significant role in driving member satisfaction and, therefore, should be the focus of the industry. At the top of the list for primary drivers that could impact future satisfaction were "online banking," "branch staff," "branch convenience," and "information/communications." 

The chart below illustrates the contribution of each primary driver towards increasing member satisfaction. The two missing drivers of satisfaction ("rates and fees," and 'products and services") have already 'maxed out' as a driver of additional satisfaction according to the study, thereby limiting any the impact that an improvement in these two drivers would have on future member growth.

Driver Contribution to Increasing Satisfaction

Are Some Banks Too Small to Survive?

With increasing regulatory capital requirements, declining interest margins, a greater need for investment in innovation and new competition, there are many in the industry who believe that smaller banks may have limited opportunity for growth in the future. 

These pressures may lead to an acceleration of consolidation in the banking industry that impacts both small and mid-tier banks and results in a significantly reduced number of institutions in the future.

While attending both the BAI Payments Connect and CBA Live conferences in Phoenix last month, discussions often revolved around the heavy financial and organizational impact of new capital requirements and of regulatory compliance being faced by institutions of all sizes. It was also clear that the investment in advanced technology and the pace of innovation was creating a distinction between the 'haves' and the 'have nots'. While there were some exceptions, this line of demarcation appeared to be defined by the size of organization.

The question I asked several industry thought leaders over the past couple weeks is whether smaller banks are in a position to survive given the massive industry changes on the horizon. While their responses varied regarding the chances of survival for today's community bank (and smaller credit union), there was unanimity in their belief that smaller institutions must quickly adjust to the 'new reality' of increased capital requirements and regulatory pressures, a greater focus on revenue, and a need to innovate for an enhanced customer experience.

"The thing that keeps me up at night is that we will likely see an industry contraction in the next decade like we never experienced", states Bradley Leimer, vice president of the $3.2 billion asset Mechanics Bank in California. We are moving from over 14,000 financial institutions today to less than 5,000 in the next 10 years (maybe sooner). This is due to the changing nature of consumer behavior with the introduction of mobile and social and technological innovation, but also due to systematic changes to the banking model itself."

Also supporting my informal findings, Emily McCormick, director of research and writer for Bank Director, interviewed the risk officer of an $8 billion bank holding company for Bank Director's 2013 Risk Practices Survey. He told her that, while he found a lot of positives in the regulations coming out of Washington, this could be a challenge for smaller banks that lack the resources and staffing to keep up.

McCormick also believes there's a technology challenge, "Internally, smaller banks need the right resources to do things like manage risk, but they also need the resources to compete. While smaller banks have the significant benefit of connections within their local business communities - giving these banks a potential advantage in business lending - customer expectations for services like mobile and online banking will continue to rise."

Best Banking Blogs Recognized

Bank Marketing Strategy was just recognized as one of the Best Banking Blogs by The Financial Brand, the foremost online publication for bank and credit union marketers. In addition to receiving the Editor's Choice Award, Bank Marketing Strategy was also a Top 5 recipient of the prestigious Reader's Choice Award.

To be included as a winner in 2012, nominated blogs must have had specific relevance to marketers in the banking or credit union industries, been in existence for a minimum of 12 months with consistent content and an RSS feed. It was also noted that all of the blogs selected needed to display excellent writing skills with a deep knowledge of the financial services industry.

Jeffry Pilcher, publisher of The Financial Brand, stated when asked about the recognition, "Bank Marketing Strategy is a blog that combines industry research with real world applications that can be used by financial marketers daily. It is also one of the few blogs that is not a commercial endeavor, but is developed on a personal level." 

Pilcher went on to say, "If I had to pare down to just five blogs that I followed, Bank Marketing Strategy would definitely be one of them. When the blog fell silent for a couple months earlier this year, I was worried that the banking industry was losing one of the best blogs out there. But, Jim's come back with a fury, and he's at the top of his game."

Bank Marketing Strategy was developed more than 3 years ago as a way for me to better understand social media while providing an outlet for my desire to research, write and share insights with the industry I have been part of for (significantly) more than 20 years. It has been an ongoing passion, affording me the opportunity to meet and consult with some of the best people in the industry (many of whom are recognized by The Financial Brand for their blogging efforts).

I would like to thank (and congratulate) fellow bloggers Ron Shevlin, Brett King, Bradley Leimer, Matt Wilcox, JJ Hornblass, Liz Lum, Chris Skinner, Serge Milman, Christophe Langois, Karen Licker, Jim Bruene, Randy Smith, Jim Van Dyke and most importantly, Jeffry Pilcher for your ongoing encouragement and support.

At a time when our current elections involve a great deal of mudslinging, lies and putting down the other nominees, I can definitely say that all of the other blogs recognized are excellent resources I go to regularly and worthy of recognition. 

I would also like to thank all of the readers of The Financial Brand who voted to recognize Bank Marketing Strategy as a top 5 banking industry blog worldwide.

The Changing Definition of Convenience in Banking

Historically, one of the reasons people have chosen big banks has been their large network of branches and ATMs. Especially for people like myself, who travel across the country frequently, finding a place to conduct basic transactions without a fee was a competitive advantage for those institutions with a wide distribution network.

Recently, however, small institutions have been working on ways to erode this advantage, closing the gap through expanded ATM networks, improved online banking and now mobile banking services. In short, technology is quickly changing the definition of convenience for bank customers.

A recent study, The New Banking Value Proposition, from market research firm Chadwick Martin Bailey, finds that credit unions and smaller banks are maintaining their perception of having high levels of personalized service while also catching up with their larger competitors in terms of banking convenience. For those smaller institutions who are focusing on new technologies, this can allow them to more effectively compete for the increasing number of accounts in motion. Additional findings include:

Bank of America Should Become a Credit Union

I have decided that the best course of action for Bank of America may be to become a credit union. Despite the regulatory hurdles and government scrutiny that the bank would need to deal with, it may be an easier course of action than trying to catch a break with our industry's trade press, the general media and definitely those using social media to respond to every move the bank makes.

For instance, American Banker published a story last week from Ed Roberts entitled, Bank Transfer Day Spurs Big Membership Growth at CUs. The story cited that the credit union industry had near record growth in the second half of 2011 . . . 'after the ill-fated September announcement by Bank of America of monthly debit fees prompted Bank Transfer Day'. This growth of 850,000 members in the final six months of the year contributed to an annual growth for the credit union industry of almost 1.3 million new accounts, reported the NCUA.

According to my calculations, a growth of 850,000 new members for the second half of 2011 represents an average of fewer than one incremental new account per credit union (not per branch) a day. The statistics are roughly the same when you look at the annual growth rate as well. Assuming that the number of new members represented incremental growth, the 1.3 million new members reflect only a 1.4% growth over 2010 according to the 2010 Government Census. 

How does this become newsworthy? In almost all U.S. major newspapers, a version of this article ran including a reference to both Bank Transfer Day and Bank of America. The Los Angeles Times ran a headline, Banks' Fees Pay Off - For Credit Unions while Forbes ran an even more sensationalized headline, Credit Unions Membership Soars as Customers Spurn Big Banks. Does any other industry get as much press for close to flat line growth? Shouldn't this be more realistically considered business as usual? 

Banks and Credit Unions Focusing on Onboarding to Build Revenues

There has never been so much pressure on financial institutions to maximize the revenue and relationship potential of each customer. With government regulations reducing fee income, historically narrow interest rate spreads, and consumer satisfaction with many financial institutions wavering, there's a need to ensure that once a customer opens a new account, every effort is made to help the customer understand and use their account, expand their relationship, and increase loyalty to your organization.

While time and resources have been dedicated to new customer acquisition processes in the past, a majority of financial institutions are now working to implement or improve the communication process right after account opening and for several months into the relationship. And instead of a single welcome letter (or nothing at all), more and more organizations are using a series of well-timed, personalized communications leveraging multiple channels to improve effectiveness.

According to the recently completed 2012 Financial Services Marketing Survey done in partnership with The Financial Brand, both banks and credit unions indicated that onboarding would be one of the most important strategies for the next 12-24 months, with virtually no institutions stating that the importance of onboarding would be less.

2012 Financial Services Marketing Survey

Banks and Credit Union Marketers Taking Different Paths in 2012

According to a Rand Corporation research study, consumers usually select a financial institution based on convenience of branches, convenience of ATMs and bank fees. While bank users were more likely to select based on convenience, credit union users more likely chose with a desire to avoid fees. Consumers also cite personalized service when selecting a credit union.


With this as a backdrop, it is interesting to study the divergence of opinions expressed by more than 300 financial marketers from larger banks, credit unions and community banks as part of the 2012 Bank and Credit Union Marketing Survey covered on January 17 on both The Bank Marketing Strategy blog and on The Financial Brand. 


Faced with many of the same environmental challenges of increased availability of data, a proliferation of delivery options, imminent changes in how payments are processed, new marketing communication channels and consumer sentiment that has at times been polarizing, there are significant differences in how bank and credit union marketers view their roles, challenges and opportunities. There are also differences in the channels different types of organizations will use to communicate in the next 12 months.

State of Bank and Credit Union Marketing 2012

Today's bank and credit union marketers are facing a period of big data, increasing devices and more communication channels than ever before. In addition, consumers are challenging the pricing and service levels they receive from their financial institution, and are willing to speak their mind using lightning fast social media channels.


To better understand what bank and credit union marketers are thinking and doing during this period of unprecedented change and opportunity, I partnered with Jeffry Pilcher from The Financial Brand to develop the 2012 Bank and Credit Union Financial Marketing Survey. More than 300 bankers responded from banks and credit unions of all sizes thanks in no small measure to our many friends on Twitter who helped distribute the links to the survey and to ACTON Marketing, who recruited many of their clients and friends.


The results of the survey underscore the primary challenges facing financial institution marketers today:

• The need for better measurement of marketing results during a time of constrained budgets and limited human resources.
• The importance of expanding share of wallet through cross-selling, especially with credit products
• Changing the media mix used for integrated customer communication - with a greater emphasis on less familiar online and social media channels

    View Entire Survey Results   

New Email Marketing Study Highlights Missed Opportunities for Bankers

As social media channels continue to proliferate and traditional communication channels become more expensive, bankers struggle with how to maximize the effectiveness of the email channel within their marketing mix according to a just released study from SubcriberMail, a Harland Clarke company. The study entitled, Email Marketing Within Financial Services Institutions, surveyed 71 banks and 191 credit unions, finding that email marketing among these organizations to be strong and growing.

But, while many organizations are leveraging email to inform and communicate news and product information (50% for both banks and credit unions) and even cross-sell existing customers (56% of credit unions/42% of banks), a far lower percentage of credit unions and banks use email as part of a multi-channel onboarding and/or activation process (26% and 27% respectively) or use email for delivery of an electronic receipt.

Interchange Amendment Could Change Reward Programs

As if we haven't seen enough regulatory changes over the past 12 months with the Card Act and Reg E, now there is the possibility that Washington will limit interchange fees for debit transactions.

As noted in a recent Client Briefing from Celent Research, part of the proposed legislation requires the Fed to determine a “reasonable and proportional” interchange fee, which is no easy task given that interchange fees are there to balance the incentives in the payment system and tend to cover such difficult-to-quantify items as the payment guarantee and convenience.

In other words, the government can't look at just the operational and fraud prevention costs. In addition, current interchange fees differ by sector and are not standardized currently.