Credit Union Geek

Marketing, Strategy, and The Force by Joe Winn

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Unseen Credit Union Competition: “Respond Immediately!”

Credit unions aren’t just “cheaper banks”, nor are they “banks owned by the people”.  They’re unique community institutions.  At least, I still believe this.  Do you?

This article dives into what happens after a member closes a loan (auto or mortgage) with you. Specifically, we look at the solicitations they receive. And what your role is in helping your member understand it all.

Who’s Your Competition?

It’s tempting to think that your primary competition and challenge comes from the big banks. Sure, they offer similar products and target the same groups of people (ie. your potential membership). Their marketing efforts present them as a community-focused option.  They make it about their customers, not about the money.  I’m no expert, but it definitely sounds like they’re competitors.

It’s true.  They are.  And for many people, you can offer a better option which will save them money.  Yet, besides the exceptional record of Wells Fargo, the national banks don’t engage in “slimy tactics” or attempt to steal customers by just-nearly-but-not-quite misrepresentation.  On the whole, banks (both community and national) want their customer’s business and aim to gain and keep it through honest means.

However, there’s others with a slightly different agenda. This article looks at competition to credit unions besides banks, and how you can use your existing products, member relationships, and educational mission to beat them at their own game.

Loan Closing & What Comes After

Last year, I bought a new car.  Yes, I have a lot of fun when driving.

Shortly after, I began to receive letters in the mail much like this:

Real…ish

Packed in official-appearing envelopes (many had that, “fold each side and tear in order” government style design), with names such as, “Automotive Services Department” or some other bogus, yet “maybe they’re real?” title, they appeared in masse.  They encouraged, no, insisted I follow up immediately regarding my vehicle’s impending warranty expiration.  Never mind it’s a new car, with a 3 year factory warranty included.  I COULD BE AT RISK FINANCIALLY IF I DON’T ACT NOW! Of course, the action to take is to get in touch with whomever runs these shady enterprises (they’re not affiliated with any of your VSC providers, trust me) and make sure my car is protected.  Much protection, indeed.  “Do you cover diagnostic time and taxes?” is a question I would feel obligated to ask if I ever were forced to reach out.

Why mention these letters?  Because every time your member finances with you and every time they don’t, they’re getting dozens of mail pieces like this.  And this is what they ask themselves: Do I know for certain it has nothing to do with my credit union?  Is it a scam?  Can I get a better deal from here or my dealer?  Is it even something I need?  What’s the harm in a call?

It’s unlikely your members will ever ask you any of these questions.  But you can bet they’re asking someone, whether it be Google, that helpful voice in their head, or a spouse or friend.  You can be there for your members in more ways than you think.  And this is what sets you apart.

A Loan Closing Tip

Imagine if at every loan closing (that includes mortgages, because I get things like this for my house all the time), you had a short conversation about potential fraud and things to beware.

“Ok, Jenna, we’re just about done.  Are you excited?  Because I am!  Since we’re here for you across your entire financial life, we want to make sure you’re empowered to spot what’s real and what isn’t.  Here are some examples of letters you’re going to get in the mail, maybe even in your Inbox.

They’re not from us.

All of our communications will always include your member number and our logo. These make themselves look really official, and often have scary wording. Crazy, right?

Please look out for these and make sure any future interaction about your financing is with myself or someone else here at ABC CU.  I know it may seem silly, but we used to see many members fall for similar scams, and we want to help ensure you’re not one of them!

And as far as vehicle service contracts go, we’d be happy to have that discussion to see if it makes sense for you!  Does this make sense?”

Has anyone ever said that to you?  What if they did?  How would that make you feel?  A bit more trusting of your credit union, right?  That they have your back, and want to go above and beyond to keep you safe and secure?  That’s a credit union I want to do business with and share with my friends and family.

In a future post, we’re going to address GAP and warranty coverage (the legitimate ones) and how they differ (or don’t) between credit union, dealer, and insurance provider.  Later on, we’ll educate each other and members on buy-here-pay-here lenders.

It’s About Your Credit Union Mission

Remember, your mission likely includes something about ensuring your members live a financially successful life.  Here’s one easy thing you can implement which may make a big difference for your members.

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The 3 Challenges Any Effort Must Overcome

This post began as I considered technologies emerging within the financial space. From chatbots to mobile app improvements, I don’t have to explain all the emerging…stuff. We were going to have a nice chat about how people of different generations, careers, technological comfort, and more may react to all of it.

But that’s casting too small a net. I missed the point. The topic of this post isn’t about technology. It’s about you. Not you the humble, beautiful, and giving person reading right now. You the credit union. You the dentist. You the grocery store.

Where am I going with this? What I’m about to say is going to sound so simple that you’ll want to laugh in my face. Then you will realize it’s been in your head all along. As it has every one else.

There are three challenges you must overcome in order to get someone to change their behavior. That could mean using your mobile platform. Or flossing. Or even just grasping that you exist as an entity. Those three challenges are as follows:

  • Don’t know
  • Don’t care
  • Don’t want to

Don’t Know

If you’re trying to attract new members, you have to overcome each of these challenges, in order, before they’ll make the switch. First, it’s possible they don’t know you exist. How can you solve such a massive problem? Marketing? Word-of-mouth campaigns? That’s up to you. Then, there has to be a reason for them to pay attention. Why care about opening a relationship with your credit union? Lower fees or interest rates are fine, yet when talking credit cards, security is the first priority for switching. Help members care by understanding what they care about.

Don’t Care

After putting all this glorious energy into reaching out, informing, addressing their pains, and making it easy to get started, there’s still another obstacle. Even after acknowledging their current strategy might not be ideal, they just don’t want to make a change. I know people who refuse to use online banking (they’ll never go mobile). To them, it’s a security nightmare and just isn’t worth anything it can offer them. These people don’t care about what you are offering.

Don’t Want To

You’re not going to attract everyone, no matter what you do. That’s why my readership is only 84% of the credit union industry (I’m estimating on the fly…probably close, right?) and not all of it. And that’s ok. Though I still need to ensure more people know about my blog (and speaking), then give them a reason to care. Those who don’t want to care, well, that’s their choice. I’m still happy to extend honorary geek status to them at any time.

TL;DR (Too Long, Didn’t Read) Lesson: Everything you do has to overcome three challenges to succeed: Knowing. Caring. Wanting. If you miss one, said thing won’t be a success. How do you seek to overcome these Big 3?

Plaid Among Fintechs You’ve Never Heard Of But Changing Banking

No, I’m not talking about the clothing pattern. Plaid is a Fintech startup which just announced a Series C funding round of $250 million. That gives them a valuation of $2.65B. Yes, billion. Chances are, 25% of your credit union members are using their service without even knowing. And Plaid isn’t alone, either in ubiquity or in valuation.

Powering The New Banking

Plaid powers the backend technologies which connect cool financial apps to your bank (or credit union) account. Little players like Venmo. Which is owned by PayPal (they bought them in 2013). I’m sure these aren’t worth your attention.

It’s not like Plaid does anything which may make your credit union into a “Dumb Bank”, simply a place where your funds sit and nothing else. No, they have no plans to take on other traditional bank services. Like mortgages. Oh, it appears they do. But it’s ok, they want your help.

This appears to be a common theme. PayPal’s new debit card “checking program” links with banks across the country to provide needed services, like deposits, check scanning, and lending. ApplePay partners with Discover and GreenDot Bank, itself a Fintech providing reloadable debit cards.

You’re Still Necessary, But Only For the Boring Bits

Fintechs look to partner with banking institutions because the bank part is hard. There’s lots of regulations, safeguards, and steps you know lots about. Basically, it’s easier to buy space in the safe than to build one yourself. Except they don’t pay you. Your resources get used, your members find great value, and might forget you’re the one holding their money.

“So if Fintechs need us banking institutions, why worry?” It’s a good question. And I’ve answered it before, in reference to lending services. How do you best serve your members? Is it with zero interaction, contact, or even awareness from them that you exist?

Of course not! You’re a part of their lives and they know it.

Well, what if your members never knew who you were? What if you were as recognizable as the brand of tires on your car? (I think I have Dunlop, but I’m not sure, and don’t really care, so long as they do their job) Could you still accomplish your mission?

At Least There Aren’t A Lot Of New Fintechs…

If only. Here’s a short list:

  • GoodMoney – Taking a piece of the credit union playbook, they give shares to all users, making them part owners, then use funds to support charitable works. Mission-focused and mobile-centric.
  • Netspend – Prepaid debit products in lieu of using traditional banking
  • Gotransverse – Backend software to allow complex billing solutions for companies
  • Simple – Banking with an app and debit card
  • Koho – Canadian firm with similar product to Simple. Site makes it clear “We are not a bank”, yet with their card, you don’t really need one.
  • PayPal – Besides powering online payments, making business loans, offering the underbanked a checking solution, they can also replace your banking needs. At least they did for this financial sector journalist.
  • Amazon – Business lending, potential checking, and pretty much anything…they’re Amazon

This list is by no means exhaustive. And, more importantly, the larger firms listed (and many more not included, like big banks and other tech companies) acquire start-ups for millions once they offer a competitive advantage. That’s a competitive advantage over you, to be clear.

What Can Credit Unions Do?

It’s unlikely your team will develop the next billion dollar valuation financial services solution. They’re too busy serving your members and countering the efforts of emerging Fintechs!

For me, the only answer is in partnerships. Some Fintechs seek to replace you. Others, like Kasasa or Econocheck (Disclosure: My company represents this service) focus on adding value to your services, while keeping your name front and center.

Your members will look to make their financial lives easier. Services like Plaid might be part of that answer. However, to remain relevant, you must deliver clarity on your value proposition to members as well. Take a look at some of these Fintechs, understand what they are doing and why they are so popular, and then decide how you can adopt these principles to grow into the future!

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