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Bank Transfer Day has come and gone. We might never know exactly how many new members—in flight from banks—joined credit unions during the time leading up to, and following, the Nov. 5 date.
But the effects of Bank Transfer Day are likely to be long-lived for credit unions in a very positive way, if we can take advantage of it.
For people too distracted by trying to keep up with the Kardashians’ marital escapades, or to guess next week’s front-runner for the Republican presidential nomination, Nov. 5 was the day consumers were encouraged to transfer their accounts from large banks to credit unions.
This was in response to large banks’ announcements that they would increase fees on debit card use, under the guise of making up for reductions in revenue caused by the Federal Reserve’s new rule cutting debit interchange fees roughly in half.
The rule resulted from the “Durbin Amendment” to the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010.
As important as Bank Transfer Day was for credit unions, there are signs this will be the beginning of Bank Transfer Season. This would be very good news for credit unions.
Initially, this will affect credit unions in two ways:
1. Many consumers who aren’t already members will join credit unions; and
2. Many current members will transfer more of their business to credit unions—making credit unions their primary financial institutions.
Combined, these two trends will mean more members and a greater wallet share from existing members.
This positive growth for credit unions is likely to last well into next year and beyond because:
• Banks will continue (although in a more subtle way) to seek additional revenue from retail customers. Recently passed consumer financial protection legislation has created serious new compliance burdens for credit unions, but the effects on banks will be even greater.
The new rules require more transparency, so banks no longer can hide fees. They must change their business models and be more explicit on pricing. This will make credit union offerings relatively more attractive.
• The people who’ve recently left banks to join credit unions represent an important demographic group. Frequent debit card users tend to be from the younger segment of the population—the very group whose awareness of credit unions is relatively weak.
It’s also the group credit unions must attract if they wish to flourish in the future.
As large numbers of younger new members discover credit unions, they’ll tell their friends. And because of social media, today’s youth are much more effective about telling their friends what excites them than previous generations were.
This could lead to an extended period of membership growth among younger consumers.
For this viral membership growth to occur, new members must like what they see in credit unions. Make sure they do.
These new members previously did their banking elsewhere because other financial institutions met their needs—primarily for convenience and online access. They must find that they can meet these needs just as well at their new credit unions.
Far be it for an aging economist to give advice on how to market to young members and potential
members. Seek and take the advice of your credit union’s marketing professionals who know what they’re talking about.
Two obvious features to mention:
• The wide availability of no-fee ATMs, through the CO-OP Network and other arrangements; and
• The availability of online and mobile banking.
But each credit union must find its own way to delight these new members. This could lead to substantial benefits down the road—not the least of which is the likelihood these new, younger members will look to the credit union for loans in the coming years.
BILL HAMPEL is CUNA’s senior vice president of research and policy analysis/chief economist. Contact him at 202-508-6760.