CU Member Loyalty Rises at Banks’ Expense

Nearly 60% of members say a CU is their primary financial institution, up from 42% in 2009.

August 2, 2013
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Members’ loyalty to credit unions has risen sharply in recent years at banks’ expense, according to CUNA’s 2013-2014 National Member and Nonmember Survey Results.

Nearly 60% of members now say a credit union is their primary financial institution (PFI), up considerably from 42% in 2009. Meanwhile, banks’ numbers declined from 56% in 2009 to 38% this year, the survey reports.

The August edition of Credit Union Magazine provides an in-depth look at the survey findings.

“The financial crisis of 2008 and 2009 caused many consumers to question their loyalty to banks, which many consumers blamed for triggering the economic collapse,” says Jon Haller, CUNA’s director of corporate and market research.

Since that time, many consumers have embraced credit unions’ not-for-profit, cooperative business model. The financial crisis spurred many members to shift their primary loyalties from banks to credit unions.

Loyalty has become the Holy Grail of marketing because highly loyal members use more credit union products and services than other members, and are the cooperatives’ most passionate advocates.

Credit unions prevail in another key measure of loyalty: active referrals. Overall, 57% of members say they’re “extremely likely” to recommend their credit union to others, while only 40% of members who also use banks say they’re “extremely likely” to recommend their banks.

Also, an overwhelming majority of credit union members (84%) say they “definitely” or “probably” will contact their credit union the next time they need financial products or services.

At the same time, credit unions have a considerable opportunity to develop deeper business relationships with their members, as 85% also have accounts with banks while only 15% don’t use banks.

Members are just as likely to use credit unions as they are banks for checking and online banking, the survey results indicate.

On the upside, 59% of members now use credit union checking accounts, up from 51% in 2009.

“This represents important wallet share growth opportunities for credit unions,” Haller says, “because the checking account is an important product that determines PFI status. As your members’ PFI, there’s a strong likelihood they’ll give you the first shot at meeting their product needs.”

Based on the momentum created by Bank Transfer Day in November 2011, credit unions opened about 2.9 million checking accounts in the 12 months ending in June 2012—more than double the annual increases of previous years.

Credit unions should continue to work on increasing checking account penetration among members by promoting low-fee or no-fee options, Haller says. About 82% of credit unions that offer checking accounts carry at least one free checking program, according to the 2013-2014 CUNA Fees Report.

In comparison, only 39% of banks offer free checking, according to Bankrate.com.

“Credit unions enjoy a competitive advantage over banks with respect to checking and ATM fees,” Haller says. “Members and nonmembers respond very well to that difference once they discover it.”

Online banking gains

In addition to increasing checking account penetration, credit unions also made gains with online banking penetration. CUNA’s research shows that 50% of members use credit union online banking services, up from 32% in 2009.

However, 49% of members also use banks’ online banking services.

While the increase in the number and use of checking accounts—along with higher PFI levels—are positive trends for credit unions, they’ve yet to translate into a significant spike in loan market share growth, CUNA reports.

Credit unions’ lending outlook isn’t as rosy. Since 2009, credit unions have been slowly losing share of members’ vehicle loans, first mortgages, and home equity loans/lines of credit.

Credit unions have 57% of their members’ vehicle loans, down from 74% four years ago—a sharp drop Haller attributes to auto manufacturers’ below-market financing offers.

Credit unions make 20% of their members’ first mortgages, down from 24% in 2009 (but up from a 16% share in 2011).

Credit unions’ share of members’ home equity loans/lines of credit also shows signs of erosion, with a 34% share compared to 39% in 2009.

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