For all the talk of member loyalty, there’s a surprising lack of focus on young members. No, not Millennials, who are turning 40, and no, not even Gen Z, who are in their 20s.
The novel coronavirus, or COVID-19, reached pandemic status nearly a year ago. When we first wrote this blog, hundreds of new cases were springing up across the U.S., and most of them were in New York. Today, after what feels like 74 months of social distancing, civil unrest, and murder hornets, we’re seeing the vaccine roll out to high-priority demographics.
Yet over 200,000 new cases are identified daily. And as cases continue to spread throughout the U.S., many companies are reviewing their policies, processes, and procedures for the long term. Instead of short-term branch closures, we’re looking to long-term changes we can make. Many companies are switching permanently to remote work. Digital events are extremely popular and they may continue to be. At least we can all buy toilet paper again.
In times like these, credit unions can step up for their members while also keeping themselves safe. Here are a few Coronavirus safety and prevention tips for credit unions.
By Robert McGarvey
The April CUNA Mutual Trends Report drops a paradoxical bomb that leaves us confused: are credit unions getting bigger? Or are they vanishing?
First the good news: more of us belong to credit unions, reported CUNA Mutual. “Credit union membership growth was on a tear during the first two months of 2018, adding 850,000 new memberships versus the 650,000 reported in the first two months of 2017.”
CUNA Mutual went on: “Credit unions should expect membership growth to exceed 3.5% in 2018. This will push the total number of credit union memberships to 117.6 million by year end, which is equal to 33% of the total U.S. population.”
Roll back to 1960 and, per NCUA data, just 6 million of us belonged to federal credit unions. A similar number belonged to state chartered institutions. That’s 12 million total, out of a US population of 180 million. That’s about 6.7% of us, far below today’s one in three.
Plainly, a lot more of us belong to credit unions now, probably because of expanding FOMs and also because many credit unions offer tempting deals – for used car loans, for instance, and in some markets home mortgages – that bring in members at least for those specific products.
More credit unions also are working smarter and better at communicating that their membership is pretty much open to all. There remain some of us who believe they can’t join a credit union because they don’t belong to a union – but those numbers are shrinking.
Member growth is good. But do the CUNA Mutual data mean the credit union movement should pop open champagne and toast the good times?
At least not just yet. There’s more to digest in the CUNA Mutual data dump.
Toward the end of the report, CUNA Mutual serves up these disturbing numbers: “As of February 2018, CUNA estimates 5,757 credit unions are in operation, down 240 from February 2017. The pace of consolidation in the credit union system is accelerating due to the following factors: retiring baby boomer CEOs, rising regulatory/compliance burdens, low net interest margins, rising concerns over scale and operating efficiency, rising competitive pressures, and members’ demand for ever more products, services and access channels. NCUA’s Insurance Report of Activity showed 9 mergers – 7 mergers were due to ‘expanded services,’ 1 for ‘poor[Text Wrapping Break]financial conditions,’ and one for ‘lack of growth’ – were approved in February with a merging credit union average asset size of $13 million. This is a fewer than the number of mergers reported in February 2016 with a merging credit union average asset size of $10 million. We are forecasting the number of credit unions will decline 250 in 2018.”
Do the math. If the current rate of consolidation continues, by 2028 there will be a bit over 3000 credit unions.
In 1960 there were about 10,000 federally chartered credit unions, per NCUA.
As for the membership growth, CUNA Mutual sees it continuing, sort of. “The membership gain was partly driven by the 502,000 new jobs created during January and February, according to the Bureau of Labor Statistics, and by the tremendous growth in credit union indirect auto lending. During the last few years credit union membership growth has been highly correlated with job creation with the seasonally adjusted annualized growth rate exceeding 4% over the last year. With job growth expected to slow slightly in 2018 to 2.2 million, we forecast credit unions to pick-up an additional 4.0 million members.” (Emphasis added.)
Many credit union executives, at least privately, of course grumble about indirect car loans because the “members” they bring in often limit their memberships to the car loan and they aren’t especially profitable.
Add this up and what’s the meaning? Credit unions need to do a much better job of expanding their relationships with members. It is great to have an expanding number of members, it is not so great not to be creating more solvent credit unions.
The truly good news is that if one in three Americans belong to a credit union that is plenty of bulk to use to seek to grow the institutions organically. For instance: get that indirect car loan borrower using a sharedraft account and a credit card and the credit union is onto something wonderful.
The alternative is to join the thundering herd of dying credit unions, many of which are like wildebeest in the Tanzanian Great Migration, there essentially to be picked off by predators.
Parse the CUNA Mutual data and just maybe the message is a double edged sword: grow membership, especially the right membership, and success may lie ahead. Or shrink into extinction.
That is the stark choice in front of today’s credit union executives.
By Robert McGarvey
New research out of Javelin, sponsored by identity specialist Jumio, makes plain multiple facts and the central one is that digital banking rules and it does so across generations. It’s not just a Millennial thing anymore.
Another key takeaway: most financial institutions – eyes on you – stumble in many key places, particularly in deploying mobile banking. This is eroding member loyalty: they will sometimes simply flee to another institution.
And security concerns continue to be a bother for many users, according to the Javelin research. Despite the fact that generally a mobile banking session over a cellular network is much more secure than one over an online network. No matter. A lot of users remain very worried about safety and digital banking and the smart institutions are addressing these fears.
What all this means is that mobile banking – increasingly the channel that matters in banking – is where credit unions have to double down on efforts to compete with the money center banks and the fintechs that continue to nibble at the user base of smaller, legacy institutions (talking about you, Amazon).
Al Pascual, SVP, Research Director and Head of Fraud & Security at Javelin Research elaborated: “To capitalize on the growing demand for mobile banking as millennials grow in spending power, financial institutions must simplify user experience and address ongoing concerns around security and fraud.”
Dive deeper into the report and the results can surprise. For instance, although 76% of Millennials now regularly use digital banking, 77% of Boomers do – and, yep, that says Boomers have greater acceptance of the channel.
But Millennials are way ahead with mobile banking. 62% use it monthly, compared to 34% of Boomers. Also, claimed Jumio, “millennials report stronger satisfaction with nearly all aspects of mobile banking, compared to Generation X and Baby Boomers.”
Millennials definitely have fewer gripes about mobile banking. 25% of them express concerns with the channel, compared to 33% of Gen X and 35% of Boomers. What kinds of concerns? 28% grumble about “hidden fees,” while 53% complain about ease of use.
The study uncovered valuable findings when it focused on abandonment issues – why do we just close out when midway into a task in a digital banking session? 36% said they did so because “the process [was] taking too long.” 20% complained about authentication “being too time consuming.”
Waste a consumer’s time – and the consumer is the judge of this, not a cautious credit union manager – and they will blow you off. Just that fast.
Here’s the kick in the head: “One-third of consumers respond negatively to their FI after abandoning a mobile banking activity,” reported Jumio. Understand: 7% decided to open an account at another financial institution. And 13% shared their grumble about the experience with family and friends.
That’s word of mouth you don’t need.
In this regard, the Javelin research shows that account opening tools must cater to Millennials, mainly because they are the leading cohort when it comes to adding new accounts and services. Their chief complaint: it takes too long. The antidote: speed it up.
And make it easy to complete the tasks on a mobile device. That is becoming a crucial battleground.
When it comes to authentication, Millennials in particular prefer biometrics, especially eye scans and facial recognition, according to the Javelin data. Farther down the list are legacy modes such as QR codes. Very probably institutions that want to stay on the cutting edge of Millennial acceptance need to roll out multiple biometric modalities.
Another, key piece of advice from the research is: “Put security first (and make sure your customers know it).”
“But… weave security into the customer experience in smooth, fast, intuitive ways.”
Don’t make security into hurdles members have to jump – how many routinely forget passwords? – but do let members know that security protocols are always there, always protecting them. They want that reassurance even if they don’t want the hassles of dealing with in your face security challenges (what street did your father live on at age 6?).
Sift through the Javelin findings and there is much to cheer credit union leaders. There is no way they can compete with money center banks in terms of branches – but they don’t need to. What a credit union needs is top grade digital experiences, online and mobile, that include easy account opening and build in seamless security that will protect members.
None of that is easy.
But it all is doable at credit unions that embrace the digital mandate.
By Robert McGarvey
A new report from RemoteDepositCapture.com makes plain that mRDC now is a must for credit unions. Declared the report: “mRDC is no longer a competitive differentiator, but instead a ‘must-have’ offering Financial Institutions need simply to remain competitive.”
Without mRDC you just may not be competitive. That’s a stinging reality.
This claim, incidentally, is underscored by a separate report, led by the Federal Reserve of Boston, that claimed 73% of the institutions it surveyed already offer mRDC and another 18% “plan to offer.” Just 9% don’t have mRDC on their dance cards.
Small credit unions are very much included among the adopters. Said the Fed: “ Even among the smallest respondents, 78 percent support or plan to support mRDC within two years “ It defined “smallest respondents” as < $100M in assets. And just 22% of them have no plans to offer mRDC.
Big institutions are all aboard. Among institutions with assets >$1 billion, the Fed said 92% already offer mRDC and only 3% have no plans to follow.
mRDC has become a must have. That’s a key reality in today’s new reality where we have entered the era of mRDC 2.0. Now the focus is on new uses, more usage by members, and there also is a wholly new kind of thinking around mRDC fraud and how to combat it.
A lot has happened to mRDC since 2009 when USAA debuted mRDC. A handful more joined the chase in 2009-2010. But then the race was on at full speed inside most CUs to offer mRDC.
Initially many credit unions grumbled about the fees associated with mRDC – fees charged by third party processors – but, by now, most larger institutions have simply decided to suck up the added costs, which incidentally usually are much, much lower than the costs associated with a paper check deposited at a branch.
That’s a fact: mRDC saves a credit union money. While expanding the convenience and utility of the account to members who now can make deposits while dressed in their PJs and sitting at the breakfast table. That is cool and it ultimately is why mRDC usage will remain popular as long as paper checks circulate and these days about 17 billion of them get written in the US annually. That number continues to slip down but it will be years before checks vanish (and aren’t we all waiting for the long predicted death of cash?).
Face it: checks are hanging around and so will mRDC because it just is so much better than driving to a branch or to an ATM.
John Leekley, CEO of RemoteDepositCapture.com, said many institutions have gotten increasingly more skilled at their mRDC offerings.
A plus: Leekley pointed to data that shows a 35% year over year increase in mRDC transactions which means more checks are getting deposited this way.
Today’s take is very different, said Leekley, who indicated that his survey found that “the vast majority (74%) of respondents indicated they had no losses directly attributable to mRDC.”
That means zip.
The big fear still revolves around duplicate deposits – depositing the same paper at multiple institutions – but the numbers don’t show there is a threat of any real magnitude. Leekley’s report goes on: “Exclusive to RemoteDepositCapture.com, the industry’s mRDC Duplicate Loss Rate in 2016 was just 0.035%, or 3.5 in every 10,000 items. To put this in perspective, according to the Federal Reserve, the industry’s overall return item rate was 0.4%, or approximately 40 out of every 10,000 checks deposit.”
What’s next for mRDC? Most credit unions now appear to want to get more consumers depositing more items with mRDC.
Leekley also indicated many institutions are giving a re-think to mRDC deposit limits. Traditionally, some institutions set very low limits, to manage exposure to fraud. But, said Leekley, more effective and more consumer friendly approaches involving smart use of big data are taking hold.
Many institutions also are looking to increase business use of mRDC, added Leekley, who said this was a big frontier for many. Exactly how will be a huge topic of discussion and exploration this year but know this: now is the time for you to begin to seek to push mRDC usage into new arenas.
It’s a good tool, it works. Let its success fuel your institution’s.