The Credit Union Halo Effect

I had a conversation recently with some really smart people working in the credit union space. It was their opinion that, from a technology standpoint, credit unions were lagging banks.

My take: I’m not so sure credit union members would agree.

Research done by a couple of the leading analyst firms challenges my friends’ opinion (which I think is commonly held among CU execs) that CUs are technology laggards. Forrester presented consumers with a list of attributes, and asked them if they’d associate those terms with their bank. Compared to the average across all banks, CU members were more likely to consider CUs:

  • Leading-edge. Overall, just 14% of consumers considered their bank to be leading-edge. Granted, at 16% CUs didn’t come in a whole lot higher. But that number is about double the number of Citizen Bank and US Bank customers that called those banks leading-edge, and five times greater than the number of Fifth Third bank customers. CUs were just one point behind Wachovia, Wamu, and Nat City, and tied with Citibank.
  • Innovative. Twenty-three percent of CUs members described their CU as innovative, five percentage points higher than the national average. CUs outscored BofA, Citibank, Wamu, and Wells Fargo on this attribute.

Jupiter Research, meanwhile, asked consumers how satisfied they were with their bank/CU’s online banking offering. The leader was Wachovia, with 57% of its online banking customers very satisfied. Number two, at 50%, were credit unions (the overall average was 44%).

The percentage of CU members very satisfied with OL bill pay was equal to the overall average, and the percentage very satisfied with online alerts was 29%, which put CUs in a tie for first place with Wachovia (although Jupiter didsn’t say how many CUs offer this service).

So if CUs are technology laggards, consumer perceptions and ratings don’t reflect it. Why are consumers’ perceptions at odds with the insiders’?

  • Halo effect. Overall, CU members are highly satisfied with their CUs. As a result, they form positive impressions of the CU across a range of attributes and offerings — like innovativeness and OL banking. It wouldn’t surprise me, that after saying they’re very satisfied with their CUs OL banking offering, if many of these CU members couldn’t identify specific features or functions that lead them to be very satisfied.
  • Lower expectations. Neither Forrester nor Jupiter broke their findings out into the demographics of the banks/CUs customer bases. It’s just a hypothesis, but older consumers might have lower expectations for the technology offerings than younger consumers who’ve grown up with the Internet. And regardless of demographics, CU members might not expect that their CUs to be as technologically advanced as big banks (that might not be the reason they chose to do business with the CU in the first place). As a result, any solid technology offering the CU provides might be evaluated in a different light.

What does this mean if you’re a CU exec? Two implications:

1) Your point of reference or benchmark regarding your technological standing should be your member base, and not other FIs. Being a technology laggard might just be a figment of your imagination. You’re only a laggard if your customers or members think you’re a laggard.

2) Satisfaction ratings should be evaluated in a broader context. You should be asking: Are younger customers more satisfied than older customers? Are customers with less OL banking tenure more satisfied than those with longer tenure? What percentage of OL banking customers raised or lowered their satisfaction rating from the previous survey?

Thanks to Charlie and Doug for their help on this one.

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3 thoughts on “The Credit Union Halo Effect

  1. Lower expectations are the key I think. Most people tend to think of credit unions as the financial institution that sits in the broom closet and they just tend to expect less. And another key thing you mention is the differences in age groups and generations with satisfaction. While online banking might be cool and meet expectations for the average credit union consumer, I still want my balances via RSS and I want a kick ass, smoothly integrate online banking site.

  2. Thanks for this. Interesting. I say Halo…and I also believe that members have higher expertations. I love it that its referenced this bank and that bank and then ALL of the CUs. Just like the advocacy stuff Forrester does.

  3. I agree. It’s the consequence of customers who feel they are getting better service.

    In the commodity service we call banking, the big differentiator is demonstrating a genuine interest in ones customers.

    Thanks for the insight.


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