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An E-Scan Report

SURVEY OF

POTENTIAL MEMBERS Opportunities and Challenges in Growing Your Membership

2009-2010

How much do you really know about your members and potential members?

It’s planning time. Shouldn’t it be time for a member survey? Is your credit union looking to decide… • Which new services to add • What policies and service-quality issues may need some fine-tuning • What your advantages are over your competitors • What you can do to build stronger member loyalty and attract more of your members’ financial business As a board member, you know that getting member feedback is a key component in ensuring that you’re effectively meeting your members’ needs and addressing their concerns. A CUNA Survey gets real answers! We can help you discover what members and potential members like, want and need – essential information for product and membership growth. Compliment your own good business sense and efforts to keep a pulse on your members’ financial needs with a Member Survey from CUNA Research – the leader in credit union-focused research and provider of the quintessential strategic planning tool, the Credit Union Environmental Scan (E-Scan). Visit: advice.cuna.org and choose Member Surveys/Custom Research Email: mktresearch@cuna.coop Call: 800-356-9655, ext 4172

Survey of

Potential Members

The 2009-2010 Survey of Potential Members is produced by the Market Research Department of the Credit Union National Association Written by Jon Haller, director of corporate and market research

Published by: Credit Union National Association P.O. Box 431 Madison, WI 53701 FOR MORE INFORMATION Visit advice.cuna.org Call Toll Free 1-800-356-9655, ext. 4172 Email mktresearch@cuna.com ÂŠ 2009 Credit Union National Association, Inc. Stock No. 28533

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Table of Contents

Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . vii Chapters Chapter 1: Membership Growth Opportunities. . . . . . . . . . . . . . . 1 Chapter 2: Keys to Attracting More Members . . . . . . . . . . . . . . . 11 Chapter 3: Loyalty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Chapter 4: Use of Financial Services . . . . . . . . . . . . . . . . . . . . . 20 Chapter 5: Delivery Channels . . . . . . . . . . . . . . . . . . . . . . . . . 23

Results Tables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 Survey Methods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61 Resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62

Survey of Potential Members

List of Tables

Chapter 2 2-1

2-2

2-3 Chapter 3 3-1 3-2

3-3

3-4

3-5 3-6

3-7

3-8

3-9 3-10 3-11 3-12 3-13

Keys to Attracting More Members Familiarity with Financial Services and Fee/Rate Benefits Available at a Credit Union What Credit Union Could Do to Persuade Nonmembers to Begin Using the Credit Union’s Services Current PFI Is Same Provider Relied on as PFI Two Years Ago

Chapter 4 4-1 4-2 4-3 4-4 4-5 4-6

Use of Financial Services Use of Convenience Services Use of Saving Services Whether Have Loan Use of Loan Services Amount in Outstanding Loans Number of Balance-Carrying Services Used at a Bank

Loyalty Overall Agreement with Statements Regarding PFI Agreement with the PFI Statement: Their Office(s) Are Conveniently Located Near My Home or Workplace Agreement with the PFI Statement: The Quality of Service Provided by Their Staff is Excellent Agreement with the PFI Statement: They Are (or Would Be) Committed to Resolving My Service- or Account-Related Problems to My Satisfaction in a Reasonable Amount of Time Agreement with the PFI Statement: I Feel Like They Truly Appreciate My Business Agreement with the PFI Statement: They Provide Me Good Overall Value, Given the Fees Charged and Rates Provided Agreement with the PFI Statement: I Trust Them to Have My/My Household’s Best Interests at Heart Agreement with the PFI Statement: They Are Involved with Events and Charitable Causes in My Community Overall Satisfaction with Bank Satisfaction with Bank Compared with One Year Ago Likelihood of Recommending Bank to Others Bank Net Promoter Scores Nonmember Profiles Regarding Bank Loyalty

Chapter 5 5-1

Delivery Channels Frequency of Using Delivery Channels Compared to One Year Ago Frequency of Using Internet Banking Channels Compared to One Year Ago Frequency of Using Bill Payment via the Internet or via Email Compared to One Year Ago Frequency of Using Debit/Check Card to Make Purchases Compared to One Year Ago Frequency of Using Automated TouchTone Phone Service to Conduct Financial Transactions Compared to One Year Ago Frequency of Using an Automated Teller Machine (ATM) to Make Deposits Compared to One Year Ago Frequency of Using an ATM to make Withdrawals Compared to One year Ago Frequency of Using the Drive-Up Window Compared to One Year Ago

5-2 5-3

5-4

5-5

5-6

5-7 5-8 5-9

Frequency of Using Credit Cards to Make Purchases Compared to One Year Ago

5-10

Frequency of Conducting Financial Transactions Over the Phone with a Person Compared to One Year Ago

5-11

Frequency of Conducting Financial Transactions in Person, Inside the Lobby Compared to One year Ago

Overview

Membership Growth: The Recession’s Silver Lining In many ways, the current recession is a drag on credit union operations. But if there’s a silver lining, it has to be the potential for membership growth. The current crisis has presented credit unions with their greatest opportunity in decades to bring in new members. But being aware of an opportunity and benefiting from it are totally different. Taking a business-as-usual approach will yield little or no growth. Most CEOs, board members, marketers, and other executives are acutely aware of the realities facing today’s consumers. In response, many of them are incorporating new approaches, along with the tried-and-true, to attract new members and improve the credit union’s bottom line. In CUNA’s second Survey of Potential Members report, we uncover current trends relating to nonmembers’ financial behavior and expectations. We outline the opportunities and challenges they bring, and we suggest approaches for reaching your credit union’s growth objectives. Heading our list of conclusions:

r Informing nonmembers of the core credit union values—which many consumers find missing at their current financial institutions— is the master key to attracting new members.

youth and young adults, and Hispanics. r -PX BXBSFOFTT BNPOH OPONFNCFST JT UIF perennial hurdle we face. They need to know more about the benefits and advantages credit unions provide, and they need to understand membership eligibility. This report contains dozens of strategic considerations from multiple sources: consulting and marketing firms specializing in credit unions, CUNA research staff, and industry task forces comprised of credit union and league executives. Some of these observations and recommendations may be more applicable to your credit union than others. To identify opportunities for attracting members, you’ll need to conduct research on consumers within your own marketplace. Consider your credit union’s unique position with respect to mission, staffing levels and expertise, and available funding. Make this information part of your next planning session. Planning is the point at which research joins with strategy and goals to create opportunity. Keep in mind that the opportunity presented now is unlike anything we’ve seen in the last 75 years. The potential for membership growth may just be this recession’s silver lining.

r Convenient location is another key to success, always in demand by busy consumers.

r Surprisingly, access to nearby branch locations is just as important to heavy online users as it is to those who don’t rely primarily on electronic transactions to conduct their financial business.

r Membership-growth opportunities are plenti-

Jon Haller Director of Corporate & Market Research Credit Union National Association

ful in two important and sizeable markets –

vii

Survey of Potential Members

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Chapter 1

Membership Growth Opportunities It’s no secret that despite a rising U.S. population, credit union membership growth has been on the decline. While credit unions enjoyed an average annual growth rate in the 1980s and 1990s of 3.9% and 2.5%, respectively, the rates since then – and the 2009 forecast from CUNA’s economists – lag these levels (Figure 1-1). Simply put, many credit unions are struggling to build their memberships. The good news, however, is that opportunities for membership growth abound. In 2008, CUNA’s Membership Growth Task Force – a group lead by credit union and league executives – collected input from credit unions and leagues nationwide. The task force then reviewed opportunities for credit unions to achieve meaningful growth during the years ahead. “Substantial growth opportunities clearly exist in many markets,” according to the task force report. These include traditional markets such as select employee groups and families. They include nontraditional groups such as single heads of households. And several new market opportunities surfaced repeatedly: 1. Populations “undeserved” by mainstream financial institutions. 2. Youth and young adults. 3. Immigrants/ethnic groups – including, but not limited to, the Hispanic/Latino population. Of course, there’s a fair amount of overlap between these groups. Members from one of the three groups would quite possibly fall within one or both of the other classifications as well. Acknowledging this overlap, we have developed special focus sections on two of these markets – the youth/young adult and Hispanic/Latino markets.

Highlights r Growth opportunities prevail in both traditional markets (SEGs, families) r r

and nontraditional areas such as single heads of households. Two potential markets stand out: Youth and young adults, and Hispanic/Latino populations. Peak borrowers (25-44 years) and future borrowers (18-24 years) are key to the future of credit unions. Concerted efforts are necessary to win over both groups. The sheer size of the Hispanic/Latino population presents huge opportunities in many markets. Recognize that the Spanish-speaking population subdivides into specific groups based on national origin and cultural differences. Growing your credit union membership takes effort, persistence, and buy-in at all levels. Many resources exist to guide the effort.

Average Annual Credit Union Membership Growth 5.0%

4.0%

3.9%

3.0%

2.5% 2.0%

1.8%

2.0%

1.5%

1.0%

0.0% 1980's 1990's Source: CUNA Economics and Statistics.

2000's

2008

2009 (forecast)

Figure 1 – 1

Peak Borrowers Rise, but Where Are Young Consumers? To the extent that credit unions are adding new members, they are increasing their ranks of “peak borrowers,” defined as members age 25 to 44 (Figure 1-2). At the same time, they appear to be slipping in their abilities to attract “future borrowers” in the 18 to

24 age range. (These findings are presented in more detail in CUNA’s 2009-2010 National Member Survey report, the companion to this study.) Over the past several years, many credit unions have been working diligently to attract more members in the peak borrowing ages, in an effort to improve their lending volume. These efforts, combined with the initial signs Survey of Potential Members

Chapter 1 – the negative impact of the current economy notwithstanding. But credit unions’ gains in peak borrowers appear to be coming at the expense of any significant growth in future borrowers – a group critical to credit unions’ longer-term success.

of a long-awaited turnaround in the prevalence of peak borrowing consumers, are behind the first rise in peak borrowers recorded by credit unions in more than two decades. This is encouraging news from a near-term lending perspective

Percentage of Adult CU Members – Future Borrowers and Peak Borrowers 100%

18 to 24 - Future 25 to 44 - Peak

80%

60%

51%

47%

45%

42%

40%

20% 9%

10%

42%

38%

0% 1989

1998

2000

2002

2006

2008

Source: CUNA’s Member Statistics studies – 1989 to 2008

Figure 1 - 2

Age Distribution – Nonmembers and Members 18%

18-24

4% 15%

25-34

23% 18% 19%

35-44

18%

45-54

23% 14%

55-64

18% Nonmembers 17%

65+

Members

13% 0%

10%

15%

20%

25%

Figure 1 - 3

30%

All told, 18-to-24 year-olds comprise only 4% of the country’s adult credit union members. By comparison, they represent 18% of the nation’s nonmembers (Figure 1-3). Clearly, nonmembers who are young adults comprise a large, attractive target for membershipgrowth efforts. This challenge in attracting young adults reveals a longstanding pattern. Consumers 18 to 34 – many of whom will be instrumental in affecting credit unions’ future success – are among the age groups least likely to be using credit union services. Only about 25% are members – matched only by the low rate among consumers 65 and older, and well below the roughly 35% levels registered among other age groups (Figure 1-4). Compounding this situation, nonmembers 18 to 34 lead all age groups in acknowledging that they are, indeed, eligible to join a credit union or are uncertain of their eligibility (Figure 1-5). A number of credit unions have recognized the extreme importance that young adults hold for the organization’s future. Some have had tremendous success in bringing them into the fold. However, credit unions as a whole still have significant room for improvement in this area. The same can be said regarding credit unions’ efforts to reach more of the nearly 20 million consumers under the age of 18 who currently reside in member households but do not belong to a credit union (Figure 1-6). Two-thirds of members who have children in the household have not signed up any of their offspring for membership, according to CUNA studies. “Young people represent credit unions’ future. Without an

Membership Growth Opportunities infusion of young members, credit unions’ growth and viability are in jeopardy,” notes Mark Condon, senior vice president of CUNA’s business and consumer publishing division. These young consumers – often functioning primarily online – have a host of financial-service options available to them, including Internet banks with impressive rates. Credit unions must make a concerted effort to attract and retain young members, notes Condon. “This means offering products and services that are customized for different age groups. Offering financial-literacy programs will help young members manage their money wisely and become financially responsible adult members.” Citing statistics from a Harris Interactive YouthPulseSM survey that show people between ages 8-21 have annual income totaling $211 billion – most of which they spend rather than save – Condon concludes that young adults “are ideal prospects for credit union membership, not only for their current financial resources but for their potential as lifelong members.” The Model Youth Program Guide, from CUNA’s Center for Personal Finance, outlines five keys to attracting and serving youth: 1. Formalize your commitment. Youth programming that’s an afterthought will fail. Include a focus on young members in your mission statement and strategic plan, so that their needs influence the steps you take now for long-term growth. Making youth an official priority of your credit union – with support from the highest levels and among the entire staff – sends an important message to your membership.

Percentage of Adults Who Are CU Members by Age 40%

37%

36% 31%

31%

30%

26%

20%

10%

0% All U.S. adults

18-34

35-44

45-54

55-64

65+

Source: CUNA’s 2008 Member Statistics study

Figure 1 - 4

Percentage of Nonmembers Indicating They Are, or Could Be, Eligible to Join a Credit Union By Age All nonmembers

72%

18-24

84%

25-34

78%

35-44

67%

45-54

62%

55-64

70%

65+

72% 0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Figure 1 - 5

2. Woo them while they’re young. It’s a lot easier and less expensive to win the hearts and life-long loyalty of an eleven-year-old than a twentyone-year-old. Kids are easier to impress. And because few other financial institutions care about serving them, often you’ll have no competition. But wait 10 3

years, and you’ll spend a fortune trying to outmuscle Wells Fargo for their attention and their business. 3. Communicate. Listen to young members. Ask them frequently, as individuals and in focus groups, about their financial goals and habits. Don’t worry about “speaking their Survey of Potential Members

Chapter 1

100

Estimated Numbers of Members, Young Members, and Young Nonmembers Living in Member Households

90 82.0

Millions

70 60 50 40 30 19.1

20 11.5

10 0 Total individual members

Members <18

<18 in member HH w ho are not CU members

Source: CUNA Research estimates

Figure 1 - 6

language.” Although you want to be aware of their cultural preferences, you’re not trying to be their friends – you’re trying to become a trusted financial partner. For that role, plain English, spoken respectfully, and a genuine interest in what they have to say work just fine. 4. Provide financial services. Financial education delivered in a vacuum will generate the same reaction as algebra lessons that are too abstract: The student wonders, “When am I ever going to use this?” Base your efforts on the financial services that young people need, want, and can use – saving and investment accounts, transaction services, and credit. Young members are a low-risk and profitable demographic once they’ve been educated about their responsibilities. 5. Enlist their aid. Form a youth advisory panel to generate ideas for service design and marketing tactics. Open an in-school branch and give

students training and the chance to teach their peers and families about saving, credit, and membership. Hire interns to project your credit union’s youthful image. Reward them for successful recruitment efforts. “Although youth development is critical for growth, most credit unions do not have a comprehensive generational marketing plan,” says Bill McKenna, president of credit union marketing firm Marketing Partners. He urges credit unions to make attracting younger members a priority and develop a youth marketing strategy. (See Focus on Youth sidebar.) “Many credit unions have not dedicated nearly enough resources to this goal,” adds McKenna. “When they do, amazing results can be achieved.”

Potential in the Hispanic/ Latino Market The rapid population increase among Hispanic/Latino populations 4

– along with their impact on society, finance, and the workplace – have long been chronicled by CUNA and other sources. Hispanics will account for nearly 50 million of the nation’s 310 million-person population by 2010, based on U.S. Census estimates. To date, they have accounted for just over 50% of the overall growth in the U.S. population since 2000, according to the Pew Research Hispanic Center. A 2008 study of U.S. Hispanics, sponsored by CUNA, sheds light on the issues related to the successes – and the remaining opportunities and challenges – associated with serving this growing and increasingly influential market. Just over 20% of adult Hispanic consumers belong to a credit union. Membership penetration is stronger in certain geographic regions: Western (27%) and southern (22%) regions have greater penetration than in the north central (14%) and northeast (11%) regions. Perhaps not surprisingly, the more heavily Hispanic western and southern regions are also where the majority of the initial waves of migrants first planted their family roots. Their longer tenure in the U.S., and the assumed greater familiarity and comfort levels with U.S. financial institutions, may at least partially explain the higher Hispanic/Latino membership penetration levels in these regions. One key finding from the CUNA study is that credit unions’ success in attracting U.S.-born Hispanics/ Latinos stands slightly higher than their success in attracting all U.S. consumers nationwide (Figure 1-7). The primary challenge in further penetrating the Hispanic market is to attract the non-U.S.-born immigrant population to financial institutions. It’s a challenge shared

Membership Growth Opportunities by credit unions, banks, and other financial services providers. It means developing strategies and implementing tactics to reach, communicate with, and ultimately win that market share. At present, about 15% of foreign-born Hispanics use credit union services â&#x20AC;&#x201C; but they account for 40% of the U.S. Hispanic/Latino population, according to the Pew Hispanic Center. Language, geographic mobility, and â&#x20AC;&#x153;trust barriersâ&#x20AC;? concerning financial institutions are some of the hurdles financial providers face in efforts to penetrate the foreign-born Hispanic market. Credit unions and other financial institutions continue to face a U.S. population millions of peak borrowers short of what prevailed earlier this decade. The Hispanic market, with its abundance of current and future peak borrowers (25 to 44 years of age and 18 to 24 years, respectively) relative to the population as a whole, presents credit unions with another excellent opportunity to build its pool of potential borrowers. Sixty-nine percent of Hispanic nonmembers are aged 25 to 44, compared to just 46% of all adult credit union members. One important takeaway is that your existing Hispanic membership may only marginally reflect the group of Hispanic nonmembers youâ&#x20AC;&#x2122;re seeking to attract. Factors to examine include their current financial resources, plus the extent to whichâ&#x20AC;&#x201D;and the rapidity with whichâ&#x20AC;&#x201D;they will acculturate into the â&#x20AC;&#x153;American way of life.â&#x20AC;? Consider also their own definitions of financial success, their education levels, and the like. Therefore, strategies and tactics designed to serve your existing Hispanic members need to be

Focus on Youth To gain more young members, build a solid program with attention to investments in: t .FNCFSTIJQ #BTF "OBMZTJT: Review your current membership and compare it to the national and peer group growth averages to determine where you stand today. Establish a baseline for future analysis. Watch it closely and monitor your growth. t $3. .$*' %BUB "OBMZTJT Analyze your member product/service relationships as they apply to your younger membership segments. Getting them to join is just the first step; they must actually use the services you offer. Then make a focused effort to retain them as members as they move on in life. t :PVUI .BSLFUJOH &Ă˛PSUT Review your past and current youth marketing efforts. Measure your success levels and identify the additional marketing necessary to attract more members. If youâ&#x20AC;&#x2122;re not attracting young members youâ&#x20AC;&#x2122;re not doing enough. t ,FZ %FWFMPQNFOU (PBMT Identify your credit unionâ&#x20AC;&#x2122;s short- and long-term youth development goals. Start now, or in five years youâ&#x20AC;&#x2122;ll be way behind your competitors. t 1SPEVDU 4FSWJDF .BSLFU 4IBSFT Calculate and compare member product/ service market shares to peer group and national statistics. Establish a baseline for future comparisons. t /FX 1SPEVDUT BOE 4FSWJDFT Review your current products and services to identify new opportunities that will attract younger members. Determine which services will maximize their credit union relationships as they mature. Make sure your services fit their lifestyle â&#x20AC;&#x201C; one size does not fit all. t .BSLFUJOH 1SPNPUJPOT Identify and outline the necessary marketing elements to attract younger members and achieve

your membership goals. Marketing elements should be flexible so they can be rapidly adjusted based on market conditions and new trends. t *UFNJ[FE #VEHFU Establish a detailed budget that includes all marketing elements for the entire year. It will take money to grow this segment. Consider it an investment in your future, because without younger members many credit unions may not have a future. t *NQMFNFOUBUJPO 4DIFEVMF Include a marketing implementation calendar with project start and due dates and stick to them. No excuses! t 1FSTPOBM 3FMBUJPOTIJQT Designate the person(s) who will work on building relationships with youth. Depending on your circumstances, this may be a full-time assignment. There are many amazing opportunities to connect with this group â&#x20AC;&#x201C; in person, online, or by phone â&#x20AC;&#x201C; but they all take time. t *OOPWBUJPO â&#x20AC;&#x153;Same oldâ&#x20AC;? is not enough; innovation is critical. Try new ideas and approaches to reaching younger members. Understand how they look at the world, and focus on what they like and what matters to them. Remember, todayâ&#x20AC;&#x2122;s youth are more sensitive to marketing than you might think. Theyâ&#x20AC;&#x2122;re skeptical and initially look at many product and service claims as hype. Those who successfully attract large numbers of children or young adults admit that it takes time, effort, and, especially, commitment. These flow from the CEO, executives, and board and energize the entire staff. If your credit union has yet to take these steps, thereâ&#x20AC;&#x2122;s no better time than the present to begin. Source: Marketing Partners: A Marketing Plan For Attracting Young Members

Survey of Potential Members

Chapter 1

Percentage of Hispanic/Latino Adults Who Are CU Members 50% 40%

35% 31%

30% 22% 20% 14% 10% 0% All U.S. adults

All Hispanic/Latino adults

U.S.-born Hispanic/Latino adults

Foreign-born Hispanic/Latino adults

Sources: CUNA’s 2008 “Member Statistics” and “Hispanic/Latino Membership” studies

Figure 1 - 7

reviewed and perhaps altered to better reflect the language, economic, and cultural differences that exist between U.S. born and the non-U.S.-born Hispanic market. Consider the following differences between current Hispanic credit union members and Hispanic consumers who are not yet members: r Foreign-born Hispanic citizens comprise 35% of current Hispanic credit union members, but fully 63% of Hispanic nonmembers. r Three-fourths (74%) of Hispanic members own their homes, compared to just 30% of Hispanic nonmembers. r Two-thirds (63%) of Hispanic members are employed fulltime, compared to half (48%) of Hispanic nonmembers. r One-third (36%) of Hispanic members have a high school degree or less, compared to 70% of Hispanic nonmembers. r The vast majority (84%) of Hispanic members indicate

they can speak and understand conversational English “very well” or “pretty well,” compared to just 46% of Hispanic nonmembers. r Less than 30% of Hispanic members indicate they speak Spanish only or more Spanish than English in their homes, compared to 60% of Hispanic nonmembers. r Three-fourths (76%) of Hispanic members indicate they can read a newspaper or book in English “very well” or “pretty well,” compared to just 44% of Hispanic nonmembers. These and other findings illustrate both the tremendous opportunity and primary challenges in achieving additional membership growth with this group. The keys to successfully reaching out to this market are twofold, particularly for credit unions new to Hispanic outreach: 1. Establishing the right organizational mentality within the credit union.

2. Adapting to the Hispanic market instead of waiting for the market to adapt to your credit union. Both are vital, according to Warren Morrow, CEO of Coopera Consulting, a firm dedicated to assisting credit unions in their efforts to serve and attract the Hispanic market. (These two elements and the process for implementing them are outlined in the sidebar, on page 8.) Many credit unions have stepped up efforts to serve and attract Hispanic/Latino consumers. Some are serving sizeable populations for the first time. Others have been successfully serving large concentrations of Hispanic/Latino consumers for decades. The most recent study from CUNA’s Hispanic/Latino Task Force shows that: r Already existing or planned “special programs” to serve the Hispanic market tend to surface once this group comprises 11% or more of the potential field of membership. Nationally, about 15% of consumers are Hispanic/ Latino. (Source: The Pew Hispanic Center.) r One in four credit unions with $200 million or more in assets already has a program in place; another 5% to 15% were in the process of starting one. r Credit unions considering it “important” to serve this market do so because: r Their area has a significant number of Hispanics/Latinos. r “It’s the right thing to do.” Seventy-four percent say it’s good for business (up from 60% in 2004), while 57% consider it part of the credit union’s mission (up from 40% in 2004).

Membership Growth Opportunities r In serving the Hispanic market, services and activities that have become more prevalent since 2004 include: r Risk-based lending r Accepting taxpayer ID number for identification r Spanish-language CU materials r Low-cost international remittance services* r Ads/articles in the Spanishlanguage media* r Nonmember check-cashing services* r Among credit unions that currently have programs, nearly one in five of their full-time employees speaks Spanish.

Achieving Growth Will Take Effort Clearly, numerous opportunities exist to attract and successfully serve millions of consumers who have yet to join the credit union fold. At the same time, the demographic profiles of nonmember and members differ somewhat (Figure 1-8). Credit unions that do two things stand to benefit immensely: 1. Recognize that differences may exist among the consumers you attract to the credit union. 2. Fine-tune existing product offerings to more effectively match the new members’ financial needs. The path to success will require effort, persistence, and buy-in at all levels within the credit union. But strong growth can be achieved regardless of your credit union’s asset size, field of membership, or range of service offerings. CUNA’s Membership Growth Task Force, summarizing the information and

feedback obtained from credit unions around the country that were experiencing impressive membership growth, reached the following conclusions. The task force finds that while aggregate credit union membership growth is slow, there are many specific examples of credit unions that are growing quickly. These fast growers are difficult to pigeonhole: They are found among both large and small credit unions, and they are found throughout the country – in urban and in rural settings. They are found among credit unions with disparate membership fields, and they are found among both “plainvanilla” and “full-service” credit unions.

While fast growers reflect great diversity, there are several characteristics that seem to distinguish them from credit unions that are growing slowly: r Fast growers view membership growth as a key success metric. They tend to equate membership growth with marketplace relevance. Because of this, many express a sense of urgency in bringing in new members and retaining current members. Their boards are engaged, and directors buy in to these ideas. They plan strategically and budget for membership growth. r Fast growers work hard to generate growth. It doesn’t come easy. Fast growers make it abundantly clear that no magic

Credit Union Nonmember and Member Profiles Members

Nonmembers

Average age: Age 25 – 44

47.2 42%

45.0 33%

Gender: Female Male

52% 48%

50% 50%

Married

63%

48%

Average number in household

3.2

Education completed: High school or less College degree or more

34% 36%

49% 23%

Employment: Employed full-time Employed part-time Retired

61% 7% 17%

45% 11% 18%

84%

71%

Own home Figure 1 - 8

* Greatest growth since 2004

Survey of Potential Members

Chapter 1 formula exists to transform slow growth into fast growth. They are quick to point out that there is no silver bulletâ&#x20AC;&#x201C;no single right way to approach the issue. When asked, most will tick off a list of tactics that theyâ&#x20AC;&#x2122;re pursuing to reach their growth goals. r Fast growers embrace change. One constant: They have a steady purpose and focus on improving membersâ&#x20AC;&#x2122; lives. But they seem more willing than others to change what they do, to change how they do things, to change when and where they do things, and to change who they interact with. They recognize that embracing those changes often means changing their organizationâ&#x20AC;&#x2122;s internal culture. The task force identified five specific factors that seem to play a large role in the performance of fast-growing credit unions: 1. They differentiate themselves in the marketplace. And they clearly, consistently, and regularly articulate the substantial value of credit union membership. 2. When necessary, they aggressively reach out to new markets. They recognize that attracting demographic groups like new immigrants, youth, and populations underserved by mainstream financial institutions fuel current and future opportunities. In particular, they recognize that being highly effective lenders is crucial to long-term success. They clearly see the link between these groups and the lending function. 3. They are adopters, and they arenâ&#x20AC;&#x2122;t afraid to borrow ideas. They constantly look for new and interesting ways to bring in new members. But they also recognize that there are numerous potential solutions and many of these are not new or different. Some are fairly ÂŠ 2009 Credit Union National Association

Hispanic Outreach 0SHBOJ[BUJPOBM .FOUBMJUZ Each credit union must first establish an internal foundation by developing the right mindset to reach the Hispanic market. Itâ&#x20AC;&#x2122;s not sufficient to want to serve a new market. Everyone at the credit union must realize that you need to serve this market in order to grow. Arriving at this mindset will allow your organization to transcend the question of â&#x20AC;&#x153;Should we reach out to this market?â&#x20AC;? Assuming you have Hispanic populations nearby, the question relevant to your credit unionâ&#x20AC;&#x2122;s future is â&#x20AC;&#x153;How do we reach this market?â&#x20AC;? Coopera recommends a 5-step process to establish this mental and organizational foundation. 6OEFSTUBOE UIF PQQPSUVOJUZ Take the necessary steps to understand more about the Hispanic market and the opportunity it presents for your credit union. The Hispanic market is complex and its demographic and psychographic characteristics vary widely. A deeper understanding of your local Hispanic community will provide information that will help you adapt to the market, and it will better aid your decision-making.

local and industry research. Detailing the business case helps you quantify the opportunity in serving this market, and it will help allay the doubts of those who may not support the initiative. Research enables you to better understand the potential in membership and asset growth this market may hold. "TTFTT ZPVS MFWFM PG QSFQBSBUJPO If thereâ&#x20AC;&#x2122;s a sound business case, assess how prepared your credit union is to serve Hispanics from an operational standpoint. One way to do this is by evaluating the 4Ps: Personnel, Product, Processes, and Promotion. This self-evaluation process will expose challenges and opportunities that can inform your strategy. %FWFMPQ B TUSBUFHJD QMBO Conduct strategic planning sessions to set goals and measures for your outreach plan. Consider hiring an outside consultant to facilitate your planning session. Goals derived from planning should guide you to results in the areas of community partnerships, outreach initiatives, membership growth, and product and service growth.

%FUFSNJOF ZPVS MFWFM PG DVMUVSBM SFBEJOFTT Itâ&#x20AC;&#x2122;s important that your entire credit union â&#x20AC;&#x201C; management and staff â&#x20AC;&#x201C; be realistic and honest about whether itâ&#x20AC;&#x2122;s culturally ready to serve Hispanics. A third party can help assess a credit unionâ&#x20AC;&#x2122;s organizational attitude toward serving the Hispanic market. Are members of management and the board in alignment with their peers on making Hispanic outreach a priority? Does staff have doubts or concerns about serving a new market? Reflect on these and other questions before proceeding.

"EBQUJOH UP UIF .BSLFU Once youâ&#x20AC;&#x2122;ve completed the groundwork and set the foundation, you must adapt to the market instead of waiting for the market to adapt to your credit union. In approaching the Hispanic community, again use the 4Ps: Personnel, Products, Processes, and Promotion. 1FSTPOOFM Your staff should reflect your community in terms of languages spoken and cultures represented. In most markets, recruiting Spanish bilingual and bicultural staff will be essential. Pay attention to retention and advancement of this staff and to the training needs of all staff.

&TUBCMJTI UIF CVTJOFTT DBTF Perhaps the most important step in obtaining buy-in is to build the business case for serving the Hispanic market. Make use of

1SPEVDUT Credit unions have relevant products to serve Hispanics. Often, however, these

Membership Growth Opportunities Hispanic Outreach products have not been packaged in ways that are clear or useful to this market. Also, depending on the market, there may be a need for the credit union to develop new products. 1SPDFTTFT Certain systems, such as credit analysis and identification policies, were established without sufficient understanding of the unique circumstances of Hispanics and especially of Hispanic immigrants. Credit unions will need to adjust these processes to adequately serve this market. obvious. The difficult part lies in choosing strategies that are appropriate for their credit unionâ&#x20AC;&#x2122;s unique situation and then effectively executing those strategies. 4. They make membership growth a top priority, set goals, and quantify results. Their mantra is: â&#x20AC;&#x153;What gets measured gets done.â&#x20AC;? 5. They collaborate with other credit unions and credit union service providers to increase efficiencies and expand the member value proposition. Itâ&#x20AC;&#x2122;s worth repeating: Given the current economic crisis, thereâ&#x20AC;&#x2DC;s no better time than the present for the credit union movement to bring more members into the fold. Credit unions that succeed will reap the many benefits that growing memberships provide.

1SPNPUJPO BOE NBSLFUJOH TUSBUFHJFT Traditional advertising and marketing approaches may be relevant as long as the local Hispanic market has been segmented and their needs and values understood. The most effective strategy for reaching most Hispanics, however, is to activate grassroots social networks, to utilize word of mouth advertising, to provide financial literacy, and to partner extensively with key messengers within the Hispanic community. Source: Coopera This chapter contains numerous approaches that can help position your credit union to achieve stronger membership-growth levels through time. Sort through the various steps, prioritize them, and identify which approaches are most feasible to undertake in the short-term. Determine which are longer-term activities, and which simply may not be feasible due to current limitations. Prioritizing the activities, making a formal commitment to work toward your goals, assigning responsibility to those best suited to carrying them out, and monitoring progressâ&#x20AC;&#x201D;all are important first steps to membership growth and success.

Survey of Potential Members

Chapter 1 Strategic Considerations ÿ Recognize that success in penetrating the Hispanic market depends on more than just reaching out. It means developing an effective internal culture; buy-in from your board, management, and staff; and having the abilities to communicate and serve members effectively once you bring them in.

ÿ To increase membership, your credit union – no matter what type of common bond or charter – will need to continually devote significant financial, marketing, and human resources to the effort. The task is dual – to build awareness of your credit union and its advantages, and also of the values, mission, and benefits of credit unions in general.

ÿ Create an advisory board comprised of community-service organization executives, clergy, and other leaders from the Hispanic communities you are serving. Learn and stay abreast of how to best meet area residents’ financial and financial-literacy needs.

ÿ Focus on attracting consumers in the peak borrowing ages of 25 to 44 to help shore up short-term lending volume. ÿ Don’t lose sight of the fact that the nation’s young adults and children hold one of the keys to your credit union’s long-time viability. They are future borrowers, and they’re essential to your future loan portfolio.

ÿ Hire front-line and management staff who are familiar with the potentially wide range of acculturation within and/or between different generations of Hispanics/Latinos, and who are comfortable in serving and communicating with this group of consumers.

ÿ Re-double your efforts to attract young consumers. Build strong, trusting relationships with them over time, and reap the benefits as they reach their own peak borrowing years.

ÿ Place added emphasis in your Hispanic/ Latino member-recruitment efforts on secondgeneration consumers, not only to persuade them to consider joining the credit union, but also – whether down the line or sooner – to encourage them to bring their first-generation parents into the fold.

ÿ Target young adults based on value, saving money, and convenience. Create marketing promotions that use clear and concise language. Don’t over-promise. Focus on tech-driven money management services, feature money-saving loan solutions, and show young adults how they can build wealth of their own. ÿ Be aware that your current Hispanic members’ demographic profile may not be reflective of those in the Hispanic communities you wish to serve. Develop a tailored approach to reaching and communicating with these consumers, and persuading them to join.

Chapter 2

Keys to Attracting More Members Many credit unions have long struggled to achieve even modest levels of awareness among nonmembers. Today’s state of affairs is no different. What’s even more startling, however, is that current findings point to a drop in awareness from previous alreadylow levels. Presently, just one in three nonmembers is either “very familiar” or “somewhat familiar” with the types of financial services and rate/ fee benefits available at credit unions (Table 2-1 and Figure 2-1). Arguably, some type of drop in awareness would have been anticipated, given the rise in community charters. The move to community charters was accompanied by a dramatic rise in consumers who instantly became eligible to join without even knowing it. Nevertheless, the sharpness of the decline is disconcerting. On the bright side, findings also suggest that brand-building efforts and messages regarding the benefits of membership could be readily absorbed – and, hopefully, acted on – by the legions of consumers who self-report themselves as eligible to join a credit union. While strong familiarity among this group is limited, about 55% of them are at least “somewhat familiar” with the services and rate/fee benefits available at credit unions. By comparison, the corresponding figure among consumers who are unsure whether they’re eligible stands at just 19%. Community-chartered credit unions face specific challenges. In the 12-month period mid-year 2007-2008, community credit unions reported a paltry 1.1% membership growth. Along with the low overall awareness levels

Highlights r Most nonmembers are not familiar with credit unions. Promoting

r r r r

awareness and brand-building are fundamental to membership growth. Convenience remains a key factor as consumers choose a primary financial institution. With the difficulties and bad press concerning banks, this is a great time to promote the core elements that make credit unions different. Priorities and tactics required to build membership will differ among credit unions, communities, and each specific marketplace. Resource commitment—particularly in marketing budgets—is essential to educating consumers about the credit union alternative.

Nonmembers’ Familiarity With Credit Unions 50%

2009 2006 2002 1998

40%

36%

39%

38%

30%

26%

28%

26%

24%

22%

20%

17%

24% 24%

27%

19%

12%

10%

0% Very familiar

Somewhat familiar

Not very familiar

Not at all familiar

Sources: CUNA’s National Member Survey and Survey of Potential Members reports, 1998 to 2009

Figure 2 - 1

of credit unions, this suggests that some credit unions anticipated being able to grow simply by opening their doors to the community. The reality, however, is that they may not be able to realize their goals without strong investment in brand awareness activities to better educate potential members. That means committing financial, staff, and marketing resources that target area residents who are eligible to join.

It’s an uphill battle. Studies that CUNA conducts for community chartered credit unions repeatedly show that anywhere from onehalf to two-thirds of nonmember residents in the communities these credit unions serve don’t know they can use the credit unions’ services. That’s either because they had never even heard of the credit union, or they had heard of it but were unaware they could become members. Add to the

Survey of Potential Members

Chapter 2 mix the general lack of knowledge of what credit unions are, and it becomes clear that challenges lie ahead for some community-based credit unions. And don’t think that occupational, associational, and multi-group credit unions are immune to these issues. They also face awareness issues and competitive challenges for member loyalty—if perhaps not to quite the degree as those faced by their community-based counterparts. It’s no wonder, then, that better informing eligible nonmembers about credit unions and their

and concluding that an increase in resources is warranted. In total, 33% of credit unions’ 2009 marketing budgets have been earmarked for efforts to attract new members, including building brand awareness of their credit union and conducting related research. This pattern surfaces fairly consistently across all credit unions with assets of $50 million or more. Additionally, the present 33% of marketing budget devoted to attracting new members is a larger investment than in years past. It marks a jump of nearly one-fourth over the share of marketing dollars

many advantages heads the list of requirements for persuading them to join the 90 million-plus consumers who already use and enjoy credit union services. Success in stimulating membership growth will be tied, to a great extent, to credit unions’ abilities to better educate – and continually re-educate – consumers. It’s essential to provide them with a convincing response to the age-old question, “What’s in it for me?” Results from the National Member Survey indicate that many credit unions are recognizing these challenges, facing them head-on,

What CUs Would Need to Do Better than Current Provider to Persuade Nonmembers to Use CUs* Better inform me of services and rate/fee advantages

35%

Have more convenient location to my home

30%

Offer better loan rates

29%

Offer better savings rates

28%

Have lower service charges/fees

26%

Have more free ATM locations

23%

Offer a wider range of services

12%

Have more convenient hours

12%

Provide "rewards" for having multiple services/high balances

11%

Have more convenient location to my work

Provide friendlier service

Other

Nothing could persuade me to join

10% 0%

10%

20%

* Based on nonmembers who indicate they are eligible to join a credit union, or are unsure of their eligibility. Source: CUNA’s 2009-2010 Survey of Potential Members report Figure 22 - 2– 2 Figure

30%

40%

Keys to Attracting More Members devoted to these activities in 2005 (27%) and even more above the percentage from 2000 (24%). Many credit unions may benefit by going back to marketing fundamentals: Build awareness and educate consumers about what makes credit unions a viable and valuable alternative to banks. In the current economic environment and with the less-than-flattering press for many of the nation’s banks, marketers have a huge opportunity to grab consumers’ attention.

Leverage Convenience and Core Values The previous section highlighted the importance of raising consumers’ awareness of credit unions as one of the keys to increasing membership growth. One other factor forms the critical one-two punch in persuading potential members to begin using a credit union: Providing locations that are more convenient than those of their banks. Both are “switch requirements” for one in three who have yet to join a credit union (Table 2-2 and Figure 2-2). A number of credit unions have built new offices in order to make themselves more convenient to current and potential members. Until recently, however, credit union branch growth lagged that of the nation’s banks. The ongoing financial crisis is likely to change that trend to some extent in the near term. But, while some credit unions will benefit from expanding their office reach, depending on the market in which they are located, battling banks on the “brick and mortar” front may be an uphill battle for others. (See Chapter 5, Delivery Channels.)

It’s worth, then, taking another look at the secondary requirements consumers list for making credit unions a more appealing and viable option. Over 25% of respondents mention higher savings rates, lower loan rates, and a wider choice of fee-free ATM locations. Perhaps equally important, we find that only one in ten potentially eligible consumers takes the stance that there is nothing a credit union could do to persuade them to consider joining one. Granted, simple inertia, habit, and the perceived hassle of switching major checking and other accounts will prevent some consumers from considering joining a credit union – no matter what they may indicate about their openness to doing so. Nonetheless, if only one in four consumers who indicate they are open to considering a credit union actually establishes an account over the next few years, credit unions nationwide could add (conservatively) roughly 15 million adults to their membership ranks. Some consumers may be more inclined to move accounts than others. Nearly 10% of nonmembers – including roughly 15% of those age 18 to 54 – are already relying on a different provider as their primary financial institution (PFI) than they were just two years ago (Table 2-3). And with 2009’s troubling developments in the banking sector, one could easily anticipate these numbers growing higher in the near term. Some of credit unions’ greatest opportunities lie in the ability to take advantage of bank weaknesses. Banks traditionally score lower than credit unions in the ability to make customers feel like they

truly appreciate their business, to provide good overall value, and to earn customers’ trust. These characteristics are only exacerbated by the recent financial crisis. In contrast, these service factors have been long-standing strengths for credit unions. (This is discussed in more depth in Chapter 3, Loyalty.)

Survey of Potential Members

Chapter 2 Strategic Considerations ÿ Most credit unions have opportunities to benefit from threats of instability in the banking industry, and the resulting unease among consumers. Elements that can help to position your credit union as a valued provider include: r constantly practicing the service aspects that comprise your core values, r any branch location advantages, r extra effort and investment in the financial, human, and operational resources needed to build awareness and enhance credit union brand equity. ÿ Be prepared to increase your marketing budgets to build stronger consumer awareness of your credit union’s presence in the marketplace. ÿ Conduct nonmember surveys to identify: r how extensive a campaign your credit union will need to educate nonmembers on the core values, operating principles, range of services, and benefits of credit union membership, r how much financial, human resource, and marketing effort will be needed to inform nonmembers of your credit union’s role in the marketplace, their eligibility to join, and your competitive advantages over other area providers, r the degrees of “loyalty” that nonmembers have to their current provider(s), r how easy or challenging it will be to steal them away, and r what the credit union will need to do to attract their business. ÿ Ensure that your credit union is sufficiently staffed to carry out the above activities, and to ensure that new members receive the attention they need and deserve. Consider adding marketing, business development, or relationship-building

specialists–even within the prevailing economic constraints. ÿ Continually highlight any locational convenience advantages your credit union holds. ÿ Be aware that having convenient branch locations is just as important to consumers who rely heavily on remote-banking channels for their financial transactions as it is to those who do not. Thirty percent of nonmembers who use online banking indicate a credit union would need to have a branch near their home in order to persuade them to join – the same percentage as found among those who do not use online banking. ÿ Recognize that there are consumers who are extremely sensitive to deposit and loan rates. They are more than willing to start accounts with a new provider if the rate structure is more appealing than what is available at their current provider. Rate sensitivity is not limited to a specific age group. Many consumers would consider joining a credit union if its loan or savings rates were better than those provided by their banks. ÿ Look for opportunities to expand your ATM presence in the geographic areas you seek to most heavily penetrate. Promote any low-fee or no-fee ATM benefits you provide, or fee-free ATM locations you share with other providers or networks. ÿ If you don’t already do so, consider adding a function allowing consumers to sign up for membership online. About 45% of credit unions with assets of $200 million or more are already building their memberships through this option, according to CUNA’s 2008 Technology & Spending report. Additionally, two-thirds that didn’t have the capability in 2008 planned to have it operational by the end of 2009.

Chapter 3

Loyalty Virtually all U.S. adult consumers (96%) that have financial relationships – but do not belong to a credit union – consider a bank to be their primary financial institution (PFI). Banks’ greatest vulnerabilities – and credit unions’ strongest opportunities to take advantage of such weaknesses – lie in three specific areas: 1. Banks’ weaker abilities to make customers feel like they truly appreciate their business. 2. Their inability to provide good overall value (given the fees charged and rates offered. 3. T heir failure to earn customers’ trust and represent their best interests. These have traditionally been the cornerstone of credit union values and service, and they can be positioned against banks to bring in additional members. Credit unions outperform banks on six of seven potential loyalty-producing service aspects. Satisfaction is measured by the percentage of their respective PFI members/customers who strongly agree that the institution is performing admirably. The largest gaps in the two providers’ performance exist with respect to the three factors just mentioned – appreciation, value, and trust (Tables 3-1 through 3-8, and Figure 3-1). A long-standing credit union “disadvantage” comes in the form of banks’ greater brick-and-mortar presence. While the difference may be less pronounced than a decade ago, 65% of nonmembers “agree strongly” that their bank PFI has conveniently located offices. The corresponding credit union figure, among credit union-PFI members, stands at closer to 45%.

Highlights r Credit unions outperform banks in many loyalty-producing categories—particularly those involving appreciation, value, and trust.

r In the current environment, consumers report their levels of satisfaction are rising for credit unions at the same time they are declining for banks. r Nearly one-half of members are “promoters” who are willing to recommend the credit union to others—a valuable word-of-mouth liaison to potential members. r Using the Net Promoter model to gauge loyalty, nonmembers rate credit unions in the positive range (+23%) while banks receive negative scores (-7%).

Levels of “Strong Agreement” with Statements – Nonmembers With a Bank PFI and Members With a Credit Union PFI 52%

They provide me good overall value

36% 61%

They are committed to resolving problems

47% 46%

I trust them to have my best interests at heart

33% 48% 37%

I feel like they truly appreciate my business

60% 51%

The quality of service provided is excellent They are involved with community events/charitable causes

34% 32% 43%

Their offices are conveniently located

65% 0%

20%

40%

60%

80%

100%

Members; CU is PFI Nonmembers; bank is PFI

Figure 3 - 1

Bank Customers’ Satisfaction Dips Whether due to consumer frustration with certain banks, or credit unions’ regaining momentum – or a combination of the two – nonmembers’ satisfaction with their banks declined slightly from 2006 levels, while members’ satisfaction with their credit unions rose. Currently, 55% of nonmembers are “very satisfied” with their bank

(Table 3-9). By comparison, 73% of members are “very satisfied” with their credit union (Figure 3-2). In 2009, the resulting gap in the two groups’ satisfaction levels are reminiscent of the differences found in the American Banker consumer satisfaction studies conducted throughout the 1980s and ‘90s. When asked, one in ten nonmembers are more satisfied with their bank than they were

Survey of Potential Members

Chapter 3 a year ago, while an identical proportion have become less pleased (Table 3-10 and Figure 3-3). Findings provide further evidence that the current economic and financial environment presents credit unions with an opportunity to increase their membership ranks. Credit unions will do so, provided

they become sufficiently assertive, creative, and highly visible to the country’s nonmember market.

Bank Loyalty is Low Relative to Credit Unions The focus on developing product or brand loyalty, which started earlier in this decade, has become more relevant and

Nonmember Satisfaction with Banks and Members’ Satisfaction with Credit Unions 80%

73%

70% 60%

Nonmembers; bank 2009 66%

Nonmembers; bank 2006

58% 55%

Members; CU 2009 Members; CU 2006

50% 39% 37%

40%

28%

30%

22%

20% 10%

3% 4% 4%

0% Very satisfied

Somewhat satisfied

Somewhat dissatisfied

1% 1% 1%

Very dissatisfied

Figure 3 - 2

Nonmembers’ Satisfaction With Their Banks Compared to One Year Ago Less satisfied 11%

More satisfied 12%

Equally satisfied 77%

Figure 3 - 3

attracted more attention over time. Credit unions and banks alike are increasingly looking at how to best create, build, and maintain strong loyalty levels within their member/ customer bases. And with good reason. Findings from CUNA’s National Member Survey report, the companion report to this study, mirror those found in other industries: Highly loyal consumers tend to use more services than do less-loyal ones. Highly loyal members also serve an important role in spreading the word about your organization and in persuading others to begin using your products. As such, high loyalty levels are looked at by many as the Holy Grail to both increased product penetration and member or customer growth. Many financial providers have turned to the Net Promoter® model of determining loyalty – a model originally introduced by SatMetrix Systems. It was also the subject of a Filene Research Institute publication, A Fresh Approach to Measuring Member Loyalty (2007). The publication concludes that, for credit unions, “High NPS (Net Promoter Score) correlated with high credit union asset growth, high membership growth, and high loan growth.” Briefly, the theory behind this model, when applied to financial institutions, is that growth in use of products can be tied to customers’ or members’ attitudes on a single question: “How likely would you be to recommend this provider to family and friends?” Respondents are asked to indicate their position using an 11-point scale, ranging from 0 (“not at all likely”) to 10 (“extremely likely”). (See Table 3-11.) Employing this approach, we find that just under 35% of

Loyalty nonmembers are considered “promoters” of their bank (Tables 3-12 and 3-13, and Figure 3-4). They respond with an answer of “9 or 10” when asked to indicate how likely they would be to recommend it to others. That is, one in three nonmembers thinks so highly of their bank that they will obtain their future service(s) there. It follows that they will encourage others to use that provider. By comparison, the National Member Survey report indicates that nearly 50% of members are “promoters” of their credit union. At the negative end of the spectrum, over 40% of nonmembers are bank “detractors,” consumers who respond with an answer of “6” or less to the “how likely would you be to recommend?” question. These nonmembers – while not necessarily inclined to speak poorly of their bank – would not be inclined to urge others to use that provider. The corresponding percentage of credit union detractors found among members is much lower, at 26%. The Net Promoter® model’s most meaningful calculation – and the one most emphasized in the marketplace – subtracts from the percentage of “promoters” the percentage of “detractors” to derive the net figure. For banks, this comes to minus 7% (i.e., 34% - 41%). Credit unions, on the other hand, come in at a stronger position, registering a Net Promoter score of +23%. Nonmembers who stand out as the least loyal to their banks – recording Net Promoter scores in roughly the -25% range – have these characteristics (Figure 3-5): r household incomes of $25,000 to $34,999 r ages 45 to 54

r in the attractive 18-to-24 age group When credit union members who also use banks are singled out and examined, the -7% bank figure drops even further into negative territory, at -31%. Again, credit unions stand at +23%. This enormous 53-point

difference in scores between members’ relationships with their credit union and their relationship with their banks, begs the following question: “If so many members are indifferent or unimpressed with the bank they use, why do more members rely on banks as their

Loyalty Levels and Net Promoter Scores* for Banks and Credit Unions 52%

49%

50% 41%

40%

34%

30%

27%

25%

25% 26%

21%

23%

20% 10% 0% -10%

Banks; nonmembers

-7%

Banks; members with bank accounts

Credit unions

-20%

Promoters Passives Detractors Net Promoters

-30% -40%

* Net Promoter Score = Promoters – Detractors.

-31%

Figure 3 - 4

Bank Net Promoter Scores by Age and Household Income All nonmembers

-7%

18-24

-22% -9%

25-34

-8%

35-44

-27%

45-54 -7%

55-64

65+ 37%

-2%

Under $25,000

-29%

$25,000-$34,999 $35,000-$49,999

-13% -1%

$50,000-$74,999 $75,000-$99,999 7% $100,000 or more

-6%

-40%

-30%

-20%

-10%

10%

20%

30%

40%

Figure 3 - 5

Survey of Potential Members

Chapter 3 primary provider than rely on their credit unions?” We believe that for many members, the answer boils down to banks’ relative superiority in providing convenient locations. It’s also the one factor that helps most in explaining why the vast majority of credit union members also have bank accounts. Given this point, however, highly loyal members bring clear and measurable value for credit unions, in the forms of noticeably stronger credit union service-usage levels and loan balances relative to lessloyal members. But the same does not appear to hold true for banks’ highly loyal customers (Table 3-13 and Figure 3-6). This suggests that credit unions are in a far better position than banks to benefit from any financial, human-resource, and marketing efforts they make to build and maintain strong loyalty levels among members. CUNA Research analysts also conducted an in-depth analysis of the service-related drivers of high bank loyalty in nonmembers. It examined the impact of each of seven factors: r I trust them to have my/my household’s best interests at heart. r They provide me good overall value, given the fees charged and rates provided. r Their office(s) are conveniently located near my home or workplace. r The quality of service provided by their staff is excellent.

Profile of Truly Loyal Bank Customers and Less Loyal Customers Truly loyal/

Less loyal/

Promoters

Not Promoters

Percentage of bank customers

34%

66%

Have bank checking account

90%

87%

Have bank loan

41%

44%

$11,946

$12,716

2.8

2.7

Average amount in bank loans Average number of balance-carrying bank services used Figure 3 - 6

r They are (or would be) committed to resolving my service- or account-related problems to my satisfaction, in a reasonable amount of time. r They are involved with events and charitable causes in my community. r I feel like they truly appreciate my business. We found that nonmembers show high degrees of loyalty toward banks that provide good overall value given the fees charged and rates offered, deliver strong levels of service quality, and give their customers the sincere feeling they appreciate their business. Encouragingly, these factors also serve as standout features of many credit unions. They provide credit unions with their best opportunities for winning the loyalty and future business of current nonmembers.

As was pointed out in a previous chapter, 33% of credit unions’ 2009 marketing budgets are ear-marked for efforts to build their memberships. This includes building greater brand awareness among nonmembers. Targeted spending at those levels or beyond is necessary to gain attention and develop new-member loyalty.

Loyalty Strategic Considerations ÿ Convey your credit union’s core strengths of good value and excellent service, through words and actions. Send the message that you sincerely appreciate (new) member business and will earn their trust. ÿ Once members join, continually practice these core values to build and reinforce member loyalty. ÿ Ensure that sufficient funds are allocated for activities to attract new members. Based on your particular situation, more than one-third of your marketing budget may be needed for membership-growth investment. ÿ In any nonmember surveys you conduct in your area, measure: r the degrees of “loyalty” that nonmembers have to their current provider(s),

r what service-related factors displease them most about their current provider, and r what the credit union will need to do to attract their business. ÿ Determine how you can excel in a service aspect that consumers don’t necessarily expect from a credit union. Options that deliver convenient services position you to build stronger levels of loyalty with new members. ÿ Consider alternatives to building additional brick-and-mortar branches. In the pursuit of convenience – and member loyalty – weigh the financial, human-resource, technology, and other considerations and potential constraints before deciding whether to build additional space. (See Chapter 5, Delivery Channels.)

Survey of Potential Members

Chapter 4 Chapter 4 Checking accounts and online banking services stand as the financial services nonmembers use most. Nearly 85% use checking accounts, while 50% use online banking services (Tables 4-1 to 4-4, and Figure 4-1). We also find that first-mortgage loans and certificates of deposit serve as the mostused loan and savings products, respectively. With the exceptions of IRAs and used-vehicle loans, use of the various financial offerings tends to increase as household income increases. Use of the various savings products tends to rise as age increases. But, as might be expected, the use online banking and/or bill payment services is stronger among nonmembers 18 to 44 than it is among those 45 or older. In the 18-44 age group, roughly two-thirds of nonmembers currently use online services at a bank, and half use online bill payment – either offered by the bank or through individual billers/ companies via bill presentment. Those relying on bill presentment may be more easily persuaded to consider moving accounts to a credit union. Nonmembers’ current product usage levels lag those of credit union members. This is due, in part, to two factors: 1. Higher concentrations of consumers 18 to 24 and 65 or older among nonmembers than among members. 2. The tendency for these two age groups to be (with limited exceptions) weaker users of most financial services. Given nonmembers’ lower propensity to borrow relative to members, it comes as little surprise that this is also reflected in average outstanding balances © 2009 Credit Union National Association

Use of Financial Services Highlights r The most-used services among nonmembers include checking accounts and online banking services. First mortgages and certificates of deposit are also popular. r Aside from a few exceptions, use of various financial offerings tends to increase as household income increases. r Product use among nonmembers lags that of members; the same is true of average outstanding balances for all loans. r The average number of services used peaks among those 35 to 44 (emphasis on loan products) and those 55 and older (concentrated in savings products). r Bank customers – whether highly loyal or not – could be more easily persuaded to join a credit union than highly loyal members could be persuaded to switch their allegiances to a bank.

Use of Financial Services – Nonmembers and Members 84%

Checking account

96% 50%

Online banking

62% 38%

Online bill pay

50% 29%

CDs

39% 25%

1st mortgage loan

42% 23%

Money market account

33%

IRA

20%

Home equity/LOC

20%

33%

Nonmembers Members

33%

New vehicle loan Used vehicle loan 0%

19% 40% 14% 36% 20%

for all loans (including credit cards, but excluding first-mortgage loans). Nonmembers owe providers just over $12,000 in loans (Table 4-5 and Figure 4-2). The figure among members stands at nearly $20,000. Notably, the balances members owe to their credit unions are less than half the amount owed to other providers. Turning back to nonmembers, 20

40%

Figure 4 – 1

60%

80%

100%

we find that almost 60% of them have no non-first-mortgage loans outstanding. At the other end of the spectrum, about 15% have $15,000 or more in unpaid balances. The average amount among those nonmembers that have at least one outstanding loan stands at just over $19,000. Balances among members that have at least one loan at the credit union and/or elsewhere

Use of Financial Services stand well above this. The average amount of unpaid balances (including $0 balances) rises as nonmembersâ&#x20AC;&#x2122; household incomes rise. Balances range from less than $5,000 among those with household incomes of under $25,000 to about $22,000 among those with household incomes of $100,000 or more. Among the different age groups, unpaid levels peak among nonmembers 25 to 44 at roughly $16,000.

Number of BalanceCarrying Accounts Used On average, nonmembers use 2.7 loan and/or savings accounts (including checking accounts) at a bank (Table 4-6 and Figure 4-3). Only about 35% of all nonmembers are using only one balancecarrying bank service, but the figure approaches 60% for those 18 to 24. This suggests it may be somewhat easier to entice this group to join your credit union than consumers in other age groups. Among the different age groups, the average number of services used peaks among those 35 to 44 (with a likely emphasis on loan products) and those 55 and older (with a heavier concentration of savings products). As might be expected, account use also rises with household income, from an average of 1.9 balance-carrying services among nonmembers in the lowest income group, to an average of 3.1 among those in the highest category (Figure 4-4). Recall from the previous chapter that highly loyal bank customers

Average Amount in Outstanding Loan Balances by Customer Type and Provider* $20,000

$15,000

$13,531 $12,072

$10,000

$6,121 $5,000

$0 Nonmembers

Members; elsewhere

*Excludes first mortgages

Members; at CU

Figure 4 - 2

Number of Balance-Carrying Services Used at Banks 50%

40%

34% 30%

21% 20%

18% 14% 12%

10%

0% One

Two

Three

Four

Five or more

Avg. number of services = 2.7

Figure 4 - 3

Survey of Potential Members

Chapter 4 basically use no more accountcarrying services at their provider than do less loyal customers (2.8 versus 2.7, respectively). The corresponding difference among credit unions’ highly loyal members and less-loyal members is much more pronounced, at 3.2 and 2.4, respectively. Higher service use is thought to make “stealing” members or customers away from an institution more challenging. The service usage numbers imply that bank customers – whether highly loyal or not – could be more easily persuaded to join a credit union than highly loyal members could be persuaded to switch their allegiances to a bank. The caveat, of course, is that their expectations for convenience, rates, and service must be met.

Number of Times Recommended Credit Union to Others in Past Two Years 100%

80%

Truly loyal to CU Less loyal to CU

71%

Truly loyal member average recommendations: 2.3

60%

Less-loyal member average recommendations: 0.7

40% 28% 20%

24% 14%

20% 14%

13% 8%

7% 2%

0% None

3 to 4

5 or more

Figure 4 – 4

Strategic Considerations ÿ Build stronger financial ties with 18-24 year olds over the next few years. Promote online banking/ bill pay, check cards, and used car loans. This will help you become their provider of first choice for their larger-sum borrowing needs (new car, first mortgage, home equity/LOC) when they enter the peak borrowing years. ÿ To the extent that your marketing messages take on a loan-related focus, target nonmembers in the following age groups for each of the specific loan programs listed below. These groups are currently the strongest users of the particular loan type: r First mortgage loans/mortgage refinancing – 25 to 64 r Home equity loans/lines of credit – 35 to 44 and 55 to 64 r New vehicle loans – 25 to 64 r Used vehicle loans – 35 to 44 (cars for themselves and/or their children recently obtaining their drivers license) ÿ Many nonmembers may believe that the 2009 credit crunch among banks also prevails at your credit union. Tailor your marketing activities to convey an accurate message.

ÿ Recognize that having “highly loyal” members proves to be more valuable for credit unions than it does for banks with highly loyal customers. Credit unions have an opportunity to attract more consumers from the ranks of both highly loyal and less loyal bank customers. ÿ Recognize that services such as online banking – especially when combined with online bill pay – are “sticky”. Once consumers set up and use online banking with a provider, it is at least somewhat more challenging for another provider to lure them away. ÿ Make an effort to persuade nonmembers aged 18 to 44 to begin using the credit unions’ services. Those relying on bill presentment may be more easily persuaded to consider moving accounts. ÿ If your credit union is in need of deposits, target consumers 55 and older and higher-income consumers, as these groups are strong users of bank savings accounts and typically carry higher balances than other groups. ÿ Target consumers 25 to 54 for strong near-term loan growth opportunities. Recognize that young adults, ages 18 to 24, may not be heavy borrowers today but will become more so.

Chapter 5

Delivery Channels As is the case with credit union members, potential members also rely on multiple channels to conduct their financial business. Large percentages of potential members still do business inside a financial institution’s lobby, make ATM withdrawals, and conduct transactions via drive-up windows. Several other channels, discussed here, are gaining heavier usage. Compared to members, potential members are somewhat stronger users of transactions conducted via ATM, drive-up windows, audio response, and mobile technology. Part of this is due to young consumers who make up a large share of the nation’s nonmembers, and who tend to be stronger users of these channels than are their older counterparts.

Trends Are Changing Among Channels Trends of the recent past are a fairly reliable predictor of future tendencies. Consequently, we re-examine some of the data on various service-delivery channels from the previous Survey of Potential Members (Figure 5-1). In that study, we predicted that financial institutions courting eligible nonmembers could expect: r fairly strong growth in online banking, Internet/e-mail bill payment, and check card (debit) transactions; r moderate increases in ATM and audio response transactions; r a fairly sizeable drop in in-lobby transactions; and r stable numbers when it comes to the remaining service delivery channels. For the most part, these trends have held true. In the following sections, we look at

Highlights r Transaction growth continues strong in online banking and online bill payment services, making them “must-have” options among financial institutions. r Digital touchpoints are critical to consumer engagement and awareness. Web sites that draw in consumers and are easy to use are essential. r ATM networks, long popular with consumers, now need critical review alongside competing delivery channels. r Card-use patterns continue to change, trending away from credit to debit, and followed by growing interest in prepaid cards and alternative payment mechanisms. r Mobile financial services continue on the long road to viability, driven largely by younger generations shaped by wireless technology. r Branches retain an important—but changing—role, with focus shifting to delivery innovation and cost controls. r In the future, nonmembers will yield higher per-person transaction volumes than will current members across virtually all delivery channels.

them individually and also identify areas where rapid changes have occurred.

Online Banking and Bill-Pay The greatest transaction growth continues to come with online banking and online bill payment. Online bill-pay has reached such a critical point, according to industry analysts, that financial institutions have to offer it simply to remain competitive. As alluded to previously, over 60% of eligible nonmembers doing business via online channels were doing so more than they were a year earlier. A high percentage of users utilize them more frequently rather than less. And when broken out by age, participation is highest among younger users, although there’s strong participation in the mid-range as well (Tables 5-1 through 5-11). That online bill payment has

grown in popularity is borne out by a 2008 survey by CheckFree (now a part of Fiserve). It found that an estimated 63 million households, or three-fourths of those online, pay their bills electronically rather than by writing paper checks – up from 61 million in a similar survey in 2007. A separate study by TowerGroup estimates that the volume of annual online bill payments will reach 3.87 billion by 2012. Several studies in the past have pointed to online banking – especially when combined with online bill pay – as being a “sticky” service. Once consumers set up and use online banking with a provider, it’s at least somewhat more challenging for another provider to lure them away. Given the time consumers are required to invest to set up the online account and the bill payment function, many would not look forward to going through that routine again. Also, if you haven’t yet done so, consider adding online loan-

Survey of Potential Members

Chapter 5 application capabilities, preferably with an automated approval feature. Half of credit unions – including roughly 90% of those with assets of $50 million or more – accept online applications. The percentage of all credit unions providing this feature has doubled since 2002, according to CUNA’s 2008 Technology and Spending report. About half of the systems in credit unions with assets of $200 million or more also have automated approval capabilities.

Frequency of Using Various Delivery Channels* Internet banking Bill pay via Internet/e-mail Debit/check card purchases

If online is the way we’re handling more of our financial transactions, then the best thing institutions can do in the way of overall strategy is to master their own Web sites. So says a 2008 study from the Corporate Executive Board’s Advertising and Marketing Communications Roundtable in partnership with Nielsen/ NetRatings. Four digital touchpoints – Web sites, e-mail, display advertising, and paid search – were evaluated on their power to influence consumer awareness, brand favorability, and consumer engagement. The study revealed one common thread: Web sites rule. Efforts to build gold-standard sites with the consumer’s activity in mind will pay the largest return on each digital dollar invested. In general, Web sites generated the greatest increase in onlinemarketing effectiveness. E-mails, in contrast, are only effective once a consumer has gathered information and is moving closer to a purchase decision. The projected reliance on web transactions among two important market segments – nonmembers 18 to 34 and nonmembers with high incomes – may make your © 2009 Credit Union National Association

62%

35%

59%

30%

11%

More frequently 41% 40%

Audio response 19%

Just as frequently Less frequently

33%

ATM deposits

57%

10% 32%

ATM withdrawals

60%

8% 28%

Drive-up window

50%

22% 23%

Credit card purchases

58%

19% 20%

Phone w/ person

Web Sites Rule

68%

26%

55%

25% In person, inside lobby

11% 40%

20%

40%

49% 60%

80%

100%

* Percentages based only on nonmembers who currently use each particular delivery channel.

Figure 5 - 1

credit union’s web site even more important. Design it so that all pertinent information is included on the site and can be found with ease. Include the benefits of membership, how to join, product offerings, online services, current rates and fees, special promotions, community-involvement activities, and special features (such as financial calculators). In addition to long-range awareness-building activities, direct mail campaigns that drive potential members to your web site still serve to communicate the credit union’s rate, product, benefit, and other information to residents—and to attract new members.

The ATM at Mid-life Along with the growth of online delivery channels, we predicted that potential members would provide moderate growth to automated teller machine (ATM) and audio response transactions. As one of the most popular consumer-delivery channels over the last four decades, the ATM now 24

faces challenges. The issues are tied to saturation, the development of competing channels through online banking, cash options at the point of sale, legacy infrastructure, institutional inertia, and costs. Mobile capabilities and peer-topeer payment options across public networks add to the challenges. One set of demands is to determine how the ATM/ self-service channel facilitates member acquisition, retention, and relationship optimization. To maintain success and relevance, credit unions will need to consistently analyze their member preferences. Identify how these members view ATMs and selfservice kiosks in the context of a multi-channel service delivery strategy. The ATM’s mid-life crisis also offers its share of opportunity. Take advantage of timing in both the replacement and expansion of ATM networks. Review user needs, system capabilities, and locations for the best mix.

Delivery Channels Card Trends Credit Credit card purchases are the only transaction type that potential members utilize to a lower degree than do members. In general, consumers are shifting their spending away from credit cards, according to a 2009 report from Javelin Research and Strategy. But transactions that would have been credit-card transactions are not disappearing altogether. They’re migrating to debit cards, other “pay now” options, as well as “pay before” methods, such as prepaid products.

Debit Consumers fell in love with check cards (or debit cards) several years ago. For over five years, check cards have been used to make more purchases than credit cards, according to the Federal Reserve. They’re now a first-choice payment device, based largely on convenience and few fees. Regarding member acquisition, debit cards are a must-have. “Nearly every bank and savings institution now offers debit cards,” according to a fall 2007 survey from Bankrate. com. The same survey showed that “Generation P” (for “plastic,” meaning users ages 18 to 25) is driving check-card use. Sixty percent say they use check cards for small purchases from digital content and vending machines to parking and convenience purchases. And check card use now cuts across all age and income demographics. Along with Generation P, the heaviest users are female. Seniors are embracing them, too.

Prepaid Prepaid debit cards represent a growing competitive threat to financial institutions’ checking

account relationships. Institutions could lose up to $20 billion of annual revenue if large numbers of checking account holders shift their money to prepaid debit cards, according to a 2009 report from Aite Group. Financial institutions typically view underserved consumers as a promising segment they could reach through traditional checking account relationships. But few institutions realize that new technology and financial products may actually render the checking account relationship less attractive to this consumer segment. What’s needed is for institutions to start planning alternate game plans, instead of just hoping prepaid providers won’t win away consumers. Such a game plan includes rethinking the traditional emphasis on checking accounts. The most sophisticated financial institutions will find ways to profit from the appeal of prepaid debit cards to potential members.

Mobile Technologies During 2007, only 6% of Americans who bought phones purchased “smartphones” capable of Web access and application downloads. In early 2008, their ranks swelled to 16%, according to Nielsen Mobile’s survey of 70,000 U.S. wireless subscribers. And more Americans now use mobile e-mail, instant messaging, and mobile Web browsing, according to Nielsen Mobile. Most of the recent discussion around mobile payments has been how – or if – carriers and financial institutions will hammer out a shared revenue model. Those decisions are now being made, leading to the point when mobile payments will become an everyday reality.

And as a generation largely shaped by technology, today’s teenagers are redefining what mobility will be in the future, according to a 2008 survey titled Teenagers: A Generation Unplugged, by CTIA/The Wireless Association in conjunction with Harris Interactive. Eighty percent of teens surveyed said their cell phones provided a sense of security while on the go, confirming the cell phone as their mobile safety net. Another significant trend is that texting is replacing talking, with teens spending nearly an equal amount of time texting as they do talking each month. Texting has critical advantages because it offers more options, including the ability to receive real-time account alerts.

Branches Given the above trends, we noted earlier that fairly large numbers of potential members visit their financial providers’ lobbies with less frequency than in previous years. While branches are still the most relied-upon delivery channel, the data showed that only 11% of current branch users were visiting their branches more frequently than they were one year previous, whereas 40% were using them less often. The accompanying -29pp difference for branches represented the largest negative gap among the various delivery channels Branches, however, still have a place in the life of most Americans, according to analysts. Even heavy users of online banking and call centers still hit the branch nearly as often as they did a decade ago. But the steady branch traffic may mask a rapid decline in the value of the branch. It’s already happening, with many consumers far more hooked on electronic delivery than

Survey of Potential Members

Chapter 5 they ever were on branch services. As paper-check volume diminishes, branch traffic will drop further. Some branches likely will have to be weeded out, according to financial-services consulting firm Novantas. Various kinds of re-tooling will also be needed to boost overall network productivity. As with the automakers, reducing current capacity is only part of the story. New types of delivery innovation will be needed in both online offerings and low-cost, selfservice, physical outlets. Financial institutions have begun to adopt standalone ATM branches, self-service kiosks, and in-store branching. Tellers and platform staff are increasingly integrated with customer self-service terminals – similar to the efficiencies seen at airline terminals, where passengers now do most of the work when booking tickets and generating boarding passes. Novantas believes the coming years will see a wave of innovation in branch formats, with a goal of at least 50% reductions in the cost of the physical network.

r Refine existing Gen X and Y groups into natural sub-groups The quest for more members such as married couples, is driven primarily by the unmarried couples, and singles. prevalence of young adults among r Develop an experience-based nonmembers, and this group’s approach to service tailored heavy reliance on remote-banking toward the delivery preferences channels. And nonmembers, as a of Gen X and Y. group, will yield higher per-person transaction volumes in the coming Three years ago, CUNA’s years than will existing credit National Member Survey report union members. We anticipate this pointed out that credit unions, will hold true for virtually every as a group, must be prepared service delivery channel with the to handle increased check card exceptions of in-lobby transactions and online transaction volume and transactions over the phone in the coming years – just from with a “live” person. their existing members. Members’ Wealth accumulation and wealth increased reliance on these credit distribution are changing, according union services, as highlighted in the 2009-2010 National Member Survey to CUNA’s CU360 Newsletter. Baby boomers are retiring, and Gen X and report, confirms this point. Gen Y will enter their prime earning Credit unions looking to achieve years. But many financial institutions significant membership growth continue to target older consumers. through attracting young adults must be able to accommodate To close the gap and begin even greater transaction volume serving Gen X and Y, consider the for all remote-banking channels. following steps: This goes above and beyond the r Evaluate existing marketing, service levels expected from current product, and operating membership. Meeting potential capabilities to set strategies members’ transaction needs is that appeal to Gen X and Y key to success in recruiting and consumers. retaining new members. r Conduct surveys to understand the “voice” of Gen X and Y in your membership and potential membership.

Youth is the Future

Delivery Channels Strategic Considerations ÿ With ATMs, review the mix of capabilities that could provide more revenue opportunities, reduce processing costs, enhance the user experience, or leverage infrastructure improvements. When considering marketexpansion opportunities, examine your ATM mix to maintain the best balance for all locations.

ÿ Credit union members – and nonmembers – are increasing the frequency with which they use remote-banking channels. To support this increased volume, credit unions may need to make additional financial, human-resource, and technology investments. ÿ Credit unions seeking to increase membership by attracting large numbers of young adults should be prepared to handle even greater remote-banking transaction volume – particularly for check card purchases, online functions, and bill pay services.

ÿ Consider whether prepaid debit has a place in the broader account fleet that your credit union offers, as a product in its own right. Leading institutions could rapidly gain market share by striking co-brand deals with prepaid marketers that have a head start in the race.

ÿ Consider online loan applications with an automated approval feature, if not yet offered at your credit union.

ÿ Watch trends in mobile services delivery, including the growing interest in business mobile banking. Other trends include the continuing deployment of smartphones, mobile contactless payments, and the expansion of account-related financial functions.

ÿ View the Web not as just a consumer marketing vehicle, but a series of different engagement opportunities. To attract consumers, make sure your Web site is up to snuff, serving as a key platform for communicating your brand’s message through the purchase cycle.

ÿ Rather than building expensive, traditional brick-and-mortar outlets to achieve scale in each local market within branch networks, consider new types of low-cost branch formats. Look for opportunities to integrate online functionality with the physical branches, and to leverage tellers and platform staff along with member self-service options.

ÿ The heavy reliance on online banking and bill-pay services, the low familiarity with credit unions among potential members, and the relatively low awareness of membership eligibility all hold strong implications for your credit union’s web site. It can serve as one of the more-effective methods for communicating membership eligibility. It can answer the questions, “Who can join?” “How do I join?” and “Why should I join?” This information should hold a prominent position on your site.

ÿ To appeal to Gen X and Y’s desire for the simple things in life, streamline product portfolios. Offerings should be straightforward and composed of easily understood groupings. Provide “plain English” explanations of benefits and features.

Survey of Potential Members

Results Tables

ÂŠ 2009 Credit Union National Association

ÂŠ2009 Credit Union National Association

T-1

By bank loyalty status

By self-reported status

By household income

Overall By age 18 to 24 25 to 34 35 to 44 45 to 54 55 to 64 65 or older Less than $25,000 $25,000 - $34,999 $35,000 - $49,999 $50,000 - $74,999 $75,000 - $99,999 $100,000 or more Potential member Non-member Not sure if eligible Promoters Passives Detractors

N 610 72 101 102 168 113 43 142 83 91 102 69 78 200 72 332 179 148 245

Very familiar 7% 0% 6% 11% 9% 8% 12% 4% 7% 5% 8% 13% 14% 13% 7% 3% 11% 4% 7%

Somewhat familiar 26% 25% 25% 24% 24% 23% 40% 22% 31% 21% 33% 30% 33% 43% 25% 16% 27% 29% 26%

Not very familiar 28% 25% 28% 29% 33% 28% 23% 27% 24% 35% 23% 34% 29% 28% 29% 28% 29% 28% 26%

Q. 1b: In general, how familiar are you with the types of financial services and the fee/rate benefits available at a credit union?

Table 2-1 Familiarity With Financial Services and Fee/Rate Benefits Available at a Credit Union

Not at all familiar 39% 50% 42% 36% 34% 41% 26% 47% 39% 39% 36% 23% 25% 16% 39% 53% 33% 39% 41%

Results Tables: Chapter 2 â&#x20AC;&#x201C; Keys to Attracting More Members

Survey of Potential Members

Better inform me of Have more convenient Offer services and location to better loan rate/fee advantages my home rates N Overall 391 35% 30% 29% By age 18 to 24 47 32% 30% 26% 25 to 34 67 30% 34% 37% 35 to 44 65 32% 28% 31% 45 to 54 103 46% 30% 28% 55 to 64 76 34% 22% 34% 65 or older 28 36% 32% 18% By household income Less than $25,000 95 40% 26% 21% $25,000 - $34,999 51 42% 30% 32% $35,000 - $49,999 57 34% 25% 33% $50,000 - $74,999 72 32% 31% 30% $75,000 - $99,999 41 28% 43% 29% $100,000 or more 49 31% 37% 26% By self-reported status Potential member 162 38% 37% 26% Not sure if eligible 228 32% 24% 31% By bank loyalty status Promoters 113 29% 25% 37% Passives 96 27% 32% 27% Detractors 157 42% 30% 25% By whether use online Yes 201 31% 30% 28% banking at a bank No 190 38% 30% 30% *Based on non-members who indicate they are eligible to join a credit union or are unsure of their eligibility. Offer better savings rates 28% 26% 34% 20% 28% 34% 29% 23% 30% 38% 30% 26% 21% 28% 28% 20% 32% 32% 26% 30%

Have lower service charges/ fees 26% 30% 27% 25% 33% 29% 14% 34% 24% 27% 20% 34% 23% 21% 31% 23% 26% 30% 28% 25% Have more free ATM locations 23% 23% 24% 37% 27% 20% 4% 23% 18% 27% 23% 33% 18% 26% 21% 23% 21% 25% 30% 15%

Offer a wider range of services 12% 11% 9% 14% 20% 14% 7% 12% 16% 22% 9% 6% 8% 12% 13% 7% 16% 15% 14% 11% Have more convenient hours 12% 15% 10% 9% 9% 16% 11% 14% 10% 15% 11% 8% 9% 9% 14% 10% 11% 12% 11% 13%

Provide rewards for having multiple services/ high balances 11% 6% 13% 9% 11% 8% 18% 8% 9% 5% 17% 11% 10% 8% 13% 13% 10% 9% 10% 12% Have more convenient location to my work 6% 11% 7% 9% 4% 5% 0% 7% 1% 0% 12% 7% 10% 10% 3% 3% 10% 6% 11% 1% Provide friendlier service 5% 6% 3% 5% 4% 4% 4% 5% 6% 2% 2% 9% 4% 4% 5% 6% 2% 5% 5% 4%

Q. 1c: If you are eligible to join a credit union, what would it need to do better than the bank(s) you currently use in order to persuade you to begin using the credit union's services?

Table 2-2 What Credit Union Could Do to Persuade Non-Members to Begin Using the Credit Union's Services*

Other 9% 9% 7% 14% 7% 8% 11% 5% 8% 9% 11% 13% 17% 8% 10% 8% 13% 9% 11% 8%

Nothing could persuade me to begin using the CU 10% 11% 4% 5% 7% 7% 25% 13% 9% 3% 9% 6% 15% 9% 10% 17% 6% 5% 8% 12%

Results Tables: Chapter 2 â&#x20AC;&#x201C; Keys to Attracting More Members

ÂŠ2009 Credit Union National Association

T-2

Survey of Potential Members

ÂŠ2009 Credit Union National Association

T-3

By bank loyalty status

By self-reported status

By household income

N 578 66 93 98 158 111 47 126 81 88 99 69 78 192 67 307 175 148 231

Yes 91% 86% 87% 90% 87% 98% 96% 87% 94% 91% 91% 81% 98% 90% 87% 91% 96% 93% 86%

No 9% 14% 13% 10% 13% 2% 4% 13% 6% 9% 9% 19% 2% 10% 13% 9% 4% 7% 14%

Q. 9: Is the provider you checked in Q.8 the same provider you relied on as your primary financial institution two years ago?

Table 2-3 Current PFI Is Same Provider Relied On As PFI Two Years Ago

Results Tables: Chapter 2 â&#x20AC;&#x201C; Keys to Attracting More Members

Survey of Potential Members

Their office(s) are conveniently located The quality of service provided is excellent They are committed to resolving problems I feel like they truly appreciate my business They provide me good overall value I trust them to have my best interests at heart They are involved with events/charitable causes

N 580 577 582 575 579 586 555

Agree strongly 65% 51% 47% 37% 36% 33% 32%

Agree somewhat 24% 41% 40% 44% 48% 48% 43%

Disagree somewhat 7% 6% 10% 12% 13% 13% 19%

Disagree strongly 5% 2% 3% 7% 4% 7% 6%

Q. 10: How strongly do you agree or disagree with each of the following statements about the provider you checked in Q.8?

Table 3-1 Overall Agreement With Statements Regarding PFI

Results Tables: Chapter 3 â&#x20AC;&#x201C; Loyalty

ÂŠ2009 Credit Union National Association

T-4

Survey of Potential Members

ÂŠ2009 Credit Union National Association

T-5

By PFI

By bank loyalty status

By self-reported status

By household income

N 580 70 94 98 163 109 42 134 79 89 97 70 77 196 66 307 172 147 234 544 19

Agree strongly 65% 61% 56% 65% 58% 72% 81% 68% 55% 69% 68% 61% 64% 67% 66% 64% 82% 65% 54% 66% 48%

Agree somewhat 24% 21% 34% 20% 29% 21% 14% 23% 25% 22% 21% 28% 24% 22% 22% 25% 12% 27% 28% 23% 42%

Disagree somewhat 7% 7% 2% 11% 10% 5% 2% 3% 7% 8% 7% 10% 8% 6% 8% 6% 4% 4% 11% 6% 4%

Q. 10: How strongly do you agree or disagree with each of the following statements about the provider you checked in Q.8?

Table 3-2 Agreement With the PFI Statement: Their Office(s) Are Conveniently Located Near My Home or Workplace

Disagree strongly 5% 10% 7% 3% 2% 2% 2% 6% 12% 1% 3% 1% 4% 5% 4% 5% 2% 4% 7% 5% 6%

Results Tables: Chapter 3 â&#x20AC;&#x201C; Loyalty

Survey of Potential Members

ÂŠ2009 Credit Union National Association

T-6

By PFI

By bank loyalty status

By self-reported status

By household income

N 577 70 92 97 160 111 43 133 76 89 97 70 78 195 67 304 172 146 232 540 19

Agree strongly 51% 47% 38% 45% 44% 58% 77% 56% 47% 51% 48% 52% 48% 55% 42% 49% 80% 52% 29% 51% 38%

Agree somewhat 41% 44% 49% 41% 49% 38% 23% 39% 45% 42% 41% 45% 44% 39% 47% 42% 19% 44% 57% 41% 44%

Disagree somewhat 6% 3% 11% 11% 6% 3% 0% 4% 6% 3% 9% 3% 8% 4% 8% 6% 2% 5% 9% 6% 4%

Q. 10: How strongly do you agree or disagree with each of the following statements about the provider you checked in Q.8? Disagree strongly 2% 6% 2% 2% 1% 2% 0% 2% 2% 4% 2% 0% 0% 2% 4% 2% 0% 0% 6% 2% 14%

Table 3-3 Agreement With the PFI Statement: The Quality of Service Provided by Their Staff Is Excellent

Results Tables: Chapter 3 â&#x20AC;&#x201C; Loyalty

Survey of Potential Members

ÂŠ2009 Credit Union National Association

T-7

By PFI

By bank loyalty status

By self-reported status

By household income

N 582 70 94 98 163 111 42 135 77 88 100 70 78 197 65 309 174 149 232 544 20

Agree strongly 47% 40% 35% 47% 40% 49% 74% 51% 45% 38% 45% 50% 49% 56% 38% 43% 79% 49% 22% 47% 31%

Agree somewhat 40% 39% 52% 44% 45% 40% 21% 35% 43% 45% 43% 44% 44% 36% 42% 43% 21% 44% 53% 40% 46%

Disagree somewhat 10% 13% 10% 8% 12% 8% 5% 10% 9% 12% 10% 6% 6% 7% 14% 10% 0% 6% 19% 10% 9%

Q. 10: How strongly do you agree or disagree with each of the following statements about the provider you checked in Q.8? Disagree strongly 3% 9% 3% 1% 2% 4% 0% 4% 4% 5% 2% 0% 1% 2% 7% 4% 0% 2% 6% 3% 14%

Table 3-4 Agreement With the PFI Statement: They Are (or Would Be) Committed to Resolving My Serviceor Account-Related Problems to My Satisfaction, In a Reasonable Amount of Time

Results Tables: Chapter 3 â&#x20AC;&#x201C; Loyalty

Survey of Potential Members

ÂŠ2009 Credit Union National Association

T-8

By PFI

By bank loyalty status

By self-reported status

By household income

N 575 69 92 98 161 109 43 135 78 89 97 70 76 195 66 303 174 146 228 540 18

Agree strongly 37% 38% 28% 34% 29% 40% 53% 44% 40% 34% 31% 31% 36% 36% 35% 37% 65% 31% 17% 36% 39%

Agree somewhat 44% 36% 49% 43% 50% 47% 44% 42% 36% 39% 54% 58% 42% 49% 39% 43% 33% 61% 43% 45% 36%

Disagree somewhat 12% 13% 15% 19% 12% 8% 2% 6% 19% 16% 11% 9% 14% 11% 15% 12% 1% 6% 26% 12% 10%

Q. 10: How strongly do you agree or disagree with each of the following statements about the provider you checked in Q.8?

Table 3-5 Agreement With the PFI Statement: I Feel Like They Truly Appreciate My Business

Disagree strongly 7% 13% 8% 4% 9% 5% 0% 8% 6% 11% 4% 2% 7% 5% 10% 8% 0% 2% 14% 6% 15%

Results Tables: Chapter 3 â&#x20AC;&#x201C; Loyalty

Survey of Potential Members

ÂŠ2009 Credit Union National Association

T-9

By PFI

By bank loyalty status

By self-reported status

By household income

N 579 70 95 97 161 109 43 134 78 88 99 69 77 195 65 308 172 148 232 543 18

Agree strongly 36% 34% 28% 33% 32% 35% 53% 41% 37% 28% 33% 36% 38% 40% 27% 34% 64% 33% 15% 36% 39%

Agree somewhat 48% 44% 54% 51% 49% 46% 44% 41% 44% 52% 51% 58% 49% 46% 58% 48% 35% 60% 50% 49% 33%

Disagree somewhat 13% 16% 12% 14% 16% 16% 2% 11% 18% 14% 15% 5% 10% 12% 13% 13% 0% 5% 27% 12% 13%

Q. 10: How strongly do you agree or disagree with each of the following statements about the provider you checked in Q.8?

Table 3-6 Agreement With the PFI Statement: They Provide Me Good Overall Value, Given the Fees Charged and Rates Provided

Disagree strongly 4% 6% 6% 2% 4% 4% 0% 7% 1% 6% 2% 1% 2% 3% 2% 5% 0% 1% 8% 3% 15%

Results Tables: Chapter 3 â&#x20AC;&#x201C; Loyalty

Survey of Potential Members

ÂŠ2009 Credit Union National Association

T-10

By PFI

By bank loyalty status

By self-reported status

By household income

N 586 70 94 99 164 112 43 136 79 90 100 70 77 197 66 312 175 149 235 548 20

Agree strongly 33% 31% 21% 32% 26% 35% 51% 37% 25% 30% 32% 31% 34% 30% 28% 34% 58% 29% 14% 32% 31%

Agree somewhat 48% 49% 62% 40% 47% 46% 44% 47% 55% 45% 51% 52% 39% 54% 51% 44% 38% 61% 47% 48% 43%

Disagree somewhat 13% 11% 11% 19% 18% 13% 5% 8% 13% 15% 11% 15% 23% 11% 17% 13% 4% 8% 25% 14% 7%

Q. 10: How strongly do you agree or disagree with each of the following statements about the provider you checked in Q.8? Disagree strongly 7% 9% 6% 8% 9% 6% 0% 8% 7% 10% 6% 2% 4% 5% 4% 9% 1% 1% 14% 6% 19%

Table 3-7 Agreement With the PFI Statement: I Trust Them to Have My/My Household's Best Interests at Heart

Results Tables: Chapter 3 â&#x20AC;&#x201C; Loyalty

Survey of Potential Members

ÂŠ2009 Credit Union National Association

T-11

By PFI

By bank loyalty status

By self-reported status

By household income

N 555 69 90 93 152 105 42 128 75 83 95 67 74 187 64 294 165 140 223 518 18

Agree strongly 32% 22% 20% 35% 26% 36% 55% 35% 31% 36% 28% 21% 34% 34% 28% 32% 53% 26% 20% 32% 28%

Agree somewhat 43% 46% 41% 42% 51% 43% 33% 45% 38% 37% 51% 50% 40% 42% 50% 42% 34% 60% 39% 43% 25%

Disagree somewhat 19% 25% 29% 19% 19% 13% 10% 14% 23% 20% 19% 27% 17% 20% 18% 18% 10% 13% 32% 20% 17%

Q. 10: How strongly do you agree or disagree with each of the following statements about the provider you checked in Q.8?

Table 3-8 Agreement With the PFI Statement: They Are Involved With Events and Charitable Causes in My Community

Disagree strongly 6% 7% 10% 3% 4% 8% 2% 6% 8% 8% 2% 3% 8% 4% 4% 7% 3% 1% 10% 5% 29%

Results Tables: Chapter 3 â&#x20AC;&#x201C; Loyalty

Survey of Potential Members

Very Somewhat Somewhat N Average* satisfied satisfied dissatisfied Overall 592 3.4 55% 37% 6% By age 18 to 24 68 3.3 49% 38% 9% 25 to 34 91 3.3 44% 44% 10% 35 to 44 101 3.3 48% 43% 5% 45 to 54 169 3.4 49% 41% 7% 55 to 64 113 3.5 54% 42% 4% 65 or older 46 3.8 85% 15% 0% By household Less than $25,000 127 3.5 65% 27% 4% income $25,000 - $34,999 80 3.4 47% 50% 3% $35,000 - $49,999 93 3.3 47% 40% 7% $50,000 - $74,999 103 3.4 54% 35% 9% $75,000 - $99,999 72 3.4 51% 44% 3% $100,000 or more 80 3.5 56% 40% 4% By self-reported Potential member 201 3.4 54% 37% 5% status Non-member 67 3.5 55% 37% 6% Not sure if eligible 308 3.4 53% 38% 6% By bank loyalty Promoters 187 3.9 94% 6% 0% status Passives 152 3.6 57% 42% 0% Detractors 253 2.9 20% 61% 14% *Average scores based on a 4-point scale, where 4.0 represents "very satisfied" and 1.0 represents "very dissatisfied."

Q. 13: Overall, how satisfied are you with the bank you use most?

Table 3-9 Overall Satisfaction With Bank

Very dissatisfied 3% 4% 2% 5% 3% 0% 0% 4% 0% 6% 2% 2% 0% 3% 2% 2% 0% 1% 6%

Results Tables: Chapter 3 â&#x20AC;&#x201C; Loyalty

ÂŠ2009 Credit Union National Association

T-12

Survey of Potential Members

ÂŠ2009 Credit Union National Association

T-13

By bank loyalty status

By self-reported status

By household income

N 581 67 91 97 167 112 43 121 79 92 103 72 78 198 65 302 181 150 250

More satisfied 12% 19% 11% 7% 10% 13% 9% 16% 14% 13% 6% 11% 8% 11% 16% 12% 26% 5% 4%

Equally satisfied 77% 66% 73% 84% 74% 76% 91% 67% 78% 79% 83% 79% 85% 79% 73% 75% 73% 91% 71%

Q. 14: Are you more satisfied, equally satisfied, or less satisfied with the bank than you were one year ago?

Table 3-10 Satisfaction With Bank Compared With One Year Ago

Less satisfied 11% 15% 16% 9% 16% 12% 0% 17% 8% 8% 10% 10% 7% 10% 11% 13% 1% 3% 25%

Results Tables: Chapter 3 â&#x20AC;&#x201C; Loyalty

Survey of Potential Members

ÂŠ2009 Credit Union National Association

T-14 By self-reported status

By household income

Overall By age

4 4% 6% 9% 2% 6% 4% 0% 2% 15% 3% 4% 3% 1% 7% 2% 3%

5 - Neutral 21% 15% 5% 31% 25% 23% 21% 20% 22% 25% 16% 25% 20% 20% 29% 19%

18 to 24 25 to 34 35 to 44 45 to 54 55 to 64 65 or older Less than $25,000 $25,000 - $34,999 $35,000 - $49,999 $50,000 - $74,999 $75,000 - $99,999 $100,000 or more Potential member Non-member Not sure if eligible

N 596 68 91 101 170 114 47 127 80 94 103 72 81 202 68 309

Promoters 34% 22% 32% 38% 24% 31% 60% 36% 22% 35% 35% 33% 40% 38% 37% 30%

Detractors 41% 44% 41% 46% 51% 38% 23% 38% 51% 48% 36% 39% 33% 42% 44% 40%

Q. 15: How likely is it that you would recommend this bank to a friend, family member, or co-worker?

Table 3-12 Bank Net Promoter Scores

0 - Not at N Average* 1 2 3 all likely Overall 596 6.9 5% 1% 1% 2% By age 18 to 24 68 6.4 9% 1% 0% 1% 25 to 34 91 6.7 3% 1% 3% 8% 35 to 44 101 6.9 4% 2% 1% 1% 45 to 54 170 6.3 6% 3% 2% 2% 55 to 64 114 7.0 4% 0% 1% 3% 65 or older 47 8.1 0% 0% 2% 0% By household Less than $25,000 127 7.0 6% 3% 0% 2% income $25,000 - $34,999 80 6.4 4% 1% 1% 1% $35,000 - $49,999 94 6.7 6% 1% 3% 3% $50,000 - $74,999 103 7.1 5% 0% 3% 2% $75,000 - $99,999 72 7.0 1% 2% 0% 2% $100,000 or more 81 7.4 1% 2% 2% 2% By self-reported Potential member 202 7.0 4% 1% 2% 2% status Non-member 68 6.7 9% 0% 1% 2% Not sure if eligible 309 6.8 5% 2% 1% 3% *Average scores based on a 11-point scale, where 0 represents "not at all likely" and 10 represents "extremely likely." 6 6% 12% 11% 5% 6% 4% 0% 5% 8% 7% 7% 6% 5% 7% 0% 7%

Q. 15: How likely is it that you would recommend this bank to a friend, family member, or co-worker?

Table 3-11 Likelihood of Recommending Bank to Others

Net Promoters -7% -22% -9% -8% -27% -7% 37% -2% -29% -13% -1% -6% 7% -4% -7% -10%

7 10% 19% 11% 3% 11% 11% 4% 13% 9% 9% 8% 15% 7% 8% 2% 13%

8 15% 15% 16% 14% 15% 21% 13% 13% 18% 8% 22% 13% 21% 12% 17% 17%

9 12% 10% 12% 13% 4% 9% 26% 6% 12% 8% 15% 17% 14% 14% 10% 11%

10 Extremely likely 22% 12% 20% 25% 21% 22% 34% 30% 10% 26% 20% 16% 26% 24% 27% 19%

Results Tables: Chapter 3 â&#x20AC;&#x201C; Loyalty

Survey of Potential Members

Overall Average age Have bank checking account Have bank loan Very satisfied with bank Average amount in outstanding loans at bank Average number of balance-carrying bank services used 44.8 84% 40% 51% $12,072 2.7

Total

Yes 34% 49.7 90% 41% 94% $11,946 2.8

No 66% 42.7 87% 44% 34% $12,716 2.7

Table 3-13 Profiles of Non-Members Truly Loyal to/Promoters for Their Bank and Less Loyal Non-Members

Results Tables: Chapter 3 â&#x20AC;&#x201C; Loyalty

ÂŠ2009 Credit Union National Association

T-15

Survey of Potential Members

ÂŠ2009 Credit Union National Association

T-16

By bank loyalty status

By self-reported status

By household income

N 637 72 102 104 180 117 48 150 84 95 104 72 82 207 73 337 187 152 257

Checking account 84% 79% 79% 88% 86% 90% 88% 75% 82% 84% 90% 92% 98% 87% 85% 83% 90% 88% 86%

Internet/ online banking 50% 67% 64% 60% 47% 52% 17% 37% 39% 49% 65% 71% 70% 60% 34% 49% 50% 53% 55%

Internet/ online bill payment 38% 49% 52% 45% 31% 34% 19% 25% 32% 30% 49% 60% 59% 48% 21% 36% 41% 41% 38%

Q. 11: Listed below are various services offered by financial institutions. Please indicate at which type of financial institution(s), if any, you use the service.

Table 4-1 Use of Convenience Services

Results Tables: Chapter 4 â&#x20AC;&#x201C; Use of Financial Services

Survey of Potential Members

ÂŠ2009 Credit Union National Association

T-17

By bank loyalty status

By self-reported status

By household income

N 637 72 102 104 180 117 48 150 84 95 104 72 82 207 73 337 187 152 257

Certificates of deposit (CDs) 29% 11% 17% 32% 31% 33% 52% 17% 23% 34% 30% 39% 44% 31% 28% 27% 36% 31% 26%

Money market account 23% 8% 18% 28% 22% 31% 38% 8% 14% 23% 28% 33% 50% 27% 29% 19% 27% 27% 22%

Individual retirement account (IRA) 20% 8% 15% 18% 21% 26% 38% 14% 15% 24% 26% 23% 29% 20% 24% 20% 24% 23% 19%

Q. 11: Listed below are various services offered by financial institutions. Please indicate at which type of financial institution(s), if any, you use the service.

Table 4-2 Use of Savings Services

Results Tables: Chapter 4 â&#x20AC;&#x201C; Use of Financial Services

Survey of Potential Members

ÂŠ2009 Credit Union National Association

T-18

By bank loyalty status

By self-reported status

By household income

N 637 72 102 104 180 117 48 150 84 95 104 72 82 207 73 337 187 152 257

Yes 40% 22% 44% 57% 43% 53% 29% 19% 39% 46% 50% 63% 61% 47% 45% 37% 41% 47% 42%

No 60% 78% 56% 43% 57% 47% 71% 81% 61% 54% 50% 37% 39% 53% 55% 63% 59% 53% 58%

Q. 11: Listed below are various services offered by financial institutions. Please indicate at which type of financial institution(s), if any, you use the service.

Table 4-3 Whether Have Loan

Results Tables: Chapter 4 â&#x20AC;&#x201C; Use of Financial Services

Survey of Potential Members

ÂŠ2009 Credit Union National Association

T-19

By bank loyalty status

By self-reported status

By household income

N 637 72 102 104 180 117 48 150 84 95 104 72 82 207 73 337 187 152 257

First mortgage loan 25% 11% 30% 33% 26% 35% 17% 10% 14% 26% 33% 42% 45% 31% 23% 21% 27% 30% 23%

Home equity loan/line of credit 20% 6% 17% 30% 19% 28% 21% 10% 9% 25% 25% 27% 37% 24% 17% 18% 22% 23% 19% New vehicle loan 19% 13% 21% 28% 23% 23% 8% 9% 17% 21% 20% 31% 34% 21% 25% 17% 19% 19% 21%

Q. 11: Listed below are various services offered by financial institutions. Please indicate at which type of financial institution(s), if any, you use the service.

Table 4-4 Use of Loan Services

Used vehicle loan 14% 10% 15% 22% 13% 12% 15% 6% 18% 16% 20% 27% 12% 18% 11% 13% 13% 13% 18%

Results Tables: Chapter 4 â&#x20AC;&#x201C; Use of Financial Services

Survey of Potential Members

18 to 24 25 to 34 35 to 44 45 to 54 55 to 64 65 or older By household Less than $25,000 income $25,000 - $34,999 $35,000 - $49,999 $50,000 - $74,999 $75,000 - $99,999 $100,000 or more By self-reported Potential member status Non-member Not sure if eligible By bank loyalty Promoters status Passives Detractors By have bank Yes loan No *Excludes 1st mortgage loans.

Overall By age

N 563 63 93 94 158 109 45 131 75 85 100 70 76 189 59 302 171 141 226 259 304

Average $12,072 $11,706 $15,726 $16,489 $11,297 $13,922 $4,167 $4,685 $8,649 $12,717 $13,991 $20,083 $22,043 $13,844 $14,176 $11,009 $11,946 $13,698 $12,094 $19,393 $6,549

N 563 63 93 94 158 109 45 131 75 85 100 70 76 189 59 302 171 141 226 259 304

Nothing 43% 37% 38% 35% 44% 39% 62% 61% 46% 35% 32% 26% 32% 40% 36% 44% 46% 35% 41% 20% 60%

$1 $4,999 14% 14% 10% 12% 16% 10% 20% 17% 15% 12% 17% 12% 7% 11% 21% 14% 14% 16% 13% 12% 15%

$5,000 $9,999 6% 14% 5% 3% 6% 7% 2% 8% 4% 8% 6% 10% 1% 8% 5% 5% 5% 7% 7% 8% 5%

$10,000 $14,999 8% 5% 5% 13% 8% 11% 7% 3% 9% 11% 12% 8% 8% 6% 8% 10% 8% 10% 7% 12% 5%

$15,000 $24,999 9% 13% 10% 9% 8% 11% 4% 2% 17% 14% 8% 7% 11% 10% 4% 9% 8% 9% 11% 14% 5%

$25,000 $49,999 8% 8% 18% 9% 6% 7% 2% 6% 6% 11% 11% 7% 9% 9% 9% 8% 5% 8% 11% 13% 4%

$50,000 or more 12% 10% 14% 20% 12% 15% 2% 2% 3% 9% 13% 29% 32% 14% 18% 10% 14% 14% 10% 20% 6%

Q. 12: Please indicate how much your household currently owes on all of its loans (EXCLUDING 1st mortgage loans) at each of the following types of institutions. (INCLUDE home equity loans, credit cards, vehicle loans, and personal loans.)

Table 4-5 Amount in Outstanding Loans

Results Tables: Chapter 4 â&#x20AC;&#x201C; Use of Financial Services

ÂŠ2009 Credit Union National Association

T-20

Survey of Potential Members

ÂŠ2009 Credit Union National Association

T-21

By bank loyalty status

By self-reported status

By household income

N 558 59 86 94 164 108 43 116 74 89 96 69 80 189 64 291 174 142 231

Average 2.7 1.8 2.5 3.1 2.6 3.0 3.1 1.9 2.2 2.7 2.9 3.3 3.6 2.9 2.8 2.5 2.8 2.8 2.6

One 34% 59% 34% 24% 35% 24% 26% 59% 40% 32% 26% 14% 13% 30% 33% 37% 32% 28% 37%

Two 21% 22% 29% 21% 23% 19% 14% 18% 26% 21% 23% 21% 22% 25% 21% 19% 19% 26% 20%

Three 18% 8% 15% 19% 18% 23% 26% 11% 19% 23% 16% 28% 18% 14% 15% 22% 20% 17% 19%

Q. 11: Listed below are various services offered by financial institutions. Please indicate at which type of financial institution(s), if any, you use the service.

Table 4-6 Number of Balance-Carrying Services Used at a Bank

Four 12% 5% 8% 17% 9% 17% 19% 3% 11% 9% 20% 18% 17% 12% 12% 12% 12% 15% 11%

Five or more 14% 5% 14% 18% 16% 17% 16% 8% 5% 14% 16% 19% 31% 19% 18% 10% 17% 14% 12%

Results Tables: Chapter 4 â&#x20AC;&#x201C; Use of Financial Services

Survey of Potential Members

ÂŠ2009 Credit Union National Association

T-22

*Based on potential members who currently use the specific delivery channel.

103

Over the phone with a person

In person, inside the lobby

ATM (automated teller machine) withdrawals

Wireless transactions via cell phone/PDA

ATM (automated teller machine) deposits

Automated touch-tone phone service

Credit card purchases

Debit/check card to make purchases

Bill payment via the Internet or via e-mail

Drive-up window

Internet banking

11%

20%

22%

23%

28%

32%

33%

41%

59%

62%

68%

Use it more frequently

49%

55%

69%

58%

50%

60%

57%

40%

30%

35%

26%

Use it just as frequently

40%

25%

19%

22%

10%

19%

11%

Use it less frequently

Q. 12: Listed below are a number of ways in which people can conduct business with their financial institution(s). For each method you currently use, please indicate whether you are now using that method less frequently, just as frequently, or more frequently than you were one year ago.

Table 5-1 Frequency of Using Delivery Channels Compared to One Year Ago*

Results Tables: Chapter 5 â&#x20AC;&#x201C; Delivery Channels

Survey of Potential Members

ÂŠ2009 Credit Union National Association

T-23

Less than $25,000 $25,000 - $34,999 $35,000 - $49,999 $50,000 - $74,999 $75,000 - $99,999 $100,000 or more

By annual household income

*Based on potential members who currently use Internet banking.

17 15 13 7 3

18 - 34 35 - 44 45 - 54 55 - 64 65 or older

By age

6 4 5 9 9 20

Overall

100% 62% 65% 48% 92% 57%

71% 73% 54% 57% 33%

68%

Use it more frequently

0% 38% 35% 42% 0% 32%

24% 20% 38% 43% 33%

26%

Use it just as frequently

0% 0% 0% 10% 8% 11%

6% 7% 8% 0% 33%

Use it less frequently

Table 5-2 Frequency of Using Internet Banking Compared to One Year Ago*

Results Tables: Chapter 5 â&#x20AC;&#x201C; Delivery Channels

Survey of Potential Members

ÂŠ2009 Credit Union National Association

13 13 6 5 3

18 - 34 35 - 44 45 - 54 55 - 64 65 or older Less than $25,000 $25,000 - $34,999 $35,000 - $49,999 $50,000 - $74,999 $75,000 - $99,999 $100,000 or more

By age

By annual household income

T-24

67% 90% 67% 12% 92% 52%

62% 77% 50% 40% 33%

62%

*Based on potential members who currently use bill payment via the Internet or via e-mail.

3 3 5 5 10 12

Overall

Use it more frequently

33% 10% 28% 79% 8% 48%

38% 23% 33% 60% 0%

35%

Use it just as frequently

0% 0% 5% 10% 0% 0%

0% 0% 17% 0% 67%

Use it less frequently

Table 5-3 Frequency of Using Bill Payment Via the Internet or Via E-Mail Compared to One Year Ago*

Results Tables: Chapter 5 â&#x20AC;&#x201C; Delivery Channels

Survey of Potential Members

ÂŠ2009 Credit Union National Association

16 15 18 9 8

18 - 34 35 - 44 45 - 54 55 - 64 65 or older Less than $25,000 $25,000 - $34,999 $35,000 - $49,999 $50,000 - $74,999 $75,000 - $99,999 $100,000 or more

By age

By annual household income

T-25

*Based on potential members who currently use debit/check cards to make purchases.

8 6 11 11 13 13

Overall

75% 53% 58% 64% 54% 53%

69% 47% 67% 44% 0%

59%

Use it more frequently

25% 42% 39% 10% 31% 25%

19% 47% 28% 44% 63%

30%

Use it just as frequently

0% 4% 3% 26% 15% 22%

12% 7% 6% 11% 38%

11%

Use it less frequently

Table 5-4 Frequency of Using Debit/Check Card to Make Purchases Compared to One Year Ago*

Results Tables: Chapter 5 â&#x20AC;&#x201C; Delivery Channels

Survey of Potential Members

ÂŠ2009 Credit Union National Association

11 9 8 8 7

18 - 34 35 - 44 45 - 54 55 - 64 65 or older Less than $25,000 $25,000 - $34,999 $35,000 - $49,999 $50,000 - $74,999 $75,000 - $99,999 $100,000 or more

By age

By annual household income

T-26

55% 51% 59% 80% 7% 5%

55% 22% 38% 13% 14%

41%

11% 49% 33% 20% 36% 73%

36% 33% 38% 63% 57%

40%

Use it just as frequently

34% 0% 8% 0% 57% 22%

9% 44% 25% 25% 29%

19%

Use it less frequently

*Based on potential members who currently use automated touch-tone phone service to conduct financial transactions.

6 6 6 6 8 8

Overall

Use it more frequently

Table 5-5 Frequency of Using Automated Touch-Tone Phone Service to Conduct Financial Transactions Compared to One Year Ago*

Results Tables: Chapter 5 â&#x20AC;&#x201C; Delivery Channels

Survey of Potential Members

ÂŠ2009 Credit Union National Association

T-27

Less than $25,000 $25,000 - $34,999 $35,000 - $49,999 $50,000 - $74,999 $75,000 - $99,999 $100,000 or more

By annual household income

*Based on potential members who currently use ATMs to make deposits.

12 10 8 9 4

18 - 34 35 - 44 45 - 54 55 - 64 65 or older

By age

5 3 4 7 8 14

Overall

24% 45% 0% 54% 16% 41%

42% 30% 13% 11% 0%

33%

Use it more frequently

53% 55% 91% 29% 67% 59%

50% 70% 38% 89% 50%

57%

Use it just as frequently

24% 0% 9% 17% 17% 0%

8% 0% 50% 0% 50%

10%

Use it less frequently

Table 5-6 Frequency of Using an ATM (Automated Teller Machine) to Make Deposits Compared to One Year Ago*

Results Tables: Chapter 5 â&#x20AC;&#x201C; Delivery Channels

Survey of Potential Members

ÂŠ2009 Credit Union National Association

T-28

Less than $25,000 $25,000 - $34,999 $35,000 - $49,999 $50,000 - $74,999 $75,000 - $99,999 $100,000 or more

By annual household income

*Based on potential members who currently use ATMs to make withdrawals.

21 18 18 14 11

18 - 34 35 - 44 45 - 54 55 - 64 65 or older

By age

8 7 11 14 15 20

Overall

39% 63% 22% 41% 49% 11%

33% 33% 50% 21% 9%

32%

Use it more frequently

61% 37% 75% 38% 46% 75%

57% 67% 44% 71% 73%

60%

Use it just as frequently

0% 0% 3% 21% 5% 14%

10% 0% 6% 7% 18%

Use it less frequently

Table 5-7 Frequency of Using an ATM (Automated Teller Machine) to Make Withdrawals Compared to One Year Ago*

Results Tables: Chapter 5 â&#x20AC;&#x201C; Delivery Channels

Survey of Potential Members

ÂŠ2009 Credit Union National Association

18 17 27 15 16

18 - 34 35 - 44 45 - 54 55 - 64 65 or older Less than $25,000 $25,000 - $34,999 $35,000 - $49,999 $50,000 - $74,999 $75,000 - $99,999 $100,000 or more

By age

By annual household income

T-29

22% 6% 29% 38% 38% 30%

28% 35% 22% 33% 19%

28%

40% 63% 42% 52% 42% 54%

50% 47% 52% 40% 63%

50%

Use it just as frequently

*Based on potential members who currently use the drive-up window to conduct financial transactions.

10 7 13 19 14 23

Overall

Use it more frequently

38% 31% 28% 9% 20% 17%

22% 18% 26% 27% 19%

22%

Use it less frequently

Table 5-8 Frequency of Using the Drive-Up Window Compared to One Year Ago*

Results Tables: Chapter 5 â&#x20AC;&#x201C; Delivery Channels

Survey of Potential Members

ÂŠ2009 Credit Union National Association

11 19 18 12 15

18 - 34 35 - 44 45 - 54 55 - 64 65 or older Less than $25,000 $25,000 - $34,999 $35,000 - $49,999 $50,000 - $74,999 $75,000 - $99,999 $100,000 or more

By age

By annual household income

T-30

*Based on potential members who currently use credit cards to make purchases.

3 7 7 15 15 21

Overall

0% 80% 11% 36% 5% 20%

36% 16% 22% 8% 7%

23%

Use it more frequently

85% 20% 53% 56% 61% 63%

45% 63% 56% 75% 80%

58%

Use it just as frequently

15% 0% 36% 9% 34% 17%

18% 21% 22% 17% 13%

19%

Use it less frequently

Table 5-9 Frequency of Using Credit Cards to Make Purchases Compared to One Year Ago*

Results Tables: Chapter 5 â&#x20AC;&#x201C; Delivery Channels

Survey of Potential Members

ÂŠ2009 Credit Union National Association

11 8 12 8 7

18 - 34 35 - 44 45 - 54 55 - 64 65 or older Less than $25,000 $25,000 - $34,999 $35,000 - $49,999 $50,000 - $74,999 $75,000 - $99,999 $100,000 or more

By age

By annual household income

T-31

55% 0% 17% 27% 0% 12%

27% 13% 0% 13% 14%

20%

11% 100% 58% 68% 41% 38%

55% 50% 58% 50% 71%

55%

Use it just as frequently

*Based on potential members who currently conduct financial transactions over the phone with a person.

6 4 4 9 4 14

Overall

Use it more frequently

34% 0% 25% 5% 59% 51%

18% 38% 42% 38% 14%

25%

Use it less frequently

Table 5-10 Frequency of Conducting Financial Transactions Over the Phone With a Person Compared to One Year Ago*

Results Tables: Chapter 5 â&#x20AC;&#x201C; Delivery Channels

Survey of Potential Members

ÂŠ2009 Credit Union National Association

19 19 29 17 17

18 - 34 35 - 44 45 - 54 55 - 64 65 or older Less than $25,000 $25,000 - $34,999 $35,000 - $49,999 $50,000 - $74,999 $75,000 - $99,999 $100,000 or more

By age

By annual household income

T-32

15% 6% 22% 5% 0% 14%

16% 0% 7% 12% 18%

11%

Use it more frequently

17% 17% 28% 58% 71% 75%

32% 63% 62% 65% 71%

49%

Use it just as frequently

*Based on potential members who currently conduct financial transactions in person, inside the lobby.

13 7 14 22 15 23

103

Overall

68% 77% 50% 36% 29% 10%

53% 37% 31% 24% 12%

40%

Use it less frequently

Table 5-11 Frequency of Conducting Financial Transactions In Person, Inside the Lobby Compared to One Year Ago*

Results Tables: Chapter 5 â&#x20AC;&#x201C; Delivery Channels

Survey of Potential Members

Survey Methods No national study can reflect the financial attitudes, behaviors, and preferences of nonmembers in a particular area. Each credit union operates under unique circumstances concerning its competitive advantages, the financial needs of its potential members, and the local financial environment. This report, however, provides valuable perspectives on how credit unions can position themselves to bring more consumers into the credit union circle. The Survey of Potential Members introduces new issues, opportunities, and challenges that can contribute to each credit union’s membership-growth success. The focus for this study differs somewhat from its 2006 predecessor, in that it examines the attitudes and behaviors of nonmembers as a collective group, rather than only those nonmembers who self-report themselves as eligible to join a credit union. Many nonmembers are simply unaware they can use credit union services. The information presented in Chapter 2, Keys to Attracting More Members, is based on data collected in an International Communication Research (ICR) EXCEL survey. Interviews were conducted via telephone with 1,010 randomly selected adults throughout the U.S. A total of 659 respondents were nonmembers. A total of 372 respondents were actual credit union members. Half of the interviews were conducted with women, half with men. The interviews were conducted in July, 2008. The data from this ICR survey are weighted on variables such

as age, household income and gender to accurately represent U.S. consumers 18 and older. The sampling error margins in Chapter 2, at the 95% confidence interval, stand at +3.8 percentage points. In other words, if a particular survey response applies to 50% of nonmember survey respondents, there is a 95% probability that between 46.2% and 53.8% of all nonmembers in the U.S. would respond the same. Unless otherwise noted, the survey information in the remaining chapters of this report is based on data collected from a survey of U.S. consumers responding to a mail survey sponsored and conducted by CUNA. In late 2008 and early 2009, completed two-page questionnaires were received from a randomly selected sample of 11,000 heads of household across the U.S. Consumers between the ages of 18 to 24 were over-sampled, because response rates from this group tend to be much lower than for other age groups. Included with the questionnaire were a cover letter, a one-dollar bill (as an incentive to respond to the survey), and a postage-paid envelope. Questionnaires were returned by respondents directly to CUNA Research or by completing an online version of the survey. By mid-January, 1,157 usable questionnaires had been returned to CUNA Research. A total of 637 were returned from nonmembers. After eliminating bad addresses and responses that arrived after the data set had been created, the response rate was about 12%. This is a very good response rate for a single-wave mail survey probing the financial activities of individuals – most of whom do not currently do business with a credit union. 61

The sampling error margin for topics arising from the above study is +3.9 percentage points. Preliminary analysis indicated that older consumers were somewhat over represented among survey respondents, which is not unusual. It merely reflects the fact that, compared with younger consumers, older ones are more likely to respond to surveys. Recall also that 18-to-24 year-olds were over-sampled, in an effort to receive sufficient numbers of returns from them to yield reliable information. Because of this, we have adjusted for the over representations by weighting the data so that the age distributions (and, therefore, the opinions and behaviors) for nonmembers match the distributions that emerged in the ICR EXCEL study. Weighting is a standard survey analysis procedure designed to increase the reliability of results. Weighting helps ensure that results are not unnecessarily skewed by a specific group of consumers – in this instance, older consumers and young adult consumers. A companion report, CUNA’s 2009-2010 National Member Survey, is also available. Both reports are based on information collected during the same study.

Survey of Potential Members

Resources

Report, CUNA Membership Growth Task Force, September 2008 2009-2010 Credit Union Environmental Scan Report E-Scan Strategic Planning Guide The Fast 15: Winning the Race for Growth, 2007-2008 A Youthful Approach to Credit Union Growth, Best Practices Report, CUNA, 2007 Serving Spanish-Speaking Members, Best Practices Report, CUNA, 2007 A Fresh Approach to Measuring Member Loyalty, Filene Research Institute, 2007 A Marketing Plan for Attracting Young Members, Bill McKenna, Marketing Partners

For more information on CUNA products, go to buy.cuna.org and type in key words to the product finder.

ÂŠ 2009 Credit Union National Association

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