Banking

Where credit unions are beating banks in customer experience

Jennifer Bolivar, senior vice president of business transformation at Suncoast Credit Union in Tampa, Florida, remembers with pride how her team served a member who came into a Suncoast branch recently and got help with a car loan.

“Of course, they had a car loan with someone else. Refinancing it with us put an additional $400 a month in their pocket. What can you do with $400? I mean, think about that,” Bolivar said. The member’s mother heard about it, and the buzz built from there.

“That in and of itself spread the word that we’ve got something to offer from a product standpoint,” Bolivar said.

Although its rates are among the best in the market, the $15.8 billion-asset Suncoast has still been looking to offer tailored refinancing opportunities for every member “to ensure that we can give people back monthly income,” Bolivar said.

Winning new customers, or members, as credit unions dub them, can be hard for financial institutions given how adhesive banking relationships are. That’s why generating goodwill among existing and potential customers, as Suncoast did, can be crucial.

Arizent’s second annual survey on Humanizing the Bank Customer Experience in Banking reveals that credit unions — including Suncoast, which came in third place — may be doing a better job of creating a positive connection to customers than some banks, especially larger institutions.

The research, which was conducted with the creative brand experience agency Monigle, examined consumer attitudes and the customer experience in banking. The result: Six of the top 10 institutions were credit unions, and another, Chime, was a fintech. That means only three of the top 10 were banks.

Although banks still dominate financial services by deposit and asset market share, they cannot afford to become complacent and should pay attention to what their rivals are doing well, analysts said.

“You are seeing credit unions embrace, particularly in communities where community banks have been rolled up in mergers, personalized customer service,” said Steve Reider, president of the bank consulting firm Bancography. “Regional banks would be wise to reflect on their roots as community banks. They all started small at some point.”

Jennifer Bolivar, senior vice president of business transformation at Suncoast Credit Union, noted that offering tailored refinancing options for members is one way her credit union stands out.

Bryan Edward Creative

A deep dive into customer expectations

The Arizent and Monigle research consisted of two surveys completed in March and April. The first survey focused on the trends and attitudes shaping consumer behavior and expectations when it comes to financial services. Roughly 3,000 individuals participated.

In the second survey, consumers of 58 financial providers evaluated their brand experience. This included asking how respondents interacted with these firms, what consumers thought about before making a financial decision and how they felt about the different types of institutions they could patronize. This survey included almost 6,000 respondents.

CIT Bank, which was acquired by First Citizens Bank in Raleigh, North Carolina, came in first overall, in part because “customers feel understood and empowered by the bank” and believe it “leads in offering unique and innovative products and services,” the report found. CIT operates as an online-only unit of the $108.5 billion-asset First Citizens and was ranked No. 7 in 2021’s survey.

“We do a lot of research on customer journey and user experience. Other banks do, too. But what we try and do is make sure that we meet the customer’s needs and anticipate the customer’s needs,” said Ravi Kumar, head of CIT Direct Bank. “The fact that you’re digital, we have to focus on that in a different way than a bank with a brick-and-mortar solution because they can offer that omni-channel experience. So that’s what we focus on, and I think that’s why our customers know that coming in, and that’s what they like us.”

While retail banks generally performed well on metrics of security, ease of access to money and community visibility, “there are lessons for retail banks to be learned from credit unions and challenger banks,” the researchers wrote.

The institutions that ranked second through seventh included five credit unions and Chime. The next bank to make the list was USAA, at No. 8. Though the San Antonio-based USAA is a retail bank, it is similar to credit unions in that it has members, and customers must be active or retired military personnel or their family members to join.

Overall, credit unions dominated all metrics for generating positive emotions from their members and came out on average 7% ahead of both large and small retail banks in the behavioral scores, which measures ease of use of different products and services. Credit unions’ strong “emotional connection with their customers is an enduring truth; however, credit unions are also demonstrating returns on investment in their digital tools and services,” the Arizent and Monigle research found.

Creating emotional connections

Banks beat their credit union counterparts when the survey participants responded to statements such as “I see them everywhere.” Yet credit unions scored higher in

other aspects of the business. Respondents considered credit unions to have more welcoming spaces and a better understanding of their needs. They also thought credit unions were better at taking the stress out of addressing their financial needs.

Part of the explanation for this could be that the survey mainly focused on large and regional banks. It’s possible community banks would have fared better against credit unions given that consumers are likely to have a similar affinity for both types of financial institutions.

The research stated that “smaller retail banks generate greater emotional connection and links to the community.”

“The large banks play a game of scale,” Reider said. “A lot of national banks advertise and have mass availability in terms of branch networks and ubiquitous ATMs. That means at any given time, your business proposition will reach a large group of people.

“But credit unions, along with community banks, continue to focus on customer service. A lot of small businesses don’t get a dedicated loan officer anymore at a large bank. However, a community bank or a credit union will put a loan officer in front of them. That’s a stronger way to build a relationship,” Reider added.

However, asset size likely doesn’t fully explain why credit unions dominated the top of the list. Credit unions operate under a membership model requiring consumers to belong to an affinity group to join.

Arguably, this connection has weakened over time as credit unions have expanded their fields of membership to include more groups or entire geographic areas. Nonetheless, this connection apparently continues to matter to consumers. Credit unions soundly beat banks when participants in the Arizent and Monigle survey responded to the statement, “Makes me feel like I belong to something more than just a bank.”

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Bolivar believes Suncoast’s decision to keep branches open during the pandemic was the right move. “A lot of other financial institutions are stating that they’ve seen their branch traffic slowed down. Ours has not. We are at pre-COVID levels, in terms of members coming in,” she added.

Bill Serne

Branches still matter

Despite the rise in technology, customers still largely prefer having access to branches and in-person help. Sixty-eight percent of participants in the research said that they continued to visit a branch or seek out help in-person in response to a question about how they interact with their financial provider. This was the second-most popular choice behind using a debit or credit card. 

Using a drive-thru — another option that requires an institution to have a physical presence in a community — was sixth, with 54% of respondents selecting this option. Using a mobile app and accessing services through a computer were third and fourth at 60% and 59%, respectively.

Given the continued popularity of branches, how credit unions are approaching this facet of the business could be another component of their success. For instance, Suncoast Credit Union stayed open during the pandemic, a strategy that Bolivar says paid off.

“A lot of other financial institutions are stating that they’ve seen their branch traffic slowed down. Ours has not. We are at pre-COVID levels, in terms of members coming in,” Bolivar said.

Staff were encouraged to continue welcoming members who needed to use in-person services.

Suncoast, which made its debut on the list this year, has 21 branches and is contemplating opening more. The credit union’s membership is open to residents in all 40 counties of Florida.

“We see them as community plays, and we see them as a branding play,” Bolivar said of branches. 

Bo McDonald, president and chief executive at the consulting firm Your Marketing Co., said he has seen some credit unions remain open in underserved places.

“In a lot of rural areas where the banks are pulling out, credit unions have found a lot of success going back in there and being the only financial institution,” McDonald said. That strategy can generate goodwill with existing and potential members.

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Greg Mitchell, president and CEO of First Tech Federal Credit Union, said his institution will soon offer preapproved loans soon for basic needs such as an unexpected car expense. This means if the engine blows up on a member’s car, “You’ll know that First Tech has your back, and you’re preapproved for a $10,000 unsecured line of credit, and you just click a button and you’re done,” he said.

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The appeal of personalized products

Credit unions also bested their bank counterparts when respondents answered questions about their views on how both industries provide bread-and-butter financial services. For instance, respondents thought credit unions were better at personalizing their financial products to members’ needs and offering best-in-class services.

Annie Sebastian, executive vice president of the digital and contact center at Navy Federal Credit Union in Vienna, Virginia, said the $159.7 billion-asset credit union uses data to identify members who could benefit from certain perks. For example, some members now have the option to select the credit card due date that works best for them, as not all employees are paid on the same day every month and payment is easier for some people when the dates coincide.

Navy Federal, which was No. 2 on the list and is the largest credit union in the world, has also looked for ways to get more cash into members’ pockets. “We calculate how much money we’re returning back to our members relative to others, and for this year it was about $352” for every adult member, Sebastian said.

Greg Mitchell, president and CEO of the $15.9 billion-asset First Tech Federal Credit Union in San Jose, California, which came in at No. 4, said his team plans to offer preapproved loans soon for basic needs such as an auto expense.

This means if the engine blows up on a member’s car, “You’ll know that First Tech has your back, and you’re preapproved for a $10,000 unsecured line of credit, and you just click a button and you’re done,” Mitchell said. 

CIT, the online-only bank, has introduced self-service options for certificates of deposit, Kumar said. Customers find these more attractive in an environment of rising interest rates, as they may want to quickly switch out of one CD into other, higher-yield products.

“It’s something actually pretty boring, but actually it’s not boring,” Kumar said.

Instead of calling and spending an eternity on the phone with staff to close the CD, now CIT customers can close it and move the money to savings, roll it into a new CD or transfer the funds to a foreign account, among other choices.

“As we get into your banking history with us, we can give you different products or different offers, even self-service functions. So we try to personalize that experience as much as we can,” Kumar said.

“All of these features rolled together actually brought in some really good feedback from our customers,” Kumar added, citing social media posts where he noticed several customers celebrating their ability to transition without a hassle to a CD with a higher interest rate or move into other products.

For the digital-only Alliant Credit Union in Chicago, which ranked seventh in its first appearance on the list this year, making banking painless for customers sometimes means taking a hit to revenue.

Since the pandemic, several banks have dropped overdraft fees. But the $16.4 billion-asset Alliant was a pioneer in this regard, getting rid of these charges years ago.

“That was a very bold decision for us, because nobody in the industry was eliminating it” at the time, said Sumeet Grover, Alliant’s chief digital and marketing officer.

But the move saved members millions of dollars and dramatically reduced complaints.

“My monthly complaint volume, because of this fee-elimination-related impact, it dropped to zero. That’s how impactful it was,” Grover said. “And my call volume dropped, too. Because members used to call in either dissatisfied or had questions or were not sure what was going on.”

With that came lower operating expenses, improved staff morale, and a cycle of great member satisfaction and more business.

“As long as you focus on the right changes for your members and you listen to them,” Grover said, “you see the results.”

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