Why Should Credit Unions Prioritize Member Retention?

As the financial landscape continues to intensify with new and emerging players, consumers have gained a new sense of freedom and choice when it comes to how they bank. This has made it common for consumers to have relationships scattered across multiple financial providers and apps.

Credit unions that prioritize delivering services that cater to their existing member base can break through the competition and reduce the risk of losing market share. Members who have already established a relationship with their financial institution have an existing familiarity and sense of trust, and if they find value in the financial support provided, they’ll likely stick around.

Existing members are essential to a credit union’s future growth—these members make up 65% of a credit union's portfolio. However, in today’s landscape, most financial institutions focus on acquiring new members, rather than satisfying the needs of their existing base: Data shows that 44% of companies focus on member acquisition, while only 16% focus on retention.

While acquisition is one of many important initiatives for growing portfolios, loyal members generate more revenue every year they stay with a credit union. New members may be more cautious about purchasing new products until they are comfortable with your organization. Existing members, on the other hand—those who already trust and value your products—tend to buy more over time.

Not only do these members add value over time, but they are also less costly; they require less marketing effort, which frees up resources, time and expense. New member acquisition costs have increased by almost 50% in the past five years. In fact, data shows that the cost of acquiring a new member is about 7 times that of maintaining an existing relationship. Additionally, loyal members can act as “mini marketers” by referring others to their trusted institution, increasing profit margins without the credit union having to invest as much in advertising. According to Temkin Group, 77% of members would recommend a brand to a friend after a single positive experience.

The credit union business model is an excellent example of prioritizing member retention, as CUs thrive on relationships, altruistic member services and personalized financial solutions. Credit unions have a unique opportunity to leapfrog the competition by capitalizing on the true value behind member retention—to not only secure a prime spot in their members’ financial lives but grow loan portfolio, boost engagement and gain a strong competitive edge.

How can credit unions improve member retention rates?

1. Be proactive. Credit unions have more than enough data at their fingertips to anticipate the needs of their existing members and unlock a great number of opportunities to boost retention rates. For instance, in today’s crowded lending market, consumers seeking a loan have more choices than ever, from national banks to online lenders and finance companies. Credit unions can leverage internal and external data to cut through the competitive noise and proactively offer members ongoing access to credit, keeping them top-of-mind when their members shop. This approach eliminates the idea of an existing member being rejected for a loan, which happens 21% of the time, and allows them to shop with confidence.
2. Promote financial wellness. This level of insight also allows credit unions to boost retention rates through financial wellness programs that help equip members with every opportunity for financial excellence. Are they moving to a new state? Did they have a baby? Do they have a child going off to college? Credit unions can acknowledge these milestones in their members’ financial lives and tailor communication efforts and relevant recommendations that show their support, create long-lasting and trusting relationships and become top-of-wallet when the member enters into a purchase market.
3. Put the member in the driver’s seat. Credit unions can present their existing members with a digital menu of products and services that are available as soon as they log onto their online banking portal. This approach is much like what consumers experience with Amazon, which puts the consumer in the driver’s seat to choose what is best suited for their lifestyle—assisted by recommendations driven by past activity—rather than making assumptions and placing each consumer in an arbitrary bucket. With a personalized menu, members are empowered to weigh a broad range of attractive options and select what they truly need, rather than receiving a single product that was offered to tens of thousands of prospects while the credit union hopes they are in the market.
4. Be a true lending center. Credit unions must transform and elevate the consumer lending process by leveraging the next generation of lending automation technology to distinguish their online and mobile presence. Credit unions must be more than just a place for members to make transfers and check balances. Empower your branch and call center staff with the tools they need to work more efficiently and strategically and evolve into a true digital lending center where members can apply for and receive appropriate products, make deposits and so much more from the palm of their hand. Simplifying and streamlining processes for current and prospective account holders opens up opportunities to create more relationships, repeat engagements and long-term growth.

While acquiring new members is vital to the growth of a credit union, it is crucial that the existing members are not left behind. Nurturing those relationships can produce significant benefits for an organization, including the positive reputation that a satisfied member base brings.

Barry Kirby is SVP/business development and marketing at CuneXus, Santa Rosa, California.