By Ray Birch
LAKEWOOD, Colo.–Credit unions are at a crossroads when it comes to the future of the movement, according to one person, who believes many CUs have become too “bank-like,” one result of which is member perception of their service is sliding.
Alan Bergstrom, chief marketing officer at Aux, a CUSO that provides back-office support solutions, told CUToday.info that as some cooperatives seek to be more like banks—in their products, services, buildings and philosophies—the line between the two has almost been completely blurred in the minds of consumers. He pointed to the annual American Consumer Satisfaction Index (ACSI) study, which as CUToday.info has extensively reported, has found for four years now that perception of CU service has fallen below that of banks.
Bergstrom emphasized that strategic planning needs to address this shift.
“I call this the homogenization of financial services,” said Bergstrom, acknowledging it’s a point often raised by industry observers. “It's not something that happened overnight. It's something that's been happening gradually over the years.”
Bergstrom contended where many credit unions have lost their way is in their efforts to compete with banks they have recast themselves to be more like banks.
“So, the difference between credit unions and banks is not as clear as it once was. That's problem number one,” he said. “Problem number two is there's been a lot of consolidation in the industry, as we all know, which is led to a number of very large credit unions.”
Two Developments
Bergstrom’s comments are appearing here as part of a CUToday.info series looks at how credit unions are approaching their planning for 2023 and beyond.
Not only has that led to greater competition among credit unions, a line that was largely not crossed 10 years ago, it’s led to larger-asset-size credit unions.
“I think those two developments have really created a path or trajectory for a lot of credit unions to plan differently, behave differently,” said Bergstrom. “I think some of that is necessary, but at some point in time credit unions need to step back and say, wait a minute, we're not a bank. We were much more effective in the marketplace when we adhered more to the credit union mantra of people helping people, organizations that really care about their members as opposed to being so monolithic, like a bank. You walk in and you ask a member now if they know the difference between a credit union and a bank and you'll probably get blank stares.”
Alan Bergstrom
Bergstrom said credit union strategic planning efforts need to refocus the movement—have more credit unions turning back to their roots and being member focused instead of trying to compete with banks.
“I think strategic planning will help some of the market get there—get back to what we really are in business to do,” he said. “Are we in business to make huge profits at the risk of our membership? Or are we dedicated and working hard purposefully to enhance our members’ lives?”
The Taj Mahals
Bergstrom said those large profits and a focus away from members can be seen in many of the larger, more opulent offices credit unions have been building.
“A lot of these larger credit unions, with their Taj Mahal-like headquarters, so many of them seem to be going down a different path than other, smaller credit unions. I think credit unions are at a crossroads,” said Bergstrom, citing the results of the ACSI study. “This is a slippery slope down which we will continue to slide until we revisit why we are in business.”
Bergstrom said credit union strategic planning sessions should address a “mindset shift.”
“If we made the decision as a credit union industry that we are out to improve the financial health and well-being of our members, if that were, in fact, our core purpose, we would do things very differently,” he said. “We would be developing and designing different products and services that would have the betterment of members’ financial lives as their true purpose. We might, for example, not lend a member money for a car if the loan puts them upside down. I think sometimes we're too quick to do that thinking if we don't lend them the money, the bank will.”
‘Put a Stake in the Ground’
Bergstrom believes that for many years banks’ reputation suffered from decisions and products that put consumers into financial trouble.
“Last time I checked I don’t think that's the job of credit unions,” he concluded. “We have to somehow put a stake in the ground and say we are here to help our members become financially well off and healthy, and if that means developing products that make a little less money but help our members make better decisions…These products, too, need to be active, rather than reactive, to get out ahead of potential financial problems. Such as sending members an alert as they are making a purchase they can’t afford with their credit card, a text that asks them if they really can afford the purchase. Tools like that.”