By Ray Birch
CHICAGO—What does it take to become the “Best Credit Union In America?”
The CEO of Alliant CU, which recently received that honor from Money Magazine and also separately from MyBankTracker.com, says excellence results from consistently giving members a superior deal.
Offering members that value, along with being a digital first FI with only one office to serve members nationwide, has allowed the $11-billion institution to grow profitable members by double-digits annually.
“This 12% growth is in what we call our core members, not those we get through indirect or wholesale channels,” said Mooney, who addressed overall CU industry growth. “Credit union membership growth has been very healthy for a number of years, as we know. But much of that growth has been through the indirect channel.”
As CUToday.info has extensively reported, the credit union community has been challenged to turn the growing number of indirect members into profitable members with relationships beyond just that auto loan. CUNA recently reported that one-third of all new credit union members come through the indirect channel.
Mooney believes the percentage is higher.
“I have talked with several sources who think credit union market share is actually declining if you take out indirect members,” he said.
Mooney said Alliant has always been focused on giving back to its members, but not through a year-end bonus dividend. Instead, the credit union seeks to give members the best, or at least top-of-market, rates on deposits and lowest-in-market rates on loans, while also charging few fees.
The credit union in early December was paying 2.65% APY on a one-year CD and charging as low as 3.74% for a new car loan.
The Value Proposition
In handing the honor to Alliant, Money said, “Alliant has an excellent no-hassle checking account that pays 0.65% interest, offers free ATMs, and rebates $20 in ATM surcharges. Its free savings account also stands out compared with those of other credit unions, with a payout of 1.9%.”
“This all gets back to how we consistently follow our mission and value proposition—to always provide superior financial value,” said Mooney, giving credit to the CU’s staff. “And the key is our core members know this.”
Mooney told CUToday.info Alliant Credit Union does not offer special rates and pricing on deals to attract new members. It also does not apply a great deal of conditions and terms to offers.
“We don’t get engaged in those kinds of things,” he said. “We don’t offer a 4% checking account that makes you jump through a lot of hoops each month to qualify. Those things are designed for the member to fail. No credit union could afford to pay that rate if most of their checking account-holders qualified each month. We just don’t do that.”
Who ACU Doesn’t Want
Mooney explained Alliant looks to do business with people who are rate sensitive, not “rate obsessed.”
“The person on the Internet everyday looking for who has the best rate is not our core member,” said Mooney. “Our core member is someone who typically has a high balance, but they don’t want to spend the time monitoring whether they are getting a good deal. They just trust, and know that Alliant gives them a really good deal, always, and they don’t have to watch us.”
That became apparent when the Great Recession arrived and rates plummeted. Mooney said many members called the credit union after Alliant had to eventually reduce rates.
David Mooney
“It took them some time to make those phone calls, and what that told us is that they were not watching what was going on in the market or watching us closely,” he said. “We explained to them what was happening with the markets and why we had to drop our rates—which were still at the top of the market.”
Seeking ‘Continuous Relevance’
Mooney believes new account bounties and promotional pricing create “temporary relevance” and not “continuous relevance.”
“Temporary relevance also undermines member loyalty,” said Mooney. “Promotional deals typically reward those people who have not done business with you while disregarding the people who do. This complicates and blurs our value proposition, especially when you start attaching a lot of terms and conditions to things. Just everyday great rates are the way to be transparent and honest with your members.”
That has led to “tremendous” word-of-mouth advertising for Alliant, according to Mooney.
“We spend very little on advertising, and that too helps the bottom line and allows us to give more back,” he said.
Outstanding service, delivered through mobile and online channels and via a “highly consultative” call center is what differentiates Alliant, insists Mooney.
“In addition to providing superior financial value, we also work hard to simplify how people borrow and save with us,” he said.
Low Expense-to-Asset Ratio
Alliant’s digital business model allows 550-600 staff to serve 430,000 members, leading to a 1.45% expenses-to-asset ratio.
“That’s half the industry average,” said Mooney.
ACU’s net worth was 10.33% through December, ROA stood at 0.59%, and Alliant made $70.9 million in 2017 and $61.5 million last year.
So does the CEO of the CU that was just named “Best in America” believe more credit unions need to adopt its online model?
“I don’t think the pure digital model is for everyone,” he said. “For us, we have always had a national field of membership. We are multi-SEG, with United Airlines being our original sponsor. Because of our large, national field of membership, our branch network has been thin. Our membership was much more prepared for us to move to a direct business model. I don’t think it would be as easy for many credit unions to quickly shift today to an online model since their members are accustomed to using their branches.”
Changing Dynamics
But Mooney acknowledged the dynamics of retail banking are changing quickly, with a much greater emphasis placed on digital access, forcing more FIs to consider the online model.
“Consumers are no longer limited to the 10 institutions near their home or office,” noted Mooney. “People are increasingly unbundling their relationships from using just one or two financial services providers, because the friction to change is lower and the choice and transparency of offers is greater. The importance of location is eroding.”