Credit unions are off to a strong start in 2017. Loan originations in the first three months of the year topped last year’s record first quarter by 13%. Credit unions’ share of the auto finance market nationally hit 18.8%, and first mortgagemarket share hit a new high of 8.6%. Nearly 1.4 million net new members joined a credit union, the most ever during the first quarter. Balances in every category of share products grew faster over the past 12 months than one year ago. A double-digitincrease in share draft balances led the pack.
In a post-recession environment marked by historically low interest rates and an increase in regulations across nearly every business line, credit unions continue to find ways to deliver value to their members.
Member usage of products such as auto loans, credit cards, and checking accounts continues to rise along with average loan and savings balances. Data from the Federal Reserve that shows credit unions are capturing a larger share of consumer loans reinforcesthese trends.
Why are credit unions succeeding at a time when competitors are stumbling? The core reason is the cooperative model a model based on mutual success.
The credit union succeeds if it understands and meets members’ needs. Members succeed by tapping into products and services that provide them with a better financial deal, more convenience, or greater expertise.
The success of both the credit union and the member should increase as their relationship deepens over time. As a result, credit unions take the long view of relationships and avoid decisions that lead to short-term gains but potentially damage theirgreatest asset ? their relationship with members.
But to serve members, credit unions must first identify what members need.
The credit union succeeds if it understands and meets members’ needs.
Understanding Jobs To Be Done
Over the past two years, Callahan & Associates has been working with management teams at credit unions across the country on Professor Clayton Christensen’s Disruptive Strategy course. This course helps organizations avoid being displaced by disruptivecompetitors. A key component of the course is Christensen’s lesson about jobs to be done.
Understanding a consumer’s job helps companies avoid getting too focused on existing product and service offerings at the expense of recognizing and responding to the changing needs and goals of customers. By focusing on what consumers are tryingto accomplish, organizations can stay ahead of forces that could capture their existing customer base.
An example of a job to be done is expedient travel from New York to Los Angeles. A company that provided transportation via train in the early 20th century might try to move customers by building a faster train or limiting the number of stops. However,a company that was truly focused on meeting the job to be done might invest in developing airplanes to better meet the need. Such an approach helps to sustain the company and avoid being displaced by new technologies.
The jobs to be done approach has resonated strongly with the credit unions Callahan has worked with, in part due to how well it aligns with the philosophy and model of member-owned financial cooperatives. Credit unions are in the business of serving memberneeds, and any steps to further that goal are worthwhile.
There are numerous jobs members do that credit unions can help facilitate. The key is to understand it’s not about the product; it’s about the job. It’s not about the mortgage loan; it’s about helping a member to buy a house. Withthis framework, credit unions can design processes and products that best meet the needs of members who are looking to complete that job.
What Jobs Are Your Members Trying To Do?
Callahan’s Leadership Team Development uses the jobs to be done framework to help your executive team tackle challenges and manage opportunities.
Needs, Not Products
So, how can credit unions identify the jobs to be done for members? Listen to them.
Listening requires engagement from employees at all levels of the organization. Although management can direct initiatives, it’s front-line staff members who often have the greatest insight into the questions members are asking and the concerns the credit union can help them address.
At credit unions Callahan has worked with, a key issue is how to encourage staff at all levels of the organization to contribute their insights into member needs. This can be a challenge in some organizations, particularly if there are filters in place. Filters can include, for example, managers who determine ideas are not worthwhile before others have heard them, managers who don’t address ideas submitted by staff, or consistently saying no to staff ideas.
Establishing forums where staff can regularly share what they are hearing from members is a first step. Credit unions can accomplish this via an online bulletin board or periodic team meetings. Once the credit union captures ideas, it needs a process for vetting them. This should result in identifying next steps for worthwhile ideas or pinpointing good reasons for why the credit union is not pursuing an idea.
Whatever the response, communication is important to maintain the integrity of the process.
Converting Needs Into Solutions
Langley Federal Credit Union($2.3B, Newport News, VA) is one example of an institution that has established a process for gleaning staff insights, identified a job to be done, and developed a solution.
During a regular call among branch teams, one staff member said they thought the credit union was turning away too many people who couldn’t open a checking account because of low credit scores. Couldn’t Langley FCU provide a checking account that allowed the credit union to welcome these potential members and also control for risk?
From that discussion, the credit union put together a team that developed what became Langley FCU’s Essential Checking product. The account is designed for members with credit scores below 600 and includes risk-mitigating features such as not allowing offline ATM and debit transactions and not enabling remote deposit capture.
The goal is to help these members establish a relationship with the credit union and build a track record. A follow-on credit builder loan allows members to borrow up to $1,000. The credit union deposits funds into a secure savings account, where they stay until the member pays off the loan. When they pay off the loan, members have $1,000 in savings as well as a repayment history.
This is just one example of a credit union that identified a member need and responded to the opportunity. Across the country, credit unions are taking the same steps ? some more formally than others ? to solve member needs. It’s a critical and essential activity that keeps credit unions relevant to their members.
Maintaining The Momentum
Credit unions have been on an incredible run of growth over the past five years. The loan portfolio has posted three straight years of double-digit growth on consecutive years of record originations, shares now top $1.2 trillion, and membership is rising by more than 1 million each quarter.
Now the challenge is to maintain this momentum.
Fortunately for credit unions, their model has a built-in advantage to understanding and aligning with member needs. As long as credit unions maintain this approach, they and their members will continue to succeed.