“What would you like to see most from credit unions in 2007?”

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We’re continuing our series tackling the question, and in this second installment you’ll hear from:

• Denise Gabel, Chief Innovation Officer of the Filene Research Institute (I mistakenly said “Director of Innovation” in the podcast – sorry, Denise!)
• George Hofheimer, Chief Research Officer of the Filene Research Institute
• and Mark Meyer, Executive Director and CEO of the Filene Research Institute

On our upcoming podcasts, you’ll hear from Shari Storm of Verity Credit Union, Doug True of FORUM Solutions, Jim Bruene of the Online Banking Report, Ben Rogers from The CEO Report, and Kevin Davies of CUES.

After you give it a listen, leave a comment below or on our audio comments line at (206) 350-OSCU (6728). You can subscribe in iTunes here or download the podcast here.

Here’s the transcript:

Denise Gabel: A new year is always a time of personal reflection, a time to look in the mirror, take a personal inventory, own what you own and commit to change the things that you can. My wish for credit unions follows the same personal reflection philosophy and identifies three key areas.

Number 1: Watch what you eat. What we eat (read) does make a difference in the way we think and act. Consider changing your monthly subscriptions to those publications, podcasts, or listservs that you don’t normally read. For magazines: perhaps the Economist, Fast Company, or even a teen magazine. For the web: perhaps Trendwatch, or better yet, set aside some quality time to simply surf the internet and see what’s going on in the marketplace outside your circle. Again, we are what we eat.

Number 2: Avoid dyeing your roots. The root of the credit union industry is cooperation. Find ways to highlight cooperation by partnering with other credit unions, CUSOs, and vendors. Credit unions can stand tall in the fact that they are member-owned and there are no apologies needed. Let’s really own this one.

Number 3: Prioritize your time. Watch for opportunities to stretch into a future-oriented strategic frame. So much of our time is spent putting out fires and responding to today, but who’s focused on tomorrow?

Make a ten a ten and a four a four. Let me explain. If membership growth is a ten in priority, make sure you invest a ten in resources. In contrast, if new carpet in the cafeteria is a four, make it a four not a ten. You’ll have to catch yourself on this one because it’s oftentimes easier to deal with all the fours.

And as a bonus wish: Turn the headlines away from 2007 being one of the most challenging years on the record for credit unions instead to 2007 being the year when the credit union industry really stepped up to meet the needs of the marketplace and own what they own.

George Hofheimer: I have three things that I’d love to see from credit unions in 2007.

Number 1: Breakout strategies, differentiation and “Blue Ocean” kind of thinking. This is based on a project that we just completed and is available on our website. It really just talks about being different and the way and the line of thinking that credit unions need to engage in – and any organization in terms of being different in the marketplace – and it requires you to ask some difficult questions.

One of the most difficult yet simple ones is “What are we going to stop doing?” In order to create breakout strategies you’ve got to stop doing some things in 2007. One of the things I really enjoy about this publication and this line of thinking is the concept that you don’t have to compare yourself against peers or benchmark yourself against the competition because by doing so you’re essentially looking at the same market that everyone else is and you’re dividing that market into smaller and smaller pieces. So in order to differentiate and think in a break-out type of way, think about new levels of demand that you can deliver for your members at your credit union.

Number 2: The second big idea is related to that. It is really committing to understanding consumers’ needs. I’m a big fan of outsourcing things but I believe this is one thing that you cannot outsource. One of the real interesting research projects that we will be releasing in 2007 involves the use of ethnographic research and people that are trained in anthropology. What they’ve done is gone into people’s homes and just talked to them about their finances – talked to them about credit unions. The level of information that we discover by getting native with people is really understanding some of the latent needs that are very difficult for them to express in your typical type of market research that organizations conduct. By getting our hands dirty and actually talking to people in their homes and getting an understanding and not making any judgments in terms of how they deal with finances, we discover a lot of things.

A great example of this type of research and what it can yield is Bank of America’s Keep the Change program. They engaged a group of ethnographers to go into single moms’ homes to gain an understanding of how they deal with finances and what they found was that moms didn’t have the time to balance their checkbooks so they rounded up to the nearest dollar in their check registry because it was really hard to do the math of the typical transactions that they had. They said, “Aha! We’ve got an idea here. Let’s put it into a product,” and amazing success resulted. So I believe credit unions can do the same thing and even more so especially since our members are our owners.

Number 3: Which leads me to my third and final wish for credit unions in 2007 and that is one word: collaborate, collaborate, collaborate. If any industry or group of organizations have the ability to collaborate it is credit unions. We are cooperatives. Let’s start acting in the truest sense of the word like we are cooperatives by collaborating on some of the things that can make us more competitive in the marketplace. You look across the world: credit unions across the world and other cooperatives across the world are collaborating on a scale that US credit unions have not done to-date. Look at the Desjardins model up in Canada and even some newer examples of the Polish, the Brazilian and the Mexican credit union movements collaborating in a big way to take care of some things.

One thing that astonishes me: when I started in credit unions was why are these relatively small organizations, why do they each have their own data processing capability? Can’t we just outsource that and collaborate on a large scale? Not going to happen obviously for a large scale in 2007 but let’s focus on that and make that something we really aim towards achieving in the years ahead. The best time to start that is now.

Mark Meyer: I have a wish for credit unions in 2007 – I hope credit unions are increasingly relevant to consumers. In the past, credit unions have been very successful in relying on price as a differentiation strategy. That remains relevant today for many consumers – but not all consumers.

Doctor William Jackson, a financial economist and Filene fellow, recently performed a study where he validated credit unions continue to outperform banks and other financial institutions with regards to pricing. However, this differentiation may not always hold true as technology continues to evolve and the economy and competition continue to increase.

More recently credit unions have relied on service as a differentiating factor. Recent indicators from leading firms such as McKinsey & Company show that service, in and of itself, is increasingly being relied upon by financial institutions as their differentiation strategy. In essence, this means that most financial institutions believe they are different because of their service. Other financial institutions outside of the credit union space that have shareholders such as banks have discovered that providing good customer service can also result in good returns to shareholders. So how will credit unions possibly provide additional value to consumers and remain relevant to consumers in the future?

Number 1: The first thing I think credit unions should explore in 2007 is being able to concisely and crisply identify what is it their credit unions do so well that their members are willing to tell the world? That is, exploring their value proposition. What makes them a unique financial institution? What makes them different and resonates with their members to the extent that they are willing and excited to talk about it? When you consider growth and credit union growth, research does show that word of mouth is one of the most effective marketing techniques and is noted to influence up to fifty percent of various types of product and service purchases.

Number 2: A second way I believe credit unions can enhance their relevance to consumers is finding ways to attract and retain young adults. Credit union membership continues to age with an average age approaching fifty and the current business model of credit unions relying upon loan income and interest income. Having a younger membership and population will ensure the sustainability of credit unions.

Number 3: My third wish is that credit unions, not beyond attracting and retaining young adults, look for ways to identify, attract and retain board members who have the necessary competencies to enable credit unions to be successful in an increasingly competitive financial services market.

I think these three wishes – identifying the value proposition, becoming relevant to young adult members and attracting and retaining board members with the competencies necessary to compete in an increasingly competitive financial services arena will ensure credit unions have a successful 2007.