Will Your Credit Union Survive a Mass Extinction Event?

“Credit unions are giving up brand equity by not telling stories in a manner that creates emotional connection so potential members will want them as their primary financial institution.” - Ancin Cooley

Almost half of America’s credit unions have disappeared since 2010. It’s a terrifying mass extinction event for financial institutions, but yours doesn’t have to fall victim to the trend.

Ancin Cooley, principal at Synergy Credit Union Consulting, Inc., recently gave a presentation at a convention in Las Vegas about the future of credit unions. He has an intriguing take on what it means for a credit union to survive in today’s chaotic financial landscape.

A Warning From the Future 

Ancin time travels in his mind.

As a financial industry trendwatcher, he spends time examining current trends and forecasting their future impact on banking.

Being “back from the future” is a thought experiment he uses to share warnings about what he sees coming ahead for the financial world. When he gives speeches, like he recently did for a large Las Vegas audience of financial executives, he shares perspectives on what it will be like to work in banking 10, 20, or even 100 years from now.

“At the current rate in which we're losing credit unions right now, we're losing, to forced merger, about 25 to 30 per quarter,” Ancin says. “I mean, in 2010, I believe we had about 8,000 credit unions. Now we only have about 4,900 credit unions remaining.”

People in small communities are losing their credit unions at astronomical rates. In the not-too-distant future, there will be almost no community credit unions left to serve most of them.

By 2042, Ancin projects that there will be only 2,000 banks left - not just credit unions, but banks of all kinds. Mergers, acquisitions, and other market forces will work together to consolidate banking brands and further reduce consumer choice.

Losing Brand Equity Accelerates Extinction 

Ancin points out that upstart fintechs are often better capitalized and have better marketing departments than traditional banking brands. They’re capturing consumer interest and excitement in a way that’s very challenging for a legacy brand to accomplish.

Fintechs also create new and unique technology that provides the opportunity for traditional banks to do things smarter, faster, and better. Yet fintechs and traditional brands both struggle to decide whether they’re partners or opponents in the battle for new customers.

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Brand equity is a key piece of the puzzle. Traditional banks sometimes give up their equity by providing funding, but not servicing, for new loans. 

“I can run an amazing campaign that lets my members know that we have a solar panel loan. And if I run that campaign letting them know, they would come to me first for the loan,” Ancin explains. “Or I can partner with a fintech who is now at the top of the funnel through their marketing and their payments into Google Ads. And then they bring me a portion of that solar panel loan.”

The problem arises when the customer goes to the fintech first, and the traditional bank only provides funding and doesn’t service the loan. They’re invisible and they don’t secure the same margin as they ordinarily would, which means they’re giving up brand equity in the process. 

To put it another way, they’re not part of the story that creates an emotional connection with a new customer. That’s a huge loss that’s extremely difficult to regain.

The Perils of Pond Fishing

Credit unions have historically built their member bases from groups of people, like teachers, police officers, or postal workers. “I know where you get paid and I know where to find you,” Ancin says. “I use this example in presentations. That’s pond fishing.”

When it’s time to grow or innovate, these credit unions struggle. They can’t make the transition from the pond to the lake to the ocean’s wide open waters. They’re still pining away for the little pond they used to dominate.

To this day, many credit unions still refuse to see certain client groups as potential members. Their intense focus on a concentrated clientele blinds them to new possibilities. 

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James Robert shares that Seth Godin predicted this problem years ago in his book, “We Are All Weird.” The book is about the decentralization of purchasing and the niche-ification of buyer behavior. Differences are something to celebrate, yet many financial institutions aren’t interested in connecting with people over what makes them unique.

The brands that do connect with people on an emotional level are seeing astronomical growth. Banking brands like Daylight and Aspiration make a genuine effort to view their clients and individuals and celebrate their lifestyles. From the first moment you visit their websites, you can see they take a different approach to banking.

Ready for Some Good News?

It’s not all doom and gloom for credit unions.

Ancin feels cautiously optimistic about credit unions that are coming out of the pandemic forging new partnerships with government select employer groups (SEGs,) fintechs, and previously neglected customer bases.

The key to sustaining the wins will be accountability. Accountability in banking should go beyond the boardrooms and out to the member base and community. Stakeholders should be able to ask, “Why is this credit union in the bottom 25th percentile? Weren’t other credit unions in the same pandemic as you were?” 

James Robert adds that this topic digs down into the emotions that come with making transformations. As emotive beings, we take things personally, which is why taking accountability is sometimes deeply disturbing and difficult. As challenging as it is, it’s part of enduring and embracing institutional transformation.

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Ancin encourages banking and credit union executives to acknowledge that they’re good at playing the game, but the game has changed. The best way to cope with change is to be like water, move with it, and stay flexible.

“The game is the game,” Ancin says, so the goal is to accept the game’s new rules and keep striving for success. James agrees, saying, “I think that’s a great mindset. Love the game and love playing the game.”

To absorb what it means to have this perspective, look at a banking leader like Keith Costello. Keith is the 65-year-old CEO of the new Locality Bank out of Miami, Florida. It’s a digital-first banking brand that’s revolutionizing how people connect with customers.

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James says Keith is well known for having a large LinkedIn following and being a digital influencer, despite his age and history with the industry. Even though Keith comes from a banking world that existed before the internet, he’s embracing the new age of banking with open arms.

Will your financial brand go extinct or will it be one of the survivors? Now’s the time to answer this question. Wait too long, and it will be too late.