Actually those of us in the financial services world could learn a great deal by taking a closer look at what is going on in the music and book publishing industries. Like many of you I listen to music on my IPod. It is small, barely the size of a usb drive, and it can hold hundreds of songs. The same with the electronic reader I recently bought from my online book retailer.
What do both of these gadgets do for me? Your answer might sound like mine when I say, “they provide me the means of listening or reading when and where I want.” While that is true they also have another side benefit. They lock me in by building virtual castle walls around me…brick by brick..one great service, product, or convenience at a time.
A goal of every company should be to create a virtual castle walls around your customers or in the case of credit unions members. Consider the IPod. The content of the IPod only works on the IPod. This means if I want to continue to access my content I have to continue to buy that content from Apple. The same with my electronic reader. The books I have purchased only work on that specific reader. In effect the companies have build into their products a switching cost I have to be willing to pay in order to leave the devices they have chosen. In other words I have been tied to company by the very convenience and service the companies offer me.
One challenge for many credit unions is that there is no inherent switching cost in leaving them. In fact, many credit unions are hurt because many members use them for that great auto rate or a “hot” certificate special but retain primary relationships with the BigBanks.Why would a person do that? Why would someone stay with a bank they do not like? The reason is that members do not understand the value you are offering beyond that "hot money" rate.
Till Death Do Us Part
In a recent survey conducted in the United Kingdom the average Brit stayed with their bank for 16 years. The average relationship was just 14 years…meaning people stayed with their banks longer than the people that they once proclaimed to love! Primary reason they stayed was simple apathy. Banks realize this. Trust me they are building their own virtual castle walls to keep their most profitable customers.
As Big Banks look to create alterative sources for non interest income they will also invest in the very technologies that enable them to build in switching costs to the customers they serve. I remember when I left my relationship with a Big Bank having to convince my spouse that the online banking, national ATM network, and vast branch network were not the only things that mattered. I had to remind her of how tired we were of the new fees that seemed to come up month after month. What we discovered was something very different. We discovered local community based financial services. Now this readiness to provide great service is only as good as the people and technology that enable it. Financial Services for many people is an emotional transaction. They know when something "felt right" and they also know when they felt nothing at all.
As Big Banks continue to look for new fee revenue many people who were in a state of apathy will wonder what alternatives are out there. Credit Unions have to break through the clutter and engage those people that are looking for some other financial services alternative. This is the perfect time to leverage the membership growth many credit unions experienced as consumers fled Big Banks in their flight to safety. Credit union need to invest in people and convenience technology that builds the virtual castle walls needed to both attract and retain members.
Practical Application:
- Are you just a simpler more vanilla version of what your new member already experienced or will they find your front line staff lacking in their readiness to serve?
- Have you looked into the "click and carry" mobile technology that will make leaving you too difficult?
- Can members send you a check via their phone? Do you even know if they want to ?
- Do your members have to sign paper loan documents or do you allow electronic signature for seasoned members with strong standing relationships with you?
The stock market is seeing record numbers with regard to gains, losses and volume. But these high volumes of transactions can put the security of customer transactions at financial institutions at risk if the proper precautions have not been put in place.
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