Membership has its privileges

Hey there, time traveller!
This article was published 11/10/2014 (4193 days ago), so information in it may no longer be current.

One of us! One of us!

Here in Manitoba, there is a good chance you may indeed be ‘one of us.’

A credit union member, that is.

Credit unions are exceptionally popular in Manitoba, with more than one in three of us using one as our primary financial institution. That’s about 628,000 members, accounting for more than $23 billion in assets.

Based on a co-operative model that puts people before profit, the Manitoba credit union system has grown over the last 80-plus years to be one of the strongest in the nation.

In fact, our three largest credit unions are among the top 10 in Canada in terms of assets.

In an age in which banks are giving away free tablets, movie tickets and airplane rides, credit unions are the outliers, earning new business the old-fashioned way: referrals.

“Certainly, it’s a competitive world out there,” says Donna Wankling, vice-president of marketing at Steinbach Credit Union. “We know banks will offer gimmicks or time-limited, fine-print offers to generate new account openings, and we’ve never gone that route.”

So far, so good: Steinbach Credit Union happens to be the province’s most successful credit union, with more than $4 billion in assets under management, making it the seventh-largest in Canada. And it’s accomplished that with only three branches.

So what is the value proposition of credit unions? Are they really that different from the big banks?

Certainly, it’s no shock that, in talking to some of Manitoba’s most successful credit unions, they assert what sets them apart is more than competitive rates on loans and deposits and exceptional customer service.

The big difference is membership, says Peter Enns, CEO of Crosstown Civic Credit Union.

“When you’re dealing with a bank, and I don’t want to sound negative against banks because I’m not, but when you’re dealing with their service representatives, their job is to maximize serving your needs, but at the same time, they’re trying to maximize their profits from that engagement,” he says. “That’s their role, because they’re trying to maximize the return that they’re able to pay to their shareholders.”

Maximizing profits at the expense of the customer doesn’t make much sense at a credit union, because customers are members. That means they are shareholders, too.

“You actually belong and have ownership in the financial institution,” says Kim Wentz, vice-president of marketing and communications for Cambrian Credit Union, which is the 10th-largest in the nation. “It’s a one-member, one-vote kind of thing.”

 

With banks being for-profit, publicly traded corporations, the largest shareholders often have the most say in how the businesses are run. For the most part, these major shareholders seek decisions that maximize profits. Arguably, that leads to competitive loan and deposit rates, with a host of other innovative products and services such as mobile banking and online, self-directed investment accounts — with pretty decent customer service as well. After all, they’re trying to outdo their primary adversaries: the other big banks. And they do a pretty good job of attracting clients to their banner, with about $3.5 trillion in assets.

By comparison, Canada’s credit unions have about $175 billion in assets (excluding Quebec).

Being small — at least by bank standards — has its advantages. For one, credit unions are intrinsically local, created and controlled by members who are equal, regardless of how much money they have. It’s these characteristics that help credit unions punch above their weight to outdo the big banks in many ways, says Megan Adams, vice-president of marketing and communication for Assiniboine Credit Union.

“Our credit unions are governed by a member-elected board of directors,” she said, meaning those who make the big decisions are at the end of the day answerable to members.

“What that translates into for the individual is a high level of comfort that they’re dealing with someone who understands them.”

It also results in better customer satisfaction than many other financial institutions. For the last 10 years, Canadian credit unions have ranked first overall in customer service at the Ipsos Best Banking Awards.

“For us, every member that walks in the door is important,” says Diane Bilodeau, vice-president of marketing and strategy at Caisse Financial Group, the province’s largest francophone credit union.

Certainly, many businesses spout these kinds of statements, but as everybody knows, putting words into day-to-day practice is another thing altogether. Yet, it’s because credit unions are owned and controlled by members — and dependent on those members to continue to prosper — that many of the claims made by credit union supporters ring true.

“All that are in existence today were created by people in a community who got together because they felt pooling their resources would benefit the community,” Bilodeau says.

It’s not a matter of dealing with a faceless, monolith corporation (although our big banks are extraordinarily profitable and generally friendly behemoths).

“We don’t deal with anonymous customers or shareholders,” Wankling says. “We deal with people that live in our community, and we know that we can’t fail, so we hold ourselves to a higher standard of service because we know that our members have options.”

Indeed, the banks — often option A — roll out a never-ending assortment of marketing bells and whistles to drum up new business, with pretty good service and products, too.

It’s a competitive world for our money, and that’s good for the average consumer.

It’s also why credit unions know maintaining and growing membership can’t be achieved offering new members swag.

“What does that say to our existing membership, if we were giving away free iPads to new members?” Adams says. “We’re looking for people who want long-term relationships with us and not just people who are looking for something free.”

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