During the height of the Great Depression, in an address at Tulane University on June 11, 1935, Ed Filene reminds us “This is a new epoch. To discover the new responsibilities of this new epoch, and to act in accordance with those new responsibilities, is the most practical and most important problem which confronts us now.”
This timeless advice guides credit unions in rising to the challenge we now confront.
Anxiety and Trust
The uncertainty of what is to come is having a toll on consumer sentiment. Collapse in economic optimism is impacting buying attitudes and leaving consumers’ perceptions of economic conditions vulnerable to further decline. With the April unemployment rate at 14.7 percent, these numbers will get worse before they get better.
Michelle Shell – a Harvard researcher who presented at Filene’s The New Credit Union Experience – noted that members’ current anxiety is forward-looking, but it can also lead them to pull back and feel badly about their decisions. Moreover, and relevant to credit unions, this dissatisfaction with decision-making spills over to affect members’ level of trust with their service providers, even when the source of anxiety is external.
The connection between anxiety and trust is one to pay special attention to when thinking about the evolution of service. Consumers facing income reduction within their households is having a two-fold effect on credit unions. First, members engage in efforts to alleviate this burden by increasing their rate of savings (which hasn’t been this high since November 1981), reducing expenses, accessing small-dollar emergency loans, and taking a hard look at their budgets. Second, a sense of "debt phobia" bubbles up, resulting in a delay or avoidance of large purchases that credit unions would typically finance.
Faced with a trust premium, credit unions can address anxiety with clear, unambiguous advice on how to meet these challenges. For example, credit unions can offer tools across channels to support members:
- A resource hub providing options from the credit union and external sources to expand members’ opportunities for expense reduction or participation in government-sponsored programs.
- Budgeting tools to better understand members’ financial picture.
- Small-dollar emergency loans that can help members provide for immediate needs.
- Savings products that build up rainy-day protection and allow room for flexibility (e.g., bump-rate CDs, no/reduced penalty on early withdrawals, high-yield savings on small emergency savings, save-to-win options).
- Lending products that come with a built-in reassurance that members can enact a skip-a-payment option during the term of the loan at their discretion.
- Access to expert advice. Dr. Shell points out that providing customers with the opportunity (even if they don't use it) to interact with an expert – including digital self-service platforms – dampens anxiety's adverse effects on choice satisfaction and, by extension, firm trust.
Acceleration of Digital Services
As a consequence of the preventive measures adopted to combat the current health crisis, members shifted toward credit unions' digital channels in search of service. For most, a digital platform is not new, and is perhaps already their preferred service channel. For all others, it took the last couple of months to become familiar with this virtual environment.
With the enhanced focus onto digital services, credit unions should:
- Lead with safety.
With the link between anxiety and trust made clear, one driver for building trust is addressing safety concerns. Technology plays a role in fraud prevention initiatives, and these investments should be communicated clearly to members. A successful messaging strategy should include three elements: (1) reassure members the many ways credit unions are protecting their data; (2) remind members this is a joint effort, and they play a crucial role; and (3) in the event fraud concerns arise, the credit union has a transparent process in how to process such claim (hopefully, self-service).
- Recognize excellent service is all about fit.
In Member Experience and Service Excellence, Part 1, Filene Fellow and Harvard professor Dennis Campbell introduces us to the concept of member compatibility. It is about centering your service strategy to meet the demands of your target members. This framework prompts credit unions to assess what service attributes are most important and which can be left aside. Evaluate your current digital service offerings and explore what elements are critical to best meeting the priorities of your target members.
- Move towards operational transparency.
Professor Campbell also invites credit unions to consider the benefits of showing members the work that is being done on their behalf. Operational transparency improves member satisfaction and perception of value. Transparency is especially helpful for self-service solutions. A real-time service tracker displaying the different phases and milestones generates a sense of progress and control for members replacing long silences and pauses found in some service experiences.
- Encourage and support members’ use of digital channels.
Achieve this by launching safety-oriented messaging introducing currently available digital tools, while also providing tutorials and access to support.
- Consider the adoption of the telemedicine
By emulating elements of this service model credit unions could benefit from its many advantages. It allows people the flexibility to address their needs at convenient times, reduces face-to-face exposure for both parties, and could reduce the total length of the interactions by connecting asynchronously.
In-person Service Delivery
With the re-opening of business across many states, credit unions are dedicating careful attention to what face-to-face interactions with members may look like. Reimagining operations is not an easy task, but to build confidence, credit unions must address the needs of employees and members.
Starting with employee safety, credit unions are re-designing spaces to accommodate physical distancing demands, securing Personal Protection Equipment (PPE) if promoted among staff, and evaluating federal and local guidelines to understand traffic flow and building capacity restrictions.
COVID-19 may hamper members’ appetite for face-to-face interactions. And credit unions should adapt to the demand for this channel accordingly. Gone are the days of heavy walk-in traffic, 30 to 60-minute appointments, or a lobby seating area. Prioritize safety, both for employees and members.
In this new environment, credit unions should adjust accordingly:
- Manage employee anxiety.
Credit unions lead with people first. If the employees are calm and feel safe, they will pass that on to members. Provide training to member-facing staff, identify new technologies to support their work, and address employee financial well-being.
- Consider a lobby management software solution.
One tool for maintaining physical distance is a by-appointment service model. This can also be effective for walk-in traffic by creating a virtual queue, where members are alerted to return to the branch when the next available specialist becomes available. This solution also creates operational transparency, but it was not widely used when Filene studied it in 2019.
- Embrace asynchronous processes as a strategy to reduce the length of time members spend at the branch.
This approach may prevail in the absence of beginning-to-end in-person models. Accomplish portions of the service delivery remotely (e.g., completing an application, finishing a fraud claim after talking to a representative); some may require an in-person interaction (e.g., a loan closing requiring a notary service, issuing an instant card). The caveat is to design a frictionless transition between channels.
- Evaluate if additional in-branch technology investments are necessary.
This may include the addition of Interactive Teller Machines (ITMs), Teller Cash Recyclers (TCRs), eliminating paper deposit/withdrawal tickets, etc. These could reduce in-person contact with members and expedite teller transactions when cash is exchanged.
- Re-train staff to accommodate change.
New technology and strategy development will happen rapidly, but changing old habits will happen much more slowly. Evaluate all aspects of the member experience to match the new design, from the significant changes described above to the small details like how members can be greeted in the absence of handshakes and how to politely address members not following health guidelines.
This piece suggests a number of immediate changes to service delivery during COVID-19. For a deeper dive into effective business models for credit unions over the longer term, review Filene's Credit Union of the Twenty-First Century report, where we introduce four new business models to consider. These models remain relevant, and the socio-economic and technology trends they were designed to address have only accelerated. Trends that Filene identified would mature over the next five years are rapidly becoming the new reality in 2020. That forward thinking report is accompanied by a workshop guide that will help build out and activate the new strategy across your leadership teams. Best of luck in rising to the challenges of this new epoch.