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Linking Member Satisfaction to Loan Decisions: A Wallet Allocation Rule Approach

How do members decide whether to use credit unions or competing banks for their loans? Filene has released a series of reports based on a survey of over 5,000 credit union members to investigate why they prefer a particular financial institution for a specific loan category. Recognizing that different loan types come with very different drivers, we seperately examined first mortgages, refinanced first mortgages, second mortgages, home equity lines of credit (HELOCs), new auto loans, used auto loans, and personal loans. Download the comprehensive slide deck here along with the individual reports for each loan category. In the race to capture loan market share, every insight counts: 

First Mortgages

While credit unions benefit from generally strong relationships with their members, banks are percieved as offering "better fitting" loan types. "A Wallet Allocation Rule Approach to First Mortgages" reveals that among members who chose the studied credit union for their mortgage, the most important factor in their choice was their perceived relationship with the institution. For respondents that chose a bank for their first mortgage, price (i.e. interest rate) proved to be the most significant driver.  Credit unions are losing based on members' perception that they are able to offer the best loan type to meet members' perceived needs. Download the full report and slide deck to uncover how credit unions can correct these misperceptions and secure more first mortgage loans. 

 Refinanced First Mortgages

"A Wallet Allocation Rule Approach to Refinanced First Mortgages" suggests relationships are not an important driver of bank loans in this category. Credit unions must address the more price-oriented drivers head-on. Download the full report and slide deck to read how credit unions can make switching mortgage providers a seamless experience for members through effective communication. 

Second Mortgages

Second mortgage decision drivers are very similar to those of first mortgages. In "A Wallet Allocation Rule Approach to Second Mortgages" members cite their percieved relationship with the credit union as the most important second mortgage decision driver. The second most important driver in members' decision to use the studied credit union was the rate on the loan. This was the most important reason that banks were selected. Given that members are choosing credit unions and banks for their second mortgages for very similar reasons, increasing credit union selection appears to rest primarily on getting members to seriously consider the credit union as a viable second mortgage lender. Download the full report and slide deck to read more. 

 Home Equity Lines of Credit (HELOCs)                                                                                                              

“A Wallet Allocation Rule Approach to HELOCs” report suggests a vast majority of members who seriously considered the credit union in general preferred the institution to its competitors. Specifically, 74% of members who considered the credit union either only considered using it or in general preferred it to to competitors. Moreover, credit unions do a good job of translating higher satisfaction into a majority share of members' HELOCs. In this investigation, 49% of members got a HELOC with the studied credit union. Download the full report and slide deck to uncover more key insights and reccommendations. 

New Auto Loans

In "A Wallet Allocation Rule Approach to New Auto Loans" report we find that banks demonstrate much stronger connections to car dealerships. While credit unions are able to compete effectively against banks on price, they are losing out on auto-dealer influenced loans. In the study, 18% of new auto loans went to competing credit unions while banks received 29% of members' new loans. Download the full report and slide deck to learn more on how credit unions can forge stronger relationships with area car dealerships to capture more new auto loans.  

Used Auto Loans

Credit unions have a significant opportuity for growth in the used auto lending arena. "A Wallet Allocation Rule Approach to Used Auto Loans" reveals that used auto dealers have issues recommending credit unions to consumers. If the problem lies in a lack of awareness or consideration by dealerships, credit unions could create awareness by actively enhancing their communications strategy. Alternatively, credit unions could find ways to preemptively encourage or incentivize their members to initiate contact with their credit union before considering referrals from auto dealers for used car loans. Download the full report and slide deck to learn more. 

Personal Loans 

Personal loans are the only loan category where the primary competitors are not banks but other credit unions. Members are much less likely to compare options for personal loans than for any other loan type. Members appear to choose credit   unions and banks for their personal loans for the same reason: having an existing financial relationship with the provider. Download the full report and slide deck for "A Wallet Allocation Rule Approach to Personal Loans" to learn how credit unions can minimize the specific reasons members choose banks for personal loans. 

Filene would like to thank its generous supporters for making this important research possible.