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FIGHTING FIRE WITH FIRE

Like the wildfires that raged in Montana, credit unions have been adding potential members to their fields of membership aggressively. Not counting the millions of individuals added through community chartering, more than 16,000 groups comprising more than 1.5 million individuals became eligible for credit union membership in 1999 alone. Impressive as those numbers may be, they’re actually only the tip of the proverbial iceberg.

The credit union industry has a big-time game plan that every banker should know about and work to fend off. To understand the credit unions’ tactics and strategies, I recently attended a conference sponsored by Credit Union Journal. What I learned was eye-popping.

Credit union executives at the conference were told that being low-cost/high-yield providers is not enough and that they should be cozying up with the businesses and organizations that sponsor credit union services for their employees. The best targets, the execs were told, are businesses that will give credit union reps on-site access. Leading-edge credit unions are giving their reps ambitious assignments — making 20-30 calls a week to business prospects and visiting four or more of them on-site each week. A San Diego credit union expects its managers to spend 50 percent or more of their time on selling and to be out of the office at least 20 percent of the time.

Credit union services are peddled as a win-win proposition for employers. Having a credit union located at a business increases employees’ convenience at no cost to the company and can be touted as a company benefit. Having gained access, credit unions’ next step is to gain permission to include their materials as payroll inserts, to hold frequent enrollment meetings with employees and to make use of employee mailing lists. Human resources and payroll departments are given “switch kits” that employees may use to switch their accounts from banks or other taxpaying institutions to the credit unions.

Next, the credit unions persuade employers and employees to use direct deposit of payroll checks; and from there it’s an easy step to offering payroll services, business checking, individual retirement accounts and 401(k) plans, pension plans and even group insurance.

Credit unions and their consultants use soothing words to describe all this. They talk of being “business partners” with their sponsor groups, of benefits to employers and employees, of beefing up benefit packages and so forth. But the reality is that their strategy is to leverage their employee relationships to take over major chunks of commercial banking business. And they seem to be doing it without serious opposition from bankers. (A panel of human resources directors from commercial firms at the credit union conference said no banks had approached them to offer their employees financial services.)

To fight a forest fire, backfires need to be created to deprive the main fire of the fuel it needs to spread. From what I heard at the credit union conference, bankers need to set some backfires of their own with respect to credit unions.

If the CUs are cozying up to our business customers, then we should be there first with the most. Along with selling commercial services, we should offer the services that cement the loyalty of those firms’ employees, denying the credit unions their crucial beachhead.

If bankers are only visiting with CEOs of commercial firms, that’s a mistake; human resources, payroll and benefits directors should be on the visiting list as well. If bankers discover that a commercial customer is becoming too chummy with the local credit union, it’s time to turn up the heat and find out what it will take to retain that customer’s business — and deliver it if there’s any way at all to do so.

In other words, fight fire with fire.

Questions? Please contact Keith J. Leggett for more information.

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