Understanding Demographics in Your Credit Union Membership
August 2015

The first step toward successfully serving your customer is getting to know your customer, and few industries compare to credit unions when it comes to relationship-building.

On a personal level, that is — which is why credit unions consistently rank at or near the top of cross-industry customer service ratings.

But from a broad-based, low-touch perspective? Not as much.

Many smaller institutions struggle to keep pace with identifying the demographics and trends within their membership in a manner that would allow them to segment those groups and match them with the appropriate products and services.

The issue is exacerbated at credit unions that have experienced rapid growth, operate in markets with moderate to high employee churn, or have in recent years expanded their field of membership to multiple SEGs or converted to community charters.

All of these developments tax a credit union’s capability of developing the deep, personal relationships that organically create sales and service opportunities.

Certainly, the large, progressive, tech-savvy credit unions have hopped on board the analytics train. Not only do they maintain their own databases filled with member insights, they also contract with external sources to provide a richer, well-rounded consumer profile.

Many of these credit unions have harnessed that information to construct robust, efficient, needs-based cross-selling operations.

Yet on some level, financial services institutions of all stripes are still dealing with degrees of uncertainty amid cultural changes that have thrown many of the old demographic rules of thumb on their head.

Static data such as age, income, occupation, family structure, race/ethnicity, and education level remain valuable from a baseline standpoint. But these once fairly accurate predictors of financial needs have been skewed by the economic reshuffling resulting from the Great Recession, and the technology-fueled spike in financial services options in recent years has created a fragmented marketplace.

In short, no longer is there a “book” based on these factors for reaching members at critical life stages — first debit or credit card, first student loan, first vehicle loan, first mortgage, first investment account.

Rather, financial institutions have begun to place more weight on a member’s usage of various financial services, and are drawing from credit and social insights in a quest one technology solutions provider calls “identifying someone’s financial DNA.”

The credit rating firm Equifax furthers this analysis by settling on three key determinants: a member’s (or household’s) total financial opportunity and capacity; channel preference (the mix of branch, online, mobile, and ATM usage); and purchasing behavior.

“More than ever, interests, opinions and overt behaviors are a much better indicator of customer demand according to the recent studies around the use of ‘big data,’” according to The Financial Brand. “How the customer saves, spends, and transacts is a much more powerful determinant of future financial product purchase and use patterns than the demographic profile of a customer.”

The good news is that many credit unions who have stressed customer relationship management and who committed to loan portfolio management tools have ready access to much of this information.

These shifts underscore the importance of accurately inputting information in all fields, even those that seem tangential for a given transaction or exchange, and regularly slicing and dicing your data to identify the best methods of segmenting your membership into homogeneous pools likely to be receptive to marketing efforts.

Human interaction remains the most powerful channel for identifying members’ financial needs on a one-to-one basis. But credit unions must also embrace technology as the most viable, efficient means of getting to “know” their members. Which translate into better serving them, too.

Related Blog Posts
Further Your Education