Payment Protection - CUNA Mutual

Payment Protection: Member Value, Marketing Combine for Win-Win by Rich Trace, Director of Product Management, Credit Insurance Pam Schnagl, Market Research Analyst, Voice of Customer

Executive Summary CUNA Mutual Group’s Payment Protection Research examines the product value and its delivery. The research shows high value with benefits to credit unions and their members. Compared to 1998 research conducted by CUNA Mutual Group, the importance of Payment Protection in generating fee income has increased. Credit union research indicates cross-selling efforts can be improved. Members’ needs vary, and lending staff may be hesitant to promote given their level of understanding of these needs. Training reinforces product knowledge, and can be used

Compared to 1998 research conducted by CUNA Mutual Group, the importance of Payment Protection in generating fee income has increased.

to build confidence in addressing the member need. Credit union members are looking for this kind of information and advice from their credit union. A sales approach is not always seen as a member service by credit unions. However, in providing information about products

and services that meet needs, this is a service. Credit unions are seen as advocates for their members, and because of this relationship, members are even more likely to want information that will benefit them.

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The 2011 research shows: • Ninety-two percent of credit unions surveyed say a cross-sell culture is very important to their success. • A high percentage of credit unions say credit life is a product members need (82 percent) with a similar number (83 percent) Option for call out. Dolobor in tionull saying it is a good value for the amcommy incil incilla orpero money. Fornum credit disability, these et, percentages are also high (82 and con henim lut quamcon sequisit wis 78 percent, respectively). mod, si velessenim in hendrer iliquatet • Only 33 percent of credit unions incilla sumare si dipisi Xercillam zzriusc say they satisfied with their cross-sell efforts. Credit unions iduisl mod. Ureratis nis nim diamconse who are satisfied with their efforts feu feuissequam ver. training, arefeu more likely to utilize tracking and quoting the loan payment with Payment Protection. However, the satisfaction The research shows credit unions have a strong commitment to developing a cross-sell environment. They recognize the need to take full advantage of all

differences are much larger for credit unions that are using incentives, setting sales goals and

opportunities related to cross-selling financial products and services. And in order

including cross-selling results in

to be effective, a culture built on providing products that benefit members and the

performance evaluations.

credit union over the long term requires support. Because these products meet a member need, credit unions will be able to serve as an advocate in delivering the product, reinforcing a market strength.

• In that 59 percent of credit union members look to their credit union for some type of help or advice

As research shows, emotional connection alone will not create success. Companies

regarding their financial situation,

need to have the delivery, sales and service in place to be effective. Therefore,

members are interested in

streamlining this delivery and eliminating the barriers prove to be important steps

information on financial products

in facilitating that process.

and services. • Once sold, 83 percent of credit unions say members will repurchase. Given this percentage, a cross-sell investment is well worth it because it provides the basis for long-term results.

CUNA Mutual Group • Payment Lending Strategies Protection:&Member Trends White Value,Paper Marketing • December Combine 2011 for Win-Win • December 2011

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Introduction: Research confirms loan growth is a top priority for credit unions, and it also shows that fee income has become increasingly important. Fee income comprises a significant percent of a typical credit union’s revenue and for many that percentage has nearly doubled since 2000. In 2010, the credit union system generated $13 billion in fee and other operating income. For the last decade, the average credit union ROA would be below zero without non-interest income and the trend doesn’t appear to be changing.

Credit Union System Reliance on Fee Income Has Grown Basis Points Return on Average Assets (ROA) 51

ROA less Fees and Other Income*

*Note: with Fees andand Other Income werewere not removed *Note:The Theexpenses expensesassociated associated with Fees Other Income not removed

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-82

Source: CUNA Economics && Statistics, Mutual Source: CUNA Economics Statistics,NCUA NCUAand andCUNA CUNA MutualEconomics Economics

The credit union industry faces a loss of non-interest income and perhaps a greater cost to comply with new regulations. In CUNA Mutual Group’s Lending Strategies and Trends research conducted in 2010, 41 percent of credit unions said they were extremely concerned about the impact on fee income due to regulations such as “Reg E” and the Credit Card Act.1 The regulatory environment has given consumers new protections against fees even though the credit union industry historically doesn’t impose unwarranted fees on its members. Consequently, credit unions have been caught in the crossfire. The Dodd-Frank Wall Street Reform and Consumer Protection Act, signed into law in July 2010, will likely reduce income from debit card interchange fees. Perhaps a larger impact of the bill will be the Bureau of Consumer Financial Protection that it created. The impact of this new regulatory body won’t be known until it is in full operation. But it’s clear credit unions will face

Increasing member participation in credit insurance/debt protection appears to address two key

higher compliance costs.

underlying market forces converging

The economy has had prolonged high unemployment, lowering consumer confidence.

on the consumer lending industry:

Unemployment remains high, at 9.1 percent as of September 2011. Perhaps a more telling statistic is the number of Americans out of work at least 27 weeks, which was 6.2 million compared with 4.9 million in July 2009. By October, consumer confidence slid back to levels last seen during the 2008-2009 recession.

consumers’ financial needs and the loss of non-interest income.

Increasing member participation in credit insurance/debt protection appears to address two key underlying market forces converging on the consumer lending industry: consumers’ financial needs and the loss of non-interest income. A loan package that includes Payment Protection adds an expense for members, just as an over-the-limit fee does. But the cost of Payment Protection yields a more substantial benefit - protection against financial hardship. And even if no claim is made on the contract, members have said in numerous studies over those years that it offers the intangible benefit of peace of mind.

Payment Protection: Member

Marketing Combine for Win-

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If you would like the Lending Strategies and Trends Whitepaper, please contact your CUNA Mutual Group representative.

CUNA Mutual Group • Payment Protection:&Member Value,Paper Marketing Combine for Win-Win • December 2011 Lending Strategies Trends White • December 2011

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The purpose of this white paper is to examine market perceptions of Payment Protection products (credit insurance and debt protection) and show how Payment Protection marketing can be enhanced. It is primarily based on 2011 CUNA Mutual Group research that surveyed 331 credit unions $50 million or more in assets on marketing the value of Payment Protection. Payment Protection marketing can be enhanced through increased understanding of the market, stronger emphasis on cross-selling activities and specific knowledge of member benefits. Crossselling impacts the credit union’s success more broadly, and tools used in the marketing of

A prerequisite to a successful

Payment Protection can positively influence credit union culture as a whole. By addressing these challenges, credit unions develop their competitive advantage in the marketplace.

cross-sell is product value. High value translates to an easier sell.

This paper is divided into five sections.

Our research shows credit union

Section 1: Value of Payment Protection: Based on the perceptions of credit union lenders, the first section describes the value of Payment Protection to credit unions and their members.

managers strongly believe in Payment Protection products.

Section 2: Credit Union Cross-sell Efforts: The importance of cross-sell efforts, tools and resulting satisfaction are examined.

Section 3: Key Trends: This section summarizes changes in value, cross-selling and marketing. Section 4: Credit Union Strengths – Relationship and Advocacy: Members see their credit union as providing products and services that meet their needs. Credit unions are a trusted source of information. As a trusted source, their role in delivery is enhanced.

Section 5: Sales and Service for Success: Value combined with effective delivery creates opportunity for fee income.

Section 1: Value of Payment Protection A prerequisite to a successful cross-sell is product value. High value translates to an easier sell. Once value has been established, then those providing the product must have the skills to deliver, and the processes have to facilitate its delivery. If a product has high value, then the focus is on other components of delivery. Low value means the product needs to be assessed – first for its relevance in the marketplace, and then if relevant for its marketing and positioning. To develop cross-sell efforts, it’s important to understand the link between the coverage benefit and the member need, as well as the perceived value the credit union sees the product providing. One of the objectives of this study was to examine the value proposition. Credit unions were asked about the importance of Payment Protection to them and their members. Payment Protection includes credit insurance and debt protection. Our research shows credit union managers strongly believe in Payment Protection products.

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Marketing succeeds when enough people with the same worldview come together so marketers can reach them effectively. The marketer tells a story and this story resonates – and possibly changes the way the consumer experiences it. So it is important to show the value in a way that is in sync with the member. (Source: All Marketers Are Liars: The Power of Telling Authentic Stories in a Low-Trust World, Seth Godin, 2005)

Member Value Credit unions believe Payment Protection is a good value for their members. Many members need it and they buy it because it’s convenient to do so as part of the loan transaction. These products increase a member’s comfort in obtaining a loan. Members who buy Payment

High percentages of credit unions say credit life and credit disability

Protection on their loan once will purchase it again on their next loan. A high percentage of credit unions say credit or debt protection life is a product members need (82 percent), while 83 percent say it is a good value for the money. For credit or debt protection

are products that members need and provide good value.

disability, these percentages are also high (82 percent and 78 percent, respectively). However, only 52 percent of the total feel involuntary unemployment protection is necessary for members. Regarding its value, 32 percent confirm it as good.

Member Value of Payment Protection 100%

80%

60%

40%

20%

0%

Life Good Value

Life Member Need

Disability Member Need

Disability Good Value

Unemp Member Need

Unemp Good Value

Note: These percentages are based on credit unions with either credit insurance or debt protection. Compared to credit insurance, debt protection percentages for involuntary unemployment are significantly higher (83% for Need and 70% for Value).

CUNA Mutual Group • Payment Lending Strategies Protection:&Member Trends White Value,Paper Marketing • June December Combine 2011 2011 for Win-Win • December 2011

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Although more comparable to credit insurance customers on life (90 percent versus 82 percent) than disability (87 percent versus 75 percent), debt protection customers are more likely to see the value in the products. The difference was greater for involuntary unemployment at 70 percent compared to 22 percent for those credit unions with credit insurance. When looking at member need instead of value, the differences were similar. Not only is Payment Protection a good value, meeting a need, but credit unions also say it helps to increase comfort. Fifty-seven percent say that purchasing Payment Protection increases a

Virtually all credit unions say Payment Protection products benefit them in that they protect from loss due to death or disability of a member.

member’s level of comfort in obtaining the loan. The level of comfort possibly translates into greater ease in not only making the Payment Protection sale but in also making the loan sale itself. Credit unions indicate delivery as part of the loan transaction also fits member needs. Eighty-five percent of Payment Protection credit union customers agree Payment Protection products are purchased because they are convenient to purchase at the time the loan is made.

Credit Union Value High percentages of credit unions also say Payment Protection products are a benefit to them. Ninety-one percent say Payment Protection is a very important financial benefit to a credit union in that it protects the credit union from loss due to death or disability of a member. Eighty-four percent say they offer these products primarily because it helps cover financial losses for members. Also importantly from a sales perspective, 73 percent say it is important for their credit union to earn substantial income from their Payment Protection program. As shown, a majority of credit unions acknowledge Payment Protection impacts the members’ comfort with a loan. A similar percentage (50 percent) believes having Payment Protection products available is very important influence on a member’s decision on where to borrow. Virtually all credit unions surveyed (95 percent) say a credit union should be offering Payment Protection products to their members. And in terms of its priority, 77 percent say Payment Protection is one of the most important products they cross-sell to their members during the loan transaction.

Credit Union Role Credit unions are motivated to sell this product because it not only benefits their member but it benefits them as well. It is a win-win proposition. But their role actually determines their market effectiveness. Ninety-three percent of credit unions believe it is the lending staff’s job to educate members on the value of Payment Protection products. However, 73 percent say their lending staff believes in the value of Payment Protection.

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Credit Union Value of Payment Protection 100%

80%

60%

40%

20%

0%

CU Should Offer

CU Financial Benefit

Covers Member Loss

Most Important Cross-Sell

Provides Income

Influences Lender Choice

Credit unions strongly support the sale of Payment Protection products to their members. The products have high value for its members and for the credit union itself. Based on this perceived value, these Payment Protection products have potential. Regarding that potential, current cross-sell practices are assessed next to determine whether there is room for improvement.

Section 2: Credit Union Cross-sell Efforts In order for cross-sell cultures to develop, credit unions need to have the proper tools. Credit unions actively working to develop their cross-sell cultures need marketing support to do so. The Payment Protection marketing program needs to fit the credit union’s sales culture. Credit unions need to educate members because their attitudes toward the product are not always based on a specific knowledge. Credit union staff may have that product knowledge, but they also need to be comfortable making the offer to members who might be more concerned about the loan than they are about the Payment Protection.


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Credit unions with cross-sell cultures create an atmosphere where loan officers may be encouraged to ask about other products in addition to Payment Protection. Cross-selling is one component of developing relationships with members; other aspects include research, service, and market communications. Payment Protection needs to be positioned in a developing crosssell environment to its best advantage. Overall, this research shows credit unions value the Payment Protection product, and see the benefits for the credit union as well as the members. However, they express concerns about their

Lending management says a

cross-sell effectiveness.

cross-sell culture is very important to

Cross-sell Priority

their success. About two-thirds (68%)

In this research, lending management says a cross-sell culture is very important to their success.

say their credit union is continually

their credit union. About two-thirds (68 percent) say their credit union is continually developing

Ninety-two percent say cross-selling products and services is very important to the success of and enhancing their sales culture. More specifically, 60 percent say Payment Protection cross-

developing and enhancing their

sale is a priority for their credit union.

sales culture.

Marketing Tools Credit unions were asked about the importance of marketing tools in the cross-sell. Ninety-two percent of credit unions say tracking sales is key in a cross-selling effort and 79 percent believe incentives definitely increase cross-sell activity. The percentage saying incentives are important drops from 79 percent that believe in the overall positive impact (not specific to Payment Protection) to 61 percent saying incentives to loan staff for Payment Protection sales are key to successful cross-selling. So there are differences regarding how credit unions view the use in incentives by product. In addition, 73 percent say Payment Protection is continually reinforced by the management staff at the credit union. Regarding marketing materials specific to Payment Protection, 58 percent say they are very important to their cross-selling efforts. How the product is presented to the member helps determine the success. Although 74 percent say their lending staff asks every borrower whether they want Payment Protection to cover their consumer loan, a somewhat smaller percentage (65 percent) say their lending staff shows members the benefits of Payment Protection based on the members’ unique needs. But when members have questions, 78 percent of respondents respond to member concerns by pointing out features and benefits and a comparable percentage (77 percent) say their lending staff responds to member concerns by pointing out how Payment Protection will meet their needs.

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Regardless of the tools, it is important to use them most effectively. The basis for Permission Marketing, introduced by Seth Godin, is to engage the customer so the messages are relevant and not viewed as an interruption. (Source: Permission Marketing, Seth Godin, 1999) Although 71 percent say their lending staff knows how to handle any concerns or questions the members may have on Payment Protection, only 42 percent say if a member initially declines Payment Protection that their lending staff tries hard to show the member the benefits. Credit unions were asked about their use of specific marketing tools related to Payment Protection. High percentages do product/sales training and tracking, while the use of sales goals, cross-sale performance evaluation, and incentives are less common. Although 73 percent of credit unions say Payment Protection is continually reinforced by management, only 53 percent say it is part of performance evaluations.

with their cross-sell efforts can be improved. Only 42 percent say

Marketing Tool Use Tool

In general, credit union satisfaction

they have been very successful CU Percentage Using Tool

Product training for loan staff

87%

Quote with the loan payment

84%

Sales training for loan staff

78%

Sales tracking

76%

Sales goals

56%

Staff and management performance evaluation

53%

Incentives to loan staff

50%

in marketing.

Satisfaction with Cross-sell Efforts In general, credit union satisfaction with their cross-sell efforts can be improved. Although 92 percent of respondents say cross-selling is very important to the success of their credit union, only 33 percent say they are very satisfied with their cross-sell effort. Thirty-nine percent say their credit union has a very aggressive sales culture. A similar percentage (37 percent) say Payment Protection products are aggressively cross-sold by their lending staff. Regarding Payment Protection marketing, 42 percent say they have been very successful.


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Seventy-three percent of credit unions say their lending staff is adequately trained. Their comfort and cross-sell efforts illustrate the training impact. Comfort does seem to relate to their willingness to make the offer. • Sixty-nine percent say their lending staff feels very comfortable offering Payment Protection to members. • About three-quarters (74 percent) say the lending staff asks every borrower whether they want Payment Protection to cover their consumer loan. Credit unions satisfied with their cross-selling efforts tend to utilize training, tracking and quote the loan payment with Payment Protection. However, the satisfaction differences are much larger for credit unions that are using incentives, setting sales goals and including cross-selling results in performance evaluations.

Cross-Sell Satisfaction by Marketing Tool Use Tool Used

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Satisfied

Not Satisfied

Product training

95%

83%

Quote w/loan payment

94%

79%

Sales tracking

90%

69%

Sales training

88%

73%

Sales goals

77%

46%

Performance evaluation

73%

44%

Incentives to loan staff

70%

40%

Improvements to Cross-selling So, credit unions want to cross-sell, believe in the products and that they are important products for their members. Although training can be improved, high rates already endorse it. What are the barriers? Only half (51 percent) of the credit unions surveyed say Payment Protection products are easy to sell. Based on the research, it seems that understanding member needs may be an issue. With a wide variation in needs (77 percent say needs vary greatly); only 39 percent say they know what their members’ insurance needs are. So, the majority doesn’t know their members’ needs, and members could use this type of assistance. According to these credit unions, only 20 percent of credit unions report members know their own needs for insurance. The 2011 Consumer Financial Needs Research validates this – in that 59 percent of credit union members look to their credit

Once the sale is made, satisfaction with the product translates positively into future business. Eighty-three

union for some type of help or advice regarding their financial situation. About half (48 percent) of the credit unions surveyed say members have positive attitudes toward Payment Protection products, and 41 percent say credit union members are interested in knowing more about Payment Protection products. However, this level of awareness may be impacting how concerns and objections are handled.

percent say members who buy Payment Protection once will purchase it on their next loan.

About three quarters (76 percent) say Payment Protection is more easily marketed on certain types of loans with 56 percent saying it is more easily marketed on smaller loan sizes. While 65 percent are showing members the benefits of Payment Protection based on the member’s unique needs, close to one quarter (22 percent) is deciding whether to offer Payment Protection to members based on the age, income or occupation, and may be using more general parameters. A successful offer to the member involves knowing how to address their needs for information about the product, positioning it within the transaction in a way that answers their questions. Once the sale is made, satisfaction with the product translates positively into future business. Eighty-three percent say members who buy Payment Protection once will purchase it on their next loan. Members’ lack of awareness of their needs creates opportunities to educate, and provide information. Given the insurance need and the peace of mind provided by the product, this information has the potential to increase sales. Companies need to address their customers as whole human beings. Insurance provides peace of mind and increases comfort with borrowing. In these economic times, these benefits are more meaningful. (Source: Marketing 3.0, Philip Kotler, Hermawan Kartajaya, Iwan Setigwan, 2010)


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Attitudes towards Sales An advocacy value proposition (e.g., “doing what’s right for the member”) can be at odds with a more functional value proposition. Credit unions that demonstrate this advocacy spend money on staff time, communications and exception handling. They may be less inclined to promote products as value adds when they are less sure of the member need. Therefore, credit unions

Sales is a service in that it informs the

may be more resistant to a cross-sell approach for all products, not just Payment Protection. (Source: Customer Experience and Credit Union Opportunities: A Collaboration with McKinsey &

member about products and services.

Company, Filene Research Institute, 2010)

The focus on education and creating

According to CUNA Mutual Group’s 2011 Consumer Financial Needs Research, it seems the low-key no-pressure atmosphere of a credit union may sabotage its ability to communicate

awareness is important to members.

information about insurance and investment services. Many credit union members admit they lack education in financial matters. At this point in their financial lives, these credit union members crave education in a no-pressure jargon-free atmosphere. However, credit unions may not be positioning themselves effectively to address these needs. In Filene Research Institute’s report on customer experience and credit unions, McKinsey & Company notes they have never found a specific industry so averse to selling. One prevalent credit union barrier to building a frontline sales culture is staff fears that selling will detract from member service and member relationships. However, in fact, when a member accepts the offered product, their satisfaction improves because a product was offered that they didn’t know he or she needed. So it can be a very positive experience. A lending event counts as a “moment of truth” which provides the opportunity for customer satisfaction and positive customer experience. Sales is a service in that it informs the member about products and services. It can be about education, and that process rather than focusing on the outcome, the sale. The focus on education and creating awareness is important to members. A sales and service program is crucial to be market driven. It is about gathering information on the member and with this information providing them with information on products and services that meet their needs. Borrowers know lenders have a great deal of knowledge about them. This knowledge can be used to provide the member with ideas on how to better manage their finances. Credit unions should be making this information available to the member. Exchanging information, meeting needs, and adding value builds enduring relationships over time. Regarding needs, in CUNA Mutual Group’s 2011 Consumer Financial Needs research, 65 percent of credit union members said “having insurance is more important to me than it used to be.” This concern can be considered somewhat of a mandate regarding providing that information to the member.

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Section 3: Key Trends CUNA Mutual Group has tracked credit union perceptions of Payment Protection value and cross-sell efforts. Comparisons with 1998 data show credit unions continue to show strong support for the product and its cross-selling. First of all remembering back to 1998, debt protection wasn’t offered yet, so the questions for that survey used “insurance” or “credit insurance” rather than credit insurance/debt protection. In 1998, the U.S. economy was in excellent shape, especially from a consumer’s point of view. The unemployment rate dropped to 4.3% that year; the lowest since the late 1960s. The Consumer Price Index was also very low and the Gross Domestic Product was high. For credit unions, total lending grew 5.8 percent.

Today credit unions see the member need the same as they did in 1998. However, the percentage saying it is important to earn substantial income

The percentages showing Payment Protection as an important benefit to the credit union as well as the member have remained unchanged. Today, credit unions see the member need the

increased by 24 percentage points

same as they did in 1998. The percentage saying Payment Protection increases a member’s level of comfort in obtaining the loan has even increased from 42 percent to 57 percent. However, the importance of fee income has changed. The percentage that say it is important for their credit union to earn substantial income increased by 24 percentage points from 49 percent to 73 percent. So, there is additional pressure on fee income, and the data also shows some pluses and minuses in regards to the cross-sell ease. On the plus side, credit unions are less likely to market based on demographics (22 percent compared to 35 percent), and more likely to see the importance in using incentives to successfully cross-sell Payment Protection (48 percent in 1998 compared to 61 percent today). In 1998, only 28 percent of credit unions said their members were interested in knowing more about Payment Protection products. This percentage has increased to 41 percent, which combined with incentives should facilitate the cross-sell. In the 2011 Consumer Financial Needs Research conducted by CUNA Mutual Group, 36 percent of members say they are likely to purchase some type of life/accident insurance within the next five years. Members show greater interest in the Payment Protection product. Interest creates a positive environment for the cross-sell. However, their lack of knowledge can create barriers. There is a gap that needs to be addressed. There are other challenges as well. Although credit unions still say that Payment Protection is a good value for the money (78 percent for disability and 83 percent for life), there has been a dip of about 10 percentage points. As mentioned, though, 73 percent say their lending staff believes in the value. These are still good percentages, but support the need for continual reinforcement.


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In 1998, credit unions were more likely to say members who buy Payment Protection on consumer loans once will purchase it on the next loan than they are today. Virtually all (94 percent) said these members would repurchase. Today, this percentage is at 83 percent, again a slight but significant dip. There is increased competition for that consumer dollar so this may also illustrate the need for follow-up even with those members that have purchased in the past. Although the use of most tools (training, tracking, quoting loan payment with loan protection) has not increased significantly, credit unions may be moving more toward setting sales goals

Credit unions have adopted tools (goals and incentives) to help improve the product penetration. Training and coaching are still very important to increasing the comfort level to be

(56 percent compared to 48 percent) and are more likely today to be providing incentives (50 percent compared to 31 percent) for staff. So belief in incentives has not only gone up, but use has as well. Comparisons over time show the increased importance of Payment Protection to the credit union as a source of fee income. In a very positive environment related to perceived need, credit unions have adopted tools (goals and incentives) to help improve the product penetration. Training and coaching is still very important to increasing the comfort level to be effective in delivering these products.

effective in delivering these products.

Section 4: Credit Union Strengths: Relationship and Advocacy According to 2011 Consumer Financial Needs Research conducted by CUNA Mutual Group, credit union members remain pessimistic about the economy and their ability to save enough. Eighty-eight percent say they are worried about the state of the economy. Almost two-thirds (62 percent) say financial security is their biggest concern right now. In in-depth interviews, credit union members say they lack education in financial matters. They want education and are interested in getting help from their credit union. Clearly, these concerns show a need for advice and product information.

Credit Unions are highly valued by their members Research studies confirm member satisfaction with their credit union. Member satisfaction is a measure of success in fulfilling member needs. The 2011-2012 National Member Survey conducted by CUNA and Affiliates reports member satisfaction with their credit union remains extremely high. Survey findings show 71 percent of members are “very satisfied” with their credit union, while 27 percent are “somewhat satisfied.” The “very satisfied” rating jumps to 81 percent for primary financial institution (PFI) members. The Filene Research Institute report, “Customer Experience and Credit Union Opportunities: A Collaboration with McKinsey & Company,” discusses the importance of an emotional connection

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in driving customer satisfaction in retail financial services. According the report, “Company I can trust” is the most important underlying factor out of 15 customer satisfaction drivers identified by McKinsey’s surveys. “Provides a good overall value” and “Service in the branch” follow. The fourth, “Feel good about telling people that I bank with them” is also more of an emotional driver. In order to connect, companies need to have the mission and values that are consistent. If a company’s values are not in line, consumers may not buy a “needs-based” approach. (Source: Marketing 3.0, Philip Kotler, Hermawan Kartajaya, Iwan Setigwan, 2010). According to McKinsey & Company, credit unions along with other mutuals enjoy an emotional advantage related to their structure because of this emotional bond. Emotional factors and satisfaction influence existing members in considering new products with the credit unions. However, it is the operational efficiencies that close the deal. Therefore, it is important to have a process in place that makes the offer and facilitates the transaction. The 2011 CUNA Mutual Group Consumer Financial Needs Research confirms, too, that credit unions are valued because they appear to be the most friendly, personal, stable and moral entity in the financial world. Those who do business in the branch report that personnel acknowledge them by name and may even inquire about their family. Credit unions have a reputation for higher interest on accounts coupled with lower fees. According to Forrester Research Inc., members see their credit union as an advocate for their needs. Sixty-nine percent say their credit union is more likely to do what’s best for them, not just its own bottom line (Source: “Customer Advocacy 2011: How Customers Rate US Banks,

Investment Firms and Insurers”, Forrester Research, March 8, 2011). This relationship is important to developing an effective cross-sell environment. Credit unions have the relationship to be able to effectively promote these products. However, credit unions struggle with cross-selling. In the 2010 Lending Strategies and Trends Survey, 52 percent of credit unions with $50 million or more in assets say they are successfully cross-selling lending products and services through multiple channels (41 percent in 2005). Overall, 44 percent of surveyed credit unions (32 percent of those with $250 million in assets) say their front-line staffs are still better described as order-takers than advisors or counselors. Lending Strategies and Trends research confirms the challenges associated with developing a sales and service culture in credit unions. However, a credit union’s positioning in the marketplace certainly provides a distinct advantage. As mentioned, attitudes toward sales may be curtailing effectiveness.


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Employee Engagement Frontline behaviors have a direct impact on quality of customer experience. Borrowers want expertise and professionalism. Throughout the course of the experience, the financial services provider needs to demonstrate its skill. It demonstrates skill by providing information about the process itself, the product options, and the issues that need to be addressed by the borrower in taking out a loan.

Since customer service is so important to this engagement, then understanding how service, formal

Therefore, from a training perspective, it is important to empower the front line to be able to address the needs of the borrower. Being empowered transforms the front line from order takers to counselors or advisors—regarding not only the process but also options and other issues related to the loan itself. Borrowers want to improve their financial health. A loan transaction is just one experience

and informal is tied to cross-selling,

shaping the borrower’s financial situation and his or her perception of the credit union.

will help in achieving its success.

experiences. One way is to help borrowers look at their finances and get a snapshot of their

To continue the relationship, the credit union must help the borrower have other positive financial health. Marketing occurs anytime someone talks about your credit union, the ability to engage with your market. It is authentic and builds relationships. Customer service is included in this definition – it is the type of the service that empowers employees to develop lasting relationships with members. (Source: Unmarketing – Stop Marketing. Start Engaging., Scott Stratten, 2010) Since customer service is so important to this engagement, then understanding how service, formal and informal is tied to cross-selling, will help in achieving its success. Emotional factors and satisfaction bring people into the credit union; however it is operational efficiencies that are important in securing the deal. Therefore, it is important for employees to effectively deliver to build on the valuable goodwill that credit unions have with their members.

Section 5: Sales and Service for Success This white paper shows research that evaluates the current value of Payment Protection product, its delivery and positioning in the marketplace. Credit union advantages related to member advocacy in the marketplace support additional assessment of current delivery processes in order to increase success. As the research shows, credit union marketing strategies include a strong commitment to informing members about financial products and services, including Payment Protection. The credit union marketplace is changing. Regulatory and economic impacts create challenges, and necessitate evaluating options to address. Credit unions are integrating sales into their service cultures. It is important to recognize current competitive advantages to become more effective in the cross-sell of other products and services.

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Although the credit insurance delivery has traditionally been through the face-to-face channel, channel use is changing, with Generation X and Y showing greater preferences for remote. For example, the percentage of Gen Y adults with a mobile phone sending or receiving texts is 85 percent. For Gen X, it is 68 percent. Percentages for younger and older Baby Boomers with a mobile phone are 53 percent and 34 percent, respectively. (Source: Forrester Research, Inc.,

“The State of Consumers and Technology: Benchmark 2010, US” September 21, 2010). The Payment Protection offer needs to be integrated into the loan transaction from start to finish. Remote lending necessitates a review of the process and how to integrate most effectively. When surveyed by CUNA Mutual Group (Lending Strategies and Trends, 2010) credit unions forecast lending growth. However, to meet their revenue goals, they may need to take full advantage of all opportunities related to cross-selling financial products and services. Payment Protection product acceptance is generally positive, with room for improvement in cross-selling, especially in helping members assess their need for Payment Protection.

Credit unions need to be proactive in working with members to provide information about these products and services.

The research shows credit unions believe cross-sell capabilities are important to their success and that Payment Protection is a product that credit unions perceive as providing strong benefits for themselves and for the members they serve. Payment Protection is an important product offering. Credit union and members also may have limited awareness of their needs for insurance. This may create delivery issues that need to be addressed. For example, if staff presumes members know what they need, and will ask for the product and do their own needs assessment, this may not be the case. Credit unions need to be proactive in working with members to provide information about these products and services. A strong sales orientation/culture is built on providing products that benefit members and the credit union over the long term. Cross-selling must become part of the lending culture with continuous support from the leadership team and coaching among the lending staff. Long-term development is necessary for this growth. Service needs to continue to find ways to integrate a sales perspective that advocates for the member. Comparing 1998 and 2011 results from CUNA Mutual Group’s credit union surveys, it appears there may be a shift occurring regarding the increased use of sales goals and incentives. These are important elements of a sales culture. Still, about a third of the respondents are very satisfied overall with their credit union’s cross-selling efforts and only about 42 percent say if a member initially declines, their lending staff tries hard to show the member the benefits of Payment Protection. In short, credit union sales cultures are evolving. Beyond paying incentives, credit union lending staffs should commit to a continuous coaching environment. It’s typical for Payment Protection sales to spike immediately after training sessions. By providing support, attitudes and behaviors change.


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Experienced Payment Protection coaches who provide one-on-one training within branches accomplish two critical advantages: • Immediate feedback on how to improve the lending experience for members and how to uncover any needs the credit union may be able to fulfill. • Knowledge transfer about how Payment Protection has benefited members and the credit union. Especially when lending staff turnover is high, new employees need help understanding how to give every eligible member the opportunity to make an informed decision. Employee engagement is fostered by helping credit union staff stay close to their roles while trying to provide best practices, increase comfort, and monitor performance. Advocacy has been a credit union strength. Therefore, the member relationship is a catalyst for change. Research shows members want information on product and services that meet their needs. They trust their credit unions to provide them with this information. Crossselling or sales provides a service to members by letting them know the options. Being flexible as to how a relationship is developed with the member increases a credit union’s competitive advantage. Another trend, the consumers’ role in marketing has also increased over time. Social media has contributed but face-to-face with family and friends is still viable. In order to involve the consumer, we need to join the conversation and be actively engaged. (Source: Word of Mouth Marketing: How Smart Companies Get People Talking, Andy Sernovitz, 2006) For the last decade, the average credit union return on assets would be below zero without non-interest income and the trend doesn’t appear to be changing. As new regulations continue to curtail fee and interchange income, how will credit unions replace it?

If you have any questions or comments about this study or anything else related to our Voice of Customer program, please feel free to contact, David Polet, Program Director, at 800.356.2644 or [email protected].

Credit card annual fees, the demise of free checking and a host of other new fees are making headlines as large financial institutions seek to replace lost overdraft protection and interchange income. Opening or expanding income streams that create value for members -- rather than implementing more fees that have been largely portrayed in the media as punitive -- is a logical credit union solution. CUNA Mutual Group’s credit union surveys confirm the great majority of credit union leaders see Payment Protection as a good value for members, and an opportunity to meet their needs as well as improve income.

CUNA Mutual Group is a leading provider of financial services to credit unions, their members, and valued customers worldwide. With more than 70 years of market commitment, CUNA Mutual Group’s vision is unwavering: to be a trusted business partner who delivers service excellence with customer-focused, best-in-class products and market-driven innovation.

P.O. Box 391 5910 Mineral Point Road Madison, WI 53701-0391 800.356.2644 www.cunamutual.com CUNA Mutual Group Proprietary and Confidential. Further Reproduction, Adaptation, or Distribution Prohibited. 20 PR-0112-3E21 © CUNA Mutual Group, 2011 All Rights Reserved.