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Undaunted: How Credit Unions Can Thrive in the New Financial Services Environment (Credit Union Conference Presentation Slides)

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The credit union industry is being reshaped by numerous outside forces and challenges. How can we thrive? In order to answer that question, the 2011 Deluxe Collaborative focused their research on …

The credit union industry is being reshaped by numerous outside forces and challenges. How can we thrive? In order to answer that question, the 2011 Deluxe Collaborative focused their research on understanding what consumers think and feel about their financial institution, regulations, products and process. The researchers discovered that in order to survive- and thrive- organizations need to challenge five things. Learn those five things you should be thinking about and learn to thrive! More info at: www.nafcu.org/deluxe

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  • 1. A PRESENTATION FROM DELUXE PRESENTED BY Heather Vaughan March 2012
  • 2. The Deluxe CollaborativeWhat is a Collaborative? A small group of financial services executives. Why a Conduct Collaborative? Research Shape Members are smarter, Topic stronger working together. Collaboration Ideate generates creativity, problem solving and motivation. Working with industry peers facilitates larger change. Share Design &Test © 2009 Deluxe Enterprise Operations, Inc. All rights reserved. Proprietary and Confidential. 2
  • 3. Collaborative Topics 2004: The Rapid Attrition of New Customers in the First 90 Days 2005: The Ailing Small Business Banking Experience 2007: Artful Problem Resolution for Building Loyalty 2009: Selling to Millennials and Boomers when Trust in Institutions Is Low How do Banks and Credit Unions Thrive in the 2011: Increasingly Regulated Climate of Banking? © 2009 Deluxe Enterprise Operations, Inc. All rights reserved. Proprietary and Confidential. 3
  • 4. Deluxe Collaborative Process• Secondary • Ethnography • Brainstorming • Focus Groups • KQ research • Interviews • “And, also…” • Make it your own • KE site• Excursions • Co-creation • Story boarding • Online research • Expo• Analogies • Observation • Pitch and vote • Associations 1 2 3 4 5 Shape Conduct Ideate Design Share Topic Research &Test © 2009 Deluxe Enterprise Operations, Inc. All rights reserved. Proprietary and Confidential. 4
  • 5. Share DeluxeKnowledgeExchange.comKnowledge Quarterly © 2009 Deluxe Enterprise Operations, Inc. All rights reserved. Proprietary and Confidential. 5
  • 6. Deluxe Knowledge Expo © 2009 Deluxe Enterprise Operations, Inc. All rights reserved. Proprietary and Confidential. 6
  • 7. 2011 Collaborative Topic How do banks and credit unions thrive in the increasingly regulated climate of banking? © 2009 Deluxe Enterprise Operations, Inc. All rights reserved. Proprietary and Confidential. 7
  • 8. Thrive Model Things to Challenge1.How you target customers and members2.How you define and design products3.How you charge for products4.The language you use © 2009 Deluxe Enterprise Operations, Inc. All rights reserved. Proprietary and Confidential. 8
  • 9. How You Target Customers and Members © 2009 Deluxe Enterprise Operations, Inc. All rights reserved. Proprietary and Confidential. 9
  • 10. Two Consumer Mindsets Barrier Jobs to Elimination be Done © 2009 Deluxe Enterprise Operations, Inc. All rights reserved. Proprietary and Confidential. 10
  • 11. Mindset – Barrier Elimination• Hold my money.• Don’t innovate on my behalf.• I want service and access.• Don’t mess with my spending. “Give me my money, anywhere, anyhow, anyway. And, oh, don’t charge me.” © 2009 Deluxe Enterprise Operations, Inc. All rights reserved. Proprietary and Confidential. 11
  • 12. Mindset – Jobs to be Done • I am open to a deeper relationship. • Show me offers, discounts and smart spending ideas. • Give me controls I can choose from. • I will pay for value. © 2009 Deluxe Enterprise Operations, Inc. All rights reserved. Proprietary and Confidential. 12
  • 13. Motivation for Jobs to be Done Time management “Life is so busy. It’s hard to keep up with the day-to-day requirements of managing my money well. I will accept valued help from my CU.” Increased performance “I am willing to explore the possibility that by involving my CU, I will see improved progress toward the job I want to accomplish.” Shared responsibility “If I involve my financial institution, I am more inclined to stay on track. I would value having a trusted partner in this journey.” © 2009 Deluxe Enterprise Operations, Inc. All rights reserved. Proprietary and Confidential. 13
  • 14. Bridge to Profitability: TargetingOld ThinkingBased on New Thinkingthe size ofthe Based onaccount attitudes toward accomplishing desired goals • Understandnew consumer mindsets • Segment on what “jobs” they want to get done • Know which members to keep and which to let go © 2009 Deluxe Enterprise Operations, Inc. All rights reserved. Proprietary and Confidential. 14
  • 15. How You Define and Design Products © 2009 Deluxe Enterprise Operations, Inc. All rights reserved. Proprietary and Confidential. 15
  • 16. The Promise We Made… “We’ll hold your money for free.” © 2009 Deluxe Enterprise Operations, Inc. All rights reserved. Proprietary and Confidential. 16
  • 17. The New Division Barrier Elimination Jobs to be Done © 2009 Deluxe Enterprise Operations, Inc. All rights reserved. Proprietary and Confidential. 17
  • 18. What Consumers Hear… hold “It’s yours and we are free borrowing it.” “There’s no charge.”All of the industry efforts have been focusedon eliminating free - not on changing theassumption that the CU holds their money. © 2009 Deluxe Enterprise Operations, Inc. All rights reserved. Proprietary and Confidential. 18
  • 19. So, Now They Hear… “We’ll hold your money for a fee.” © 2009 Deluxe Enterprise Operations, Inc. All rights reserved. Proprietary and Confidential. 19
  • 20. “I will forgo ‘free’ for something of Appeals to Neither Segment value. ‘Hold’ is not of value.” “You cancontinue to simply‘Hold’ my money. But that should be ‘free’.” Barrier Elimination Jobs to be Done © 2009 Deluxe Enterprise Operations, Inc. All rights reserved. Proprietary and Confidential. 20
  • 21. Product DesignWhat Consumers Care About:Critically important: • Clear and honest explanation of the CU’s reasoning behind the product • Fairness to membersExtremely important: • Products and services that are simple to use and understandVery important: • Products and services that anticipate new or emerging needs • Timely products and services that allow the CU to be at the forefront of innovations © 2009 Deluxe Enterprise Operations, Inc. All rights reserved. Proprietary and Confidential. 21
  • 22. Two Products We showed consumers two different products. Traditional New © 2009 Deluxe Enterprise Operations, Inc. All rights reserved. Proprietary and Confidential. 22
  • 23. Co-Creation: The New Product For those who want to manage their day-to-day finances more effectively, without spending more time. One low monthly fee. 1. Choose your focus. • Improve ST finances, manage spending, save, access, future 2. Set your controls to help you with your focus. • # of accounts, transfers, alerts, payment tools 3. We will pay attention to the way you bank, conduct “pattern analysis”, and give you suggestions to improve your money management. © 2009 Deluxe Enterprise Operations, Inc. All rights reserved. Proprietary and Confidential. 23
  • 24. Those Interested in New...• Felt it was more relevant and wanted to learn more• Indicated a willingness to adopt• Felt that it was fair to charge for the new product• Indicated they would leave before they paid for their traditional product Indicated they would be more loyal: • satisfaction increased • bring more business • recommend their bank/CU to others © 2009 Deluxe Enterprise Operations, Inc. All rights reserved. Proprietary and Confidential. 24
  • 25. Consumers Most Interested• More educated• Perceived themselves to be busy• Age 27-40• Likely to set-up multiple accounts• Track financial goals• Less likely to keep extra money in their account as a buffer Expressed strongest agreement with: “Innovations should help me accomplish my financial goals.” “I need tools to manage my money.” “I appreciate personal interaction.” © 2009 Deluxe Enterprise Operations, Inc. All rights reserved. Proprietary and Confidential. 25
  • 26. Bridge to Profitability: ProductOld ThinkingAn accountwith New Thinkingfeatures A set ofthat holds controls thatyour money help the member accomplish desired goals • Change the role of product • Re-engineer the way you develop product • Align products to the jobs to get done © 2009 Deluxe Enterprise Operations, Inc. All rights reserved. Proprietary and Confidential. 26
  • 27. How You Charge for Products © 2009 Deluxe Enterprise Operations, Inc. All rights reserved. Proprietary and Confidential. 27
  • 28. Three Models for Charging 1. Flexible 2. Subscription 3. Free with Ads• Basics with a set price • One low annual price • No minimum balance required• Choose additional features you • Unlimited access to key features • Robust set of features want • No fees for services, e.g., foreign • Relevant ads in online banking• Add optional services for ATMs additional fees • No minimum balance required © 2009 Deluxe Enterprise Operations, Inc. All rights reserved. Proprietary and Confidential. 28
  • 29. Pricing Scenario Findings• All participants preferred “Free with Ads.”• Those who favored the New Product were more open to all three pricing models.• Younger participants rated all three pricing models higher.• Older participants rated Flexible and Subscription pricing higher and almost identically, and Free with Ads as less appealing. © 2009 Deluxe Enterprise Operations, Inc. All rights reserved. Proprietary and Confidential. 29
  • 30. Bridge to Profitability: ChargingOld Thinking Fees New Thinking based on holding Price based money on the value you create for the member• Move away from a punitive-based fee model• Create new value for members• Teach employees to sell the value you create and think in terms of new sources of revenue © 2009 Deluxe Enterprise Operations, Inc. All rights reserved. Proprietary and Confidential. 30
  • 31. The Language You Use © 2009 Deluxe Enterprise Operations, Inc. All rights reserved. Proprietary and Confidential. 31
  • 32. Language © 2009 Deluxe Enterprise Operations, Inc. All rights reserved. Proprietary and Confidential. 32
  • 33. Language © 2009 Deluxe Enterprise Operations, Inc. All rights reserved. Proprietary and Confidential. 33
  • 34. Consumer Reactions• Don’t understand the difference between regulation and policy• Believe all the “rules” are designed to punish them and restrict access to their money• Don’t think the changes are fair• Question why and when they receive notices © 2009 Deluxe Enterprise Operations, Inc. All rights reserved. Proprietary and Confidential. 34
  • 35. LanguageWe say…. They hear…Free debit card with liability protection. Liability? What is going to happen?Personalized voice and email alerts. Personalized? What other kind is there?No fee for four ATM transactions per/mo. Why only four transactions? © 2009 Deluxe Enterprise Operations, Inc. All rights reserved. Proprietary and Confidential. 35
  • 36. LanguageMoving away from… Moving to…An account that holds my money A solution that helps me get jobs doneMobile banking or online banking AccessFeatures and benefits SolutionsFree UnlimitedCategories or services ToolsDemographics/psychographics Job-based segmentationCharge punitive fees Charge for the solution © 2009 Deluxe Enterprise Operations, Inc. All rights reserved. Proprietary and Confidential. 36
  • 37. F.I.T.S. Framework Fair – Is it fair? Intentional – Is the intent clear? Timely – Does the communication occur at the right time? Simple – Is it easy to understand? © 2009 Deluxe Enterprise Operations, Inc. All rights reserved. Proprietary and Confidential. 37
  • 38. Bridge to Profitability: LanguageOld ThinkingKey word: New ThinkingFree Key word:Products Unlimiteddescribed Productsas a list of described asfeatures a path forward • Communicate the value you provide – effectively • Develop simple techniques for employees to use • Incorporate the FITS model to communicate change © 2009 Deluxe Enterprise Operations, Inc. All rights reserved. Proprietary and Confidential. 38