Thursday, April 26, 2018

Is There A Cost to Convenience?

Steve Heusuk, Senior Manager, Competitive and Market Intelligence

The financial sector has been on a mission to redefine the experience it provides. Companies continue chasing new channels, faster technologies, less friction in the customer journey and any other innovation to reach the holy grail of convenience.

But, are there unintended consequences to this singular focus on convenience? As engagement becomes easier are credit unions and members growing further apart?

Look at auto lending. Credit unions traditionally won loan decisions based on lower rates and fees. Banks, on the other hand, typically won business based on dealer relationships and/or recommendations. But there are indications these dynamics are changing.

Total outstanding credit union auto loans from the indirect channel grew from 43 percent in 2012 to 58 percent in 2017. And, they're projected to reach 61 percent by 2021. Clearly, credit unions have made inroads at the dealership – traditionally bankers’ turf.

That would be a nice story – if it ended there.

Deeper analysis shows credit unions are winning more business with members who don’t consider the credit union their Primary Financial Institution (PFI). In fact, from Q4 2015 to Q4 2017, auto loans held by this segment grew 44 percent, according to a 2018 survey conducted by Competiscan. By contrast, auto loans held by members who consider the credit union their PFI grew only 7 percent.

Learn more about this potential risk. Read the full article.