Credit Unions See CLV Differently

The financial industry is in love with data, and for good reason. Paired with the increasingly exciting field of analytics, data gives us a whole new view on what financial consumers really want, not just what they (or industry analysts) say they do.

Of course, for every ethical use of data analytics, there are 47 unethical ones. A recent Wall Street Journal article reminded me of all the temptations financial services professionals face as they get deeper into the use of analytics. It also solidified in my mind the massive opportunity credit unions have to differentiate themselves in the eyes of consumers wary of the way brands collect, analyze and share their data.

The author took a look at what the headline coined a “secret customer score.” It’s what those of us in the financial services industry know as the customer lifetime value metric, or CLV. “On hold for 45 minutes? It might be your secret customer score,” teased the article.

The article essentially said megabanks and other brands use the CLV metric to determine which customers are worth the effort of great service. Assuming this is largely true, credit unions – many of which track and score member lifetime value – should think about communicating, transparently, how they apply this score differently. Namely, that a low member lifetime value score does not cast a member off into call center Siberia. Instead, it sends them to the top of the heap where empathetic credit union personnel work hard to provide a richer and more meaningful experience for the member.

It’s always been my belief that a financial institution that provides value – real, “tell a friend” kind of value – will get that value right back. For any organization, the best clients will always be the best clients. Of course you need to take care of them and protect that relationship from competing interests. However, the goal really should be transforming that segment of so-called bad clients into a segment of good clients; and similarly, turning good clients into great ones.

For credit unions, the question isn’t which low-value members should I ignore or punish. It’s, how can I get this segment of members to engage with me more? This is particularly true for credit unions that have made courting the unbanked and underserved a strategic imperative. Imagine if these purpose-driven institutions striving for the double bottom line only paid attention to members with the highest MLV. It would be mission paralysis.

Technology, especially self-service banking technology, is throwing something of a wrench into the credit union modus operandi. Having spent decades defining “value” as providing supremely high-touch and human-centric member service, financial cooperatives are now faced with the challenge of showing respect, dignity and attention digitally.

But, here’s the deal: High-touch, human-centric service may not be the modern member’s idea of value.

Digital consumers are assigning more points to the financial institutions that help them get their jobs done faster, keep them seamlessly connected to the other aspects of their financial lives and do all of this under an umbrella of sound cybersecurity.

Given these shifting member preferences, how can credit unions go about providing the kind of value that ultimately boosts MLV scores? I have a few thoughts.

Recalibrate MLV Strategies. First, if you’re not scoring and tracking MLV, make that a strategic priority. You can’t make membership better for the individuals with the greatest need if you don’t know who they are. Second, spend some time looking into your data and analytics processes across the credit union, and if you’re ready for it, outside the credit union. Is the data feeding your MLV models as comprehensive as it could be?

Reimagine your value. Because consumers expect you to demonstrate you know them and can look ahead for them, it’s important you reexamine your value in this context. Take mortgage borrowers, for instance. Are you holding their hand from start to finish as best you can? Zillow is. In a very short period of time, the digital home-selling marketplace expanded by adding a home-buying program and mortgage lending capability. In other words, Zillow is becoming a complete, beginning-to-end home transaction ecosystem. How can your credit union expand its value proposition, either through technology integration or good old-fashioned collaboration with other business partners in your area?

Don’t forget the front line. We tend to focus so much of our energy on member-facing technology that we often forget to show our own some digital transformation love. The credit union staff who know your members best stand the greatest chance of boosting engagement on a per-member basis. Take a look at how they are spending their time. Are there ways to inject automation or some other tech-forward processes that will free their minds for concrete, value-boosting idea generation?

The financial services landscape is growing rapidly with entirely new sets of competitors jumping up and down, hands waving: Credit union members, look over here! You can do the same thing with us in three taps to the smartphone screen. Increasingly, that kind of bold-promise messaging is followed up with fast, personalized and convenient experiences consumers absolutely value.

Credit unions see MLV differently than their megabank counter parts. We all know that, but do consumers? It’s time to show them.

Ben Rempe is COO of LenderClose. He can be reached at brempe@lenderclose.com.