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International (Global) Strategies | Articles

How the decline of brand loyalty impacts community banks and credit unions

Regardless of the sector, a decline in brand loyalty is marked by two major features: an increase in both choice and customer expectations.

The preference to pay in our own currency is unique to us
The preference to pay in our own currency is unique to us

Credit unions and community banks are unique among the spectrum of financial institutions as historically users felt a strong personal connection to their brand. Afterall, these banks were often willing to serve families and small businesses at affordable rates when larger institutions refused. While this sentiment may remain in many regions, the prevalence of these locations has not. In fact, about 20 credit unions close every month.[1]

How financial institutions rely on brand value

Brand loyalty is valuable regardless of the industry but in the financial sector a positive association with a particular institution can lead to a commitment that spans generations. Cultivating this experience was easier in the past where interactions were mostly in-branch and physical proximity limited where customers could bank. This made it easier to both attract and keep clientele.

Why customers lose brand loyalty: An increase in choices

Regardless of the sector, a decline in brand loyalty is marked by two major features: an increase in both choice and customer expectations[2]. The first point may confuse financial professionals, as the number of banks in America has been in decline since 1981[3]. However, increased mobility and online banking mean that customers are no longer limited to the financial brands nearest to them and are also able to consider fintechs and other apps with no physical locations. Mobile apps for investing, saving, insurance and payments are worth billions each in the US[4] – and growing. Their ease of use, convenience and favorable pricing make them attractive to customers, even those who were once loyal to their local institution. Transparent pricing and the wide array of online information means customers no longer need to exert much effort into researching their options. The information is readily available and it’s easier than ever for customers to select a provider based on their specific needs or price point, without ever stepping into a branch. 

Why customers lose brand loyalty: Rising expectations

Brand loyalty is also in jeopardy due to the sharp rise in customer expectations, which have further intensified with the pandemic. Because of the features and functionality experienced in other sectors, like ecommerce, customers now have high expectations for companies and demand personalized service on their own time. According to Forbes, consumers consider themselves loyal to brands based on their ability to deliver convenient service with the option for self-serve functionality. Additionally, use of the latest technology is critical to nearly half of customers[5].

How community banks and credit unions can increase brand loyalty

The answer is simple: give customers what they want. Of course, such action is easier said than done. Top brands and fintechs have the luxury of external investment and large technical teams while many financial institutions must consider legacy systems and complex regulations, among other challenges. However, banks don’t need to rebuild their entire business to succeed. Even small adjustments can help stop customers from leaving for another provider: 

  1. Partnering with an established provider for new offerings is easier and costs less
  2. Incorporating customer values can attract new patrons
  3. Offering services online instead of in-branch only[6]
  4. Emphasizing community support is more important to customers post-pandemic
  5. Mirroring the positive experience customers have in other industries

These considerations can help small institutions increase relevancy and loyalty among clientele. During this challenging time in banking, community banks and credit unions cannot simply rely on the strategies of the past and hope for the best – a change is necessary.

About Western Union Business Solutions

Western Union Business Solutions is a global leader in foreign exchange services and international payment enablement for credit unions and community banks. Our financial strength, technology and experience help facilitate new revenue opportunities for over 1,800 financial institutions globally. With hassle-free implementation, we offer a world-class, 24/7 digital platform where customers can send and receive foreign funds with only a few clicks. Each institution is offered a customized solution and dedicated support, with access to payments in over 130 currencies in more than 200 countries/territories. This simple, white-labeled addition can add not only a new revenue stream to any institution but also a way to help increase customer satisfaction and attract new business.

Contact a financial institution's expert

[1] Source: Credit Union Times: https://bit.ly/3x9eHoX

[2] Source: Wired https://www.wired.com/2004/11/brands/

[3] Source: Federal Deposit Insurance Corporation: https://bit.ly/3y4Zc1l

[4] Source: Forbes: https://bit.ly/2UUyJoU

[5] Source: Forbes: https://bit.ly/3h6reE1 

[6] Source: Believe in Banking: https://bit.ly/2TlP3yv