Jeff Stephens asked on his blog why credit unions voice their opposition to being called banks, but rarely do banks express any opposition to the mix-up. I have a theory on why that is.
To the average consumer, there is no significant difference between a checking account at ABC Credit Union versus ABC Bank. Even from a marketer's perspective, the most common differences between the products are fees and minimum balances. In an effort to differentiate their products, which are virtually identical in consumers eyes, credit unions turn to their organizational structure & culture hoping to strike a chord witih Americans who like to support the little guy, the hometown hero.
Banks, on the other hand, tend to focus on their convenience features, such as technology-aided banking, branch locations and breadth of services. Big bank marketers don't lose much sleep when consumers lump credit unions into the same category as banks because large banks don't typically promote their org structure or culture as a value-add to customers. In other words, there isn't any downside for the banks when consumers view credit unions and banks through the same lense.
Credit unions fight hard to promote differences between themselves and banks, often through the use of different jargon to describe customers versus members and checking versus share draft accounts; however, there aren't really any significant differences between the products or the human beings who use them. The real difference is in the organization naming conventions (bank versus credit union), some of the lending practices, certain fee structures and their tax statuses. But at the end of the day, I am not sure that the average American banking consumer really pays much attention to those differences.
Consumer banking is becoming a commodity in America, especially as people do less of their banking - or, as Sarah Cooke might suggest, "credit unioning" - in branches and more of their banking online. It's the rise in popularity of online banking that is allowing financial institutions like ING Direct and Ally Bank to grow so rapidly.
So my position is similar to Sarah Cooke's. Let's focus less on the organizational status and more on the products & services. In the end, the financial institutions who offer the products people want most, at the best price and with the most convenience are going to come out on top, regardless of their organization structure or whether they have the word "Bank" or "Credit Union" in their names.
P.S. I should exclude credit unions who serve unique fields of membership that large banking institutions often do not cater to. They serve a special niche in the financial services industry and do have a compelling story to tell.
Mar 17, 2010 • by Jason Sherrill
