Originally published November 27, 2012 on CUinsight.com.
For most people, December begins a time of reflection. We spend time thinking about our successes during the year and celebrating our accomplishments. At the same time we lament the things we did not do well, and often try in the last month of the year to undo or correct our mistakes as best we can. We also engage in a little housekeeping, cleaning up in preparation for a new year.
Credit unions go through a similar year-end process, too. We celebrate our financial performance (if it is worth celebrating), and we seek to correct certain mistakes through the establishment of new strategic objectives. We also clean house.
Part of that annual reflection and clean-up process touches our membership roles. In December, we begin to identify members who have faded away, those that are nothing more than an empty account number, and write them off. We don’t often see this housekeeping issue as an opportunity for reflection, but we should. More specifically, annual membership purging is an opportunity for reflection on a failure.
As membership growth has finally become a national issue and objective, it is vitally important that the fairly large numbers of accounts that are officially closed every December be given adequate attention. We should take note of not simply the accounts themselves, but the reasons it takes so long for such “fading away” accounts to come to the attention of credit union management.
In this day and age of in-depth data and improved data access, it seems reasonable to assume that any credit union is capable of taking a more frequent look at account usage trends, isolating those members whose account relationships are on the downswing, and working to salvage them before they become candidates for purging.
Certainly some members are difficult to keep engaged in a credit union relationship, such as those joining by way of indirect lending or those that have moved away. However, not all dead accounts fall in these categories. Even indirect accounts and moves are not insurmountable roadblocks to account retention. Credit union management must commit to slow the growth of dead accounts by better understanding and reacting to the forces that drive people to move their business elsewhere in the first place.
In our industry, we track member growth on a net basis, meaning new members opening accounts less those that closed their accounts. If your credit union has any desire to grow–ensuring that what you gain in new members is not lost through ineffective management of existing members–then staying on top of the trends that indicate pending account closure should be priority one.
As December reflection makes way for January resolution, make it point at your credit union to do something about the failure that is the annual purging of accounts. We suggest these four actions at a minimum:
- Develop an organizational objective/mandate to grow membership. Without a mandate to grow, there is no incentive to tackle account retention.
- Identify the shared characteristics of the accounts you close due to dormancy and of those accounts that have notable, declining activity. Identifying shared characteristics will likely tell you something important.
- Understand the real motivations for closures and declining activity. If someone says you are “inconvenient,” seek to understand what they mean, and whether this perspective can be changed. If they don’t know you, as is common to many indirect lending relationships, understand why they failed to hear and act on your account development messages once they received their loans.
- Develop strategy to respond to the challenges identified in your research of characteristics that are common to closed accounts. Seek out and implement more effective, compelling means of communicating brand messaging and opportunities to these types of account holders.
We have seen success in membership growth on an aggregate basis in 2012, but approximately 47% of all credit unions suffered a net membership loss during the year– and the average growth rate is less than 1%. The future of the credit union movement is only guaranteed if we have a viable, strong, and growing membership, which requires we never make it easy for the members we serve today to ever decide to leave us behind.