The cost of switching is an age-old concept, applying to essentially every industry. Humans are creatures of habit and even when people are aware of a better alternative, they will not switch to a new product or service due to the expense or effort it would require. With something as simple as household products, there is little to no cost of switching. If a shopper routinely buys JIF peanut butter for the kids' PB&J sandwiches, but at the grocery store that week Skippy is on sale, it’s likely they’ll go with the cheaper alternative. The cost of switching here is low... peanut butter is about $2.75 (or $4 if you're a health nut who prefers organic) and if the family doesn’t like the Skippy, they’ll just switch back to JIF next time. However, there are far larger barriers when switching to something like a new cable company, insurance provider, or financial institution.
In the financial industry in particular, the perceived cost for members to switch where they bank is rather high. Switching financial institutions can be a tedious and grueling process, and there is also a risk when it comes to security. For these reasons, many are hesitant to switch FIs even if they want to. So what can your credit union do to lower the friction of switching? Offer automated account switching services that will make the process easier, and more secure.
Convenience is key when it comes to account switching and many automated account switching providers offer self-service features so members can transfer their information at home, without the help of a member service agent. Self-service is an important feature to members, and many are eager to use self-service platforms over other in-person channels. After all, an astonishing 67% of members prefer self-service over communication with a members service representative. Self-service channels won’t replace your credit unions valued MSRs, but they will allow for greater efficiencies for both staff and members. For account switching in particular, self-service is a great tool because members should have all the information they need to successfully switch to a new FI when using an intuitive automated account switching platform.
Those who want to switch FIs are often deterred by the complexity. A survey from Javelin revealed that 21% of members cited the difficulty of switching as the primary reason they decided to stay with their current financial institution. Automated account switching platforms that simplify the process will entice members to switch, while simultaneously taking the burden of manual account switching off the member.
Millennials, in particular, are eager to switch. Those aged 25-34 are 2 to 3 times more likely to close all accounts with their primary financial institution when compared to other age groups. This group is already inclined to switch financial institutions, and if your credit union is able to offer simplified account switching, it will make their decision even easier. The Financial Brand published an article looking at what motivates Millennials to switch FI's:
"As the largest generation in American history, Millennials are a crucial market segment for financial institutions to attract, engage and retain. And while most Millennials don’t even remember a time before the Internet, smartphones, or social media, this segment seems to crave more from their bank or credit union than generations before them... the vast majority of Millennials (roughly eight out of 10, or 83%) would switch banks if one offered more or better rewards (e.g., high interest rate on checking, cash back on purchases, ATM fee refunds) than another."
Understanding that this generation is a prime market for targeting self-service switching platforms for simplicity's sake can refocus your marketing efforts to that message and grow your membership base.
Members like the idea simplified account switching, yet some worry that it’s not secure and their private information or finances might end up in the wrong hands. However, many automated account switching platforms go the extra mile when it comes to security. ClickSWITCH, for example, follows strict guidelines from the National Institute of Standards and Technology, the Office of the Comptroller of the Currency, and other relevant agencies. They also completed an SSAE 16 SOC 1® Type II engagement, which is the most widely accepted compliance initiative, providing service organizations an independent evaluation to compare their internal controls and processes against information technology and risk management frameworks, such as COBIT and COSO.
Fewer than half of all new checking accounts remain activate 90 days after acquisition. This is frustrating for credit unions who allocate a lot of their budget to promotional and marketing expenses to bring in new members, only to see their accounts go dormant. On the flip side, automated account switching has a much more efficient onboarding process. It can take less than 10 minutes for members to switch and does not require a call to their former FI. If they have their account information ready, the process is painless and they get real-time confirmation when the switch is complete.
The improved onboarding process alone can help boost checking account profitability by an average of $212 per member annually. This is made possible through greater efficiencies within automated account switching as well as increased opportunities for cross-selling. For credit unions that are concerned about the expense of an automated switching platform, a change of only 1% in retention can fund a comprehensive onboarding program. In the end, account switching solutions save staff time, creates seamless member onboarding, generates more revenue and ensures your credit union is the member's primary financial institution.
Switching financial institutions is a daunting process for members, so much so that it prevents them from doing it. An automated switching platform will speed up the onboarding process and give members peace of mind knowing that their recurring payments and other direct deposit items can be transferred securely and in a matter of minutes. A lengthy and friction-filled switching process will not give members confidence in their new credit union. With automated account switching members can launch their new accounts without a hitch, leading to greater efficiency and a sticky relationship with your credit union. The perceived cost of switching financial institutions for members is high, but your credit union can prove to them that it's actually quite painless.