In 2012 I compiled “23 Credit Union Truths” for this blog site and we later discussed them on the Current Issues in Credit Unions podcast.
Truth number 9 was “You can spend $2 million pleading with your members to change their behavior. Charge a $2 fee and they change overnight. In other words, $2 can often accomplish what $2 million cannot.”
In the podcast, I gave the example of a statement fee. I joked that, as the head of marketing at my credit union, I had spent thousands of dollars encouraging, prodding, even bribing our members to turn to electronic statements. I may have had a handful of members heed our cry. Then we implemented a statement fee and – voila – 10% of our checking account holders changed to electronic statements. Hence my pithy assertion that two dollars can often do what two million cannot.
I realize that most credit unions are reluctant to broach the subject of fees after what happened last year to some of the big banks, a certain mobile service provider and a DVD rental company. But I’d like to tell you about our experience implementing a fee in this environment. I’d like to talk with you about it because I think we are all going to need to be looking at these things. I believe it will be difficult for any size credit union to thrive with the loan losses, NCUA assessments, rising operational expenses and downward pressure on net interest margin without taking a long and hard look at non-interest income.
Before we implemented our $2 per month statement fee, we had many discussions about what types of fees were appropriate and acceptable during this difficult economy. We decided that any fee we looked at must be:
- Reasonable and justifiable (as in, covers a direct cost)
- A step toward changing behavior for the better
If you look at a statement fee – it is all three of those things. All told, statements cost about $2 to mail – with paper, printing, processing and postage. By charging a corresponding fee to cover those costs, you are taking a cost that had previously been spread amongst all members and assigning it only to those members who use that service. In other words, members who get their statements electronically are no longer subsidizing those members who get their statements through the postal mail.
It is certainly a fee that members can avoid, by signing up for e-statement delivery.
Lastly, this fee helps change members’ behavior for the better. Getting statements electronically is more secure, better for the environment and more efficient for the financial co-op.
We implemented the fee one year ago. I’d love to tell you that everything was wonderful, that our building was like a movie montage with beautiful music playing in the background and cartoon butterflies and deer roaming the halls. But it wasn’t. We had our share of angry members with whom our staff and management had long conversations. It isn’t easy to tell someone that they must pay for something that they have gotten free for decades.
But in the end, almost 3,000 members stopped getting paper statements. When we started this process, 51% of our members received their statements via the postal service and today, only 36% of our members receive paper statements. We decreased our expenses and increased our revenue. And most importantly, very few members closed their accounts. As a matter of fact, our checking account numbers grew over this period of time.
I’m not writing this article to encourage credit unions to implement a paper statement fee. But I know that many credit unions are struggling with the tremendous hits we are taking to our profitability. I just wanted to give you one case study.
Shari Storm is Senior Vice President and Chief Marketing Officer of Verity Credit Union and is the author of the book “Motherhood is the New MBA”, available here: http://www.amazon.com/Motherhood-New-MBA-Parenting-Skills/dp/0312544316/ref=sr_1_1?s=books&ie=UTF8&qid=1314126290&sr=1-1