Today the Financial Inclusion Centre publishes a new report analysing the attitudes and behaviours of credit union members. To the best of our knowledge, this is the largest ever survey of credit union members, based on responses from over 12,500 users in 29 different credit unions across the country.
Attitudes to credit unions
The results were very impressive and encouraging for credit unions. 88% of respondents thought that their credit union provided good (38%) or very good (50%) value services. Just 1% said their credit union provided poor or very poor value services – a net positive score of 87%. Similarly, 85% of total respondents thought that their credit union’s customer service was good or very good. Only 3% said the customer service was poor or very poor – a net positive score of 82%.
We also asked members about their experience if they had applied for a loan and how well they understood the application process. Of those who had applied for a loan, 83% of respondents said they found the application process good or very good. Only 4% said the process was poor or very poor, while 12% said it was fair. This equates to a net positive score of 79%.
In terms of overall satisfaction levels, 81% said they were extremely satisfied or very satisfied with their credit union. Just 6% were slightly satisfied or not at all satisfied. This gives a net positive score of 75%.When asked if they would recommend their credit union to a friend, 84% of respondents said they would be likely or very likely to recommend with only 11% said they would be unlikely or very unlikely to recommend their credit union. This gives a net positive score of 73%.
A recent Which? survey found that mainstream banks average overall customer satisfaction score was 68% (these surveys are not directly comparable but they do set the impressive results achieved by credit unions in context).
The analysis also found that these credit union members scored well compared to the general population on a range of self-reported financial capability measures, saying they feel they have their finances under control and are confident in dealing with money matters.
However, analysis of the questions on actual financial knowledge (rather than self-reported answers), paints a more mixed picture – a large proportion of respondents either got the wrong answer, or didn’t know the answer to some fairly basic questions. A particular concern is the number of respondents who were not able to choose the best deal on a loan, or were unsure about what to consider when taking out a loan. This should be an area of focus for financial capability interventions.
Opportunities and challenges
The research also demonstrates the importance of the broad range of financial services being delivered by these not-for-profit financial providers, with the majority of respondents using their credit union as an affordable and fair source of borrowing – an invaluable alternative to high-cost credit such as payday loans, rent-to-own firms and door-step lenders.
If the credit unions covered in this report are representative of the wider credit union sector, the findings suggest very strongly these important not-for-profit lenders should be able to thrive. They are held in high regard by their members, customer service generates high levels of satisfaction, and large numbers of loans are being made.
But, despite everything they appear to have going for them, it is clear that (in England and Wales at least) credit unions and other community lenders have, so far, played a marginal role in meeting the financial needs of consumers and local communities.
If credit unions (and other community lenders) are to play a major role in tackling financial exclusion and providing more consumers with a viable, sustainable alternative to high cost lending, we need to understand why the impact has been so marginal. This is even more critical with the growth in fintech and big data. Financial exclusion is likely to grow as it becomes even easier to identify low profitability/ high risk borrowers.
Tougher regulation has been very effective at constraining the ability of high cost payday lenders to target vulnerable households and, in doing so, has cleared space for community lenders to thrive – for now. But, the same fintech and big data, which will exacerbate financial exclusion, allows high cost lenders to develop new business models to target vulnerable households.
The challenge now is to build capacity in the community lending sector. Our analysis at the Financial Inclusion Centre suggests that much work is needed to improve the economic viability and sustainability of the sector without losing the values of the sector. The key areas to focus on are:
- improving the efficiency of revenue generation;
- developing new distribution channels and shared platforms (including harnessing fintech and data for socially useful purposes) to generate economies of scale;
- improving back office infrastructures to reduce costs and improve efficiency;
- improving governance and risk management capabilities; and
- developing new ways of channeling long term patient capital into the community lending sector.
We look forward to working with the sector itself and other stakeholders to build the capacity of these vital lenders so they can make a real difference to the financial lives of greater numbers of consumers.
The summary report can be found here: An Insight into Credit Union Membership – Barclays CU Programme Summary Report final
The full report with details of results and methodology can be found here: An Insight into Credit Union Membership – Barclays CU Programme Full Report final
NOTES: There are currently 442 credit unions across the UK with just over 1.5 million members accessing a range of saving accounts, affordable loans and other financial services.
The membership survey was undertaken as part of the wider Barclays Credit Union Programme that will have invested £1 million over four years to support the expansion of the credit union sector to improve its effectiveness and sustainability and reach more financially excluded households.