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Executives must know their members when a crisis strikes

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No organization, including credit unions, is immune to a crisis. And the likeliness of experiencing one is increasing.

Data breaches and cyberattacks are on the rise. Last year alone saw the highest number of data breaches ever, increasing by 33% from the previous year with more than 15 billion consumer records were exposed, according to research from Risk Based Security. Even more, the number of exposed records jumped 284% over the exposed records reported in 2018, and increased 91% compared to the same data reported for 2017.

This year has been even worse. Large-scale data breaches increased 273% in just the first quarter of 2020 compared to the first quarter of last year, according to a study from cloud computing company Iomart. The COVID-19 pandemic also led to additional breaches and cyberattacks. In July 2020, FinCEN even issued an advisory warning financial institutions of COVID-19 related cyberattacks.

More individuals also started working from home and relied heavily on tools like Zoom, which was quickly hacked. And there was also a surge in digital adoption, which consequently led to greater security risks.

Beyond cyberattacks, the industry has also seen increases in compliance violations and related fines, along with a rise in harassment and discrimination claims. Add to this the prominence of social media, allowing any type of crisis to spread like wildfire.

Credit unions must be prepared — and it starts with understanding both the types of crises that offend members the most and how demographics play a role.

First, it’s important to know how at risk a credit union really is after a crisis. According to a recent consumer survey, an overwhelming majority of Americans (84%) say that they would leave a credit union if it experienced certain crises.

But what types of crises?

The number one deterrent is if a credit union was cited for a compliance or government violation. The second most offensive crisis is a data breaches or cybersecurity fraud. More than two in five Americans say they would leave a credit union if it experienced this.

The third greatest deterrent is a discrimination lawsuit at 27%, followed by an organizational misdeed from an employee, such as sexual harassment or fraud, at 22%. The fifth at 21% is if a credit union laid off employees or closed branches.

But credit unions must dig deeper into these crises based on the demographics of their member base to truly prepare and communicate appropriately.

While the majority of men and women (84%) agree that certain crises would lead them to end a relationship with their credit union, the types of crises that would cause them to do so vary. For instance, women are more likely than men to say a bank having government violations for non-compliance would cause them to leave a credit union.

On the other hand, men are more likely than women to say they would end a banking relationship if the credit union did layoffs or closed branches.

Regardless of gender, baby boomers (those who are 56 to 74 years old) are more likely than Gen Z (ages 18-23), millennials (ages 24-39) and Gen X (ages 40-55) to say they would leave a credit union if it had government violations.

Conversely, younger generations are more likely than boomers to say they’d leave a credit union if a bank employee was involved in an organizational misdeed, such as a sexual harassment claim or fraud, or if the credit union received negative reviews/comments on social media.

Additionally, Gen Z and millennials are more likely than boomers to say they would drop their credit union if it was part of a discrimination lawsuit.

Social media matters more to some generations

One-quarter of Gen Z and nearly one-quarter (23%) of millennials would part ways with their credit union if it received negative reviews on social media, compared to just 9% of boomers.

For several years, there has been a significant criticism of younger generations, with terms like “snowflake” used for being perceived as overly sensitive. However, others have recently argued this simply is not the case. While young millennials and Gen Z may have problems with ideals appropriate to boomers or Gen X, this isn’t anything new. Younger generations have historically taken different stances on issues than older generations.

However, some argue that younger generations are more plugged into the world around them, having greater accessibility to information than any generation before them. Consequently, younger generations may have stronger opinions on issues today than before.

Regardless, it is important that credit unions understand the generational differences of what some groups may find problematic enough to end a relationship with their credit union compared to other groups. This requires knowing your member base and communicating to them during crises based on what matters most to them.

The impact of education and income

Americans with an annual household income of at least $50,000 are more likely than those with a household income of less than $50,000 to say they would leave a credit union if it experienced certain crises.

Additionally, those with a household income of less than $50,000 are less likely than those with a household income of $75,000 to $99,000 to say they would leave a credit union if it experienced a data breach or cybersecurity fraud and less likely than those with a household income of $100,000 or more to say they would leave if a credit union employee was involved in an organizational misdeed.

Looking at the impact of education, those with more education (at least some college) are more likely than those with a high school degree or less to say they would leave a credit union if it faced government violations.

There is a clear difference among different demographics on what offends them most, making it imperative that credit unions understand their member base and what drives engagement and retention.

Additionally, credit unions must have a crisis plan in place with appropriate responses and messaging for different groups. If not, they run the risk of not meeting their specific concerns and needs, which may hinder any ability to retain members after a crisis.