Credit Unions Turn SVB Banking Crisis Into Master Class on Trust

For credit unions, trust has been the glue binding financial institutions and their financial services together.

But as Brian Scott, chief growth officer at PSCU, told PYMNTS, “Trust is one of those things that you earn every single day — and it takes only one event to lose that trust.”

Confidence in the banking sector was sorely shaken in the wake of the collapses of Silicon Valley Bank and Signature Bank. The fallout extends to smaller financial institutions, including CUs, even though they had nothing to do with the seismic events that transpired during historic and fraught several weeks in March.

“There’s been a perception,” Scott said of the CUs, “that they’ve been in the same boat” as the banks that folded in a matter of days.

Moving From Perception to Reality

It’s critical for CUs and community FIs to communicate to account holders that these bank failures — the second- and third-largest in history — happened because SVB and Signature were focused on certain niches (such as technology, startup lending and even cryptocurrency) and billion-dollar players where credit unions are not that deeply focused.

“The businesses that the credit unions are focused on are more mom-and-pop shops,” said Scott.

Against that backdrop, CUs need to convey a simple, powerful message: These smaller FIs have built their business models around individuals serving individuals. They’re not banks serving small numbers of large companies, he said.

Credit unions and community banks can take a proactive approach to reassuring account holders, and transparency should be core to that strategy. Many account holders may not have known that they’ve been insured for up to $250,000. Most consumers don’t have that much in individual accounts, but many business clients might, and reaching out to remind account holders that their money is safe can prevent “deposit flight” to larger FIs, he said.

There are several channels through which CUs can bolster trust — some of them weren’t even available just a few years ago. Video remains a valuable option, said Scott, and many CUs have adopted a multi-pronged approach that uses social media components. CEOs have a broader platform than they once had to become the visible face of the company and talk about the ways and means CUs are protecting their members’ interests.

“These face-to-face communications are, more than ever, really impactful,” he said.

Asked by PYMNTS whether outreach strategies must be fine-tuned, or even drastically differentiated, between individual and corporate clients, Scott contended that there are many similarities between mom-and-pop and individual consumers.

“The smaller businesses feel like they are consumers doing business with the credit union — so the messages can be standardized,” he said.

Data underpins it all. As the focus shifts away from account safety, CUs will need to reassure members that their data and privacy are being zealously defended.

As the dust from the past few months settles across the banking sector, said Scott, the opportunity is there for CUs to keep doing what they do best: help members navigate various new stages of their financial lifecycles.

“There needs to be an ongoing communication around financial wellness,” he said.

By being fully invested in guiding members through investing, saving for retirement, building college savings and getting mortgages, that essential trust gets rebuilt — and can be stronger than ever.

“That’s why credit unions are here,” Scott told PYMNTS. “It’s about people helping people — and that needs to be the keystone that is part of every message.”

“This can be an incredible opportunity for all credit unions,” he added.