How Credit Unions Can Identify and Serve Unique Markets

Credit unions are known for their community-based approach and member-centric services. While larger banks are designed to cater to a broad spectrum of customers, “being all things to all people,” credit unions can have a distinct advantage by serving specific niche markets that require customized products and services designed specifically for that niche. The recent trend has been credit unions trying to expand their market through community charters; some have succeeded in this charter change. But for most credit unions, having a niche market strategy is a strategic move that will allow them to differentiate themselves from the competition, foster stronger member loyalty, and boost their financial health and sustainability. Below, I will explore how credit unions can identify and serve a niche market.

• Analyze Demographic Data – One of the first steps in identifying a niche market is to analyze demographic data within your target area. Credit unions can use data from the U.S. Census Bureau, local government reports, or internal member data to gain insights into the population’s age, income levels, occupation types, and other relevant factors. By examining these demographics, credit unions can identify groups with unmet financial needs or unique preferences. When looking at this data, look for unique financial needs or service gaps not being met by the banks.

Suppose the data shows a growing population of young professionals in your area. In that case, consider tailoring services and marketing efforts to cater to their financial needs, such as student loan refinancing, mobile banking apps designed for tech-savvy users, a first-home mortgage product, or a tiered “down-payment” saving product intended to reward the member as they save for a down payment on a home purchase.

• Conduct Member Surveys – Existing credit union members will provide insights into potential niche markets. This is done by conducting member surveys or focus groups to identify your current members’ everyday needs, pain points, frustrations, and desires in managing their financial journey. Ask questions about their financial goals, preferences, and any gaps they perceive in your current offerings.

Steve Jobs once said, “Some people say give the customers what they want, but that’s not my approach. Our job is to figure out what they will want before they do. It’s not the customer’s job to know what they want.” Consumers only know what they see in the market. The credit union needs to become the expert that leverages what it knows to innovate products and services to meet these unique consumers’ unseen needs.

Suppose a significant portion of your members are interested in sustainable banking practices. In that case, consider offering eco-friendly banking options, such as green loans or sustainable investment portfolios, to target this niche market effectively. Remember, this survey or focus group is not to understand how well you are serving them now but to discover what they want from you outside your existing product and service offers.

Or, a credit union might find many workers (police, fire, hospital, municipal, restaurant, and retail) that work atypical schedules. Designing branch and call center hours and resources to help them manage their loan and deposits during the off hours could differentiate your credit union.

• Research Market Trends – Staying updated on industry trends and market developments is crucial for credit unions seeking to identify niche markets. Monitor financial news, reports, and emerging consumer preferences. Pay attention to evolving financial technologies, such as digital wallets, cryptocurrencies, or blockchain, and evaluate whether there is a demand for such services within your membership base.

One strategic leader should be responsible for being the “innovation officer” in their job description. In this capacity, they should bring new product and service ideas and innovations to the strategic leadership table for consideration. But, the caution here is not just to follow “best practices” but to figure out how to take them and improve on them. If all a credit union does is use best practices, they quickly become just average, not unique or niche-focused.

• Collaborate with Local Businesses – Establishing partnerships can open opportunities to serve niche markets. If we look at the heritage of credit unions, this kind of collaboration is part of its DNA. Every credit union was innovated to serve the needs of a specific group, a labor union, teachers, manufacturers, municipal workers, telephone employees, etc. This strategic effort requires the credit union to actively engage with business owners, entrepreneurs, and the C-suite of larger organizations to understand their business’s and its employees’ financial needs.

In these discussions, the credit union might discover a demand for small business-related financial services, such as tailored business loans or merchant services; you can develop products specifically designed for these niche markets. Or you may learn that an employer has a significant number of employees that are paid via payroll checks and would find benefit in having a partnership with a credit union that would easily provide these employees with a free checking account with direct deposit and a debit card to give them easy access to their deposits. Or you might find a business with a high deductible health insurance plan paying high fees for the employee’s HSA accounts and offering them a lower or no-fee HSA option.

• Collaborate with Local Non-Profit Organizations – Identify nonprofits serving unique, marginalized, or underserved markets. In this identification process, consider the presence and visibility of the non-profit. Ideally, the credit union will want to align with non-profits that have a significant presence in the market and a following by community leadership. In these conversations, the staff, board, and clients of these non-profits will help you identify products or services that are missing or are difficult for them to access or adopt.

A collaboration like this might be a community food cupboard that is serving the needs of marginalized people in a food desert or cannot afford to buy groceries. The credit union could provide business banking services for this non-profit but also provide their clients with financial access and education to help them find a pathway to financial stability.

• Leverage Member Feedback – Active engagement with members can help credit unions identify niche markets by listening to their feedback and suggestions. Encourage members to share their thoughts on how your institution can better serve their unique needs. Implement a feedback mechanism that allows members to provide input through surveys, suggestion boxes, or online forums. Also, have a listening loop where the comments made about gaps or missing products or services heard on the frontline are escalated to the decision/innovation table for consideration.

• Explore Social and Cultural Factors – In some cases, niche markets may be based on social or cultural factors. Research the diverse cultural communities in your service area and identify any financial services gaps that could be addressed.

You might find in your market a growing immigrant population; consider offering services like multilingual customer support, international remittance options, or financial literacy programs tailored to their needs. In some markets, there may be a high percentage of migrant workers who would find benefit if their banking needs were tailored to their seasonal work but also need the ability to send money to relatives in other countries. The seasonal nature of some jobs is not unlike the needs of teachers and the reason many credit unions were started.

Unlike bigger financial institutions that are designed to serve the masses, credit unions have the advantage of being flexible and adaptable enough to cater to the unique niche market needs. However, the work to identify and meet these unique must be intentional and driven by purpose. It is easy to “look like every other bank,” but the real future for most credit unions is in building a niche market sales and service strategy. By doing so, a credit union can differentiate itself from the competition, foster member loyalty, and thrive in an increasingly competitive financial landscape.