This time last year, Callahan & Associates wrote about financial wellness being a “Big Idea For 2016.” Over the past 12 months financial wellness has evolved from being an idea to being an activity that is making the movement’s products and services work better for those who need them most.
Today, there are more than 106 million credit union members, and many of them are under the kind of financial stress that until recent years had largely spared most working Americans.
The potential for credit unions to expand their impact in 2017 is great. Employment uncertainty, stagnant or declining wages, rising costs of housing, education, and medical care — the need for what a credit union can do has perhaps never been greater for the average American household.
For example, according to a Bankrate report, only 37% of Americans could cover a $500 car repair with cash. A GoBankingRates study found more than 60% of respondents had less than $1,000 in a savings account; 21% had no savings account at all.
How Will You Respond?
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Some forward-leaning credit unions are surveying their own employees, people who often are living paycheck to paycheck. They're finding that even credit union employees are using check cashers and payday lenders because they can’t, or won’t, pay large fees for standard services, or have been turned down for credit or checking accounts, or both.
It might be difficult to admit, but these alternative sources of financial services are serving a growing need, one that credit unions can, and should, be filling less expensively, more inclusively, and in the credit union way.
Leaders in the movement are working on ways to help everyone — members and employees, alike — better save, borrow, and plan. For example, there’s Q-Cash, a provider of turnkey short-term loan tools founded by Washington State Employees Credit Union ($2.6B, Olympia, WA) that serves not only WSECU but also a growing client list of other credit unions.
Then there’s Wright-Patt Credit Union ($3.4B, Beavercreek, OH), which is working with a local startup on a solution to help smooth out the income flows for people like waiters, who must budget for fixed expenses on a variable income.
Financial stress does not discriminate ... the income for almost half of U.S. households will change by 25% in any given two-year period.
Freedom First Credit Union ($453.0M, Roanoke, VA) is gaining traction in its western Virginia market with its Borrow and Save product that combines a loan and a savings requirement. The program is geared toward lower-income members, but the principle applies to members in higher income brackets, as well.
That’s critical because financial stress does not discriminate. According to the Pew Charitable Trusts, the income for almost half of U.S. households will change by 25% in any given two-year period. That could be either up or down, but for many, it’s down.
Data And Discussions
A new approach to financial wellness has to be driven by both discussion as well as data. They inform and empower each other.
For example, BECU ($15.6B, Tukwila, WA) employs a team of four or five full-time member service reps who conduct 30-minute interviews with members to assess their situation and then encourage them to set up features like automatic savings and bill pay.
That’s one way discussion can produce both insight and action.
Data also plays a role here. Many credit unions are working on better ways to rate lending risk. They’re going well beyond the FICO score into areas such as a member’s history with the credit union, including how they’ve managed their credit and debit card usage, their employment, rental, utility payment histories, and more.
Explore what is shaping today’s financial services industry and how the credit union can compete to earn the business of tomorrow’s members. Contact Callahan today to learn more about our Strategy Lab program.
Together, analytics and conversation have synchronicities that credit unions are just now appreciating and leveraging to make the movement more powerful, to boost its ability to empower the financial health of its members, one at a time.
Callahan & Associates can’t wait to see what new thought turned into action the credit union industry produces in 2017.