Beyond Affinity: The Credit Union Lending Advantage

In recent years, some credit unions have been accused of developing strategies that are “bank-lite.” Now, we are seeing the reverse: banks developing “CU-lite” strategies.


On November 15, 2006, Bank of America announced a move into affinity banking. Their press release described the decision as a “game-changing innovation [that] marks the first time in financial services a bank offers a broad complement of financial services to partner organizations whose members share a strong common interest or passion.”

This “innovation” should sound familiar to credit unions that were founded on a similar premise, yet in many cases are struggling to convey the benefit of the membership bond.  As this line between bank and credit unions continues to blur, credit unions must find new and different ways to demonstrate the credit union difference.  Or, as a credit union executive posted last week in response to our story about City First Bank in Washington, DC:

“Indirectly this story highlights the downside of CUs becoming more bank-like--creating room in the market for for-profit institutions to establish social responsibility bona fides. Collectively we need to be thinking of how we can do bold new things to create value. Price and service alone are not going to see us through!”

Beyond Affinity: Creating Real Value
As these anecdotes highlight, now is the time for credit unions to get the message out about the true value of credit union membership. While B of A might be marketing “affinity” as the new fad, to most credit unions that’s old news.

Today, credit unions go beyond what B of A calls affinity (at best - special rates; at worst - a cute logo on the credit card or check book) by developing products that truly reflect the needs of their affinity members. Some examples include:

  • Spokane Teachers Credit Union ($833 million in Spokane, WA) like other education-based credit unions has developed a line of credit for its educators that permit loan payment moratoriums during the summer when teachers are not receiving regular pay. But then the credit union went one step further. Discovering that a number of its members were borrowing money to buy generators in order to work in Alaska’s Bering Strait supporting gas and oil exploration, the credit union, using the teacher model, developed skip-payment loans during the winter months when weather conditions prevent work.
  • First Entertainment Credit Union($594 million in Hollywood, CA) offers a suite of green-loans including DRIVEgreen, RIDEgreen, and BUILDgreen as their membership becomes increasingly environmentally-conscious. The RIDEgreen loan is targeted at members interested in avoiding the congestion LA has become famous for, by providing loans for “small, eco-friendly, non-traditional personal transportation” including the Segway.

Beyond Price: Escaping the Commodity Trap
There are some who assert that loans are just another commodity product with most members merely seeking the best rate. These observers ask if there really is a need for a credit union option in an economy where lenders shower households with credit offers. The data suggest that there is a challenge and an opportunity here. Certainly price matters, and in many situations credit unions offer a better deal. However, the credit union examples above, and many others, show that it’s possible to get beyond competition on price by creating unique products that fit the specialized needs of their membership.

To understand how other credit unions are developing new loan products to meet the specialized needs of their membership base, join us for our upcoming webinar, “Avoiding the Commodity Trap: Leveraging the CU Lending Advantage,” brought to you by Callahan & Associates. The event will provide insight and inspiration to any credit union executive looking for innovative ways to create real value for their members.




Nov. 27, 2006


  • CU*Answers software, CU*BASE offers an entire suite of features geared toward credit unions really knowing their members and forging communications paths to give them all feeling of community and belonging. Credit unions need to perpetually demonstrate that they are superior to banks - members otherwise don't know or appreciate the difference.
  • Some great examples here of credit unions' ability to get close enough to their members to understand what is going on in their lives and respond with truly meaningful products and services. The human quest is to be understood and I firmly believe that credit unions are much better positioned to meet that need on a sustained basis than for-profit institutions. Enough with the doom and gloom, there is still so much untapped opportunity.