How Credit Unions Can Forge A Mutually Beneficial Partnership With SEGs

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Employer sponsors are the bedrock of the U.S. credit union industry. Every credit union began with a group of individuals coming together to form a cooperative source of credit — from parishes to factories, school districts to city services  — and every employee of the select employee group, or SEG,knew about the credit union and its offerings. Often, credit unions kept office space on the sponsor property, free of charge, so cooperative members could conveniently deposit and withdraw funds, apply for loans, and make loan payments.

The single-sponsor credit union landscape began to change in the early 1980s. An economic recession forced many companies to close or relocate jobs outside of the United States. The industry faced both declining membership and diminishing sponsor generosity. Credit unions trying to strengthen themselves by diversifying typically took one of two routes: They embraced multiple SEGs under the theory that healthier sponsors could compensate for weaker ones, or they converted to a community charter.

Many credit unions have grown and prospered under a community charter; however, that strategy officially severs the special credit union-sponsor relationship, and with it much of what historically helped the credit union stand apart from competitors. Despite the successes and growing numbers of community-chartered credit unions, the majority of the industry’s institutions are available to consumers that meet specific membership criteria. According to data filed on the 5300 Call Report, of the 4,189 federal credit unions today, 3,047 of them reported having a closed-charter membership as of June 30, 2013.

The SEG-credit union relationship remains the heart of the credit union industry, but nurturing a successful, mutually beneficial arrangement is far from easy. The strongest SEG-credit union bonds are formed when both the credit union and its SEGs understand each other. SEGs must understand the credit union’s mission, how the cooperative works, and why greater employee participation benefits the credit union as well as the SEG. Conversely, credit unions that understand their SEGs and its employees’ needs are better at providing appropriate products and services. This kind of comprehensive understanding helps all entities flourish.

First and foremost, all SEGs must have a thorough understanding of what a financial cooperative is, how it succeeds, and — probably most important — why they should want it to succeed (see below: How Your Credit Union Can Help Its SEGs). If your SEGs don’t understand why they should want you to succeed, then they aren’t going to be of much help to you. If they do understand the vital role you play in their employees’ lives, then you can use them to help grow your membership roster, shore up product penetration, and recruit better-engaged participants for your board and other volunteer initiatives.

SEGs present the opportunity to position your credit union in front of a captive audience of potential members that are in physical proximity of trusted friends and co-workers to whom they can turn for a referral. There isn’t a better environment for touting the benefits of credit union ownership and participation. You need your SEGs to promote participation in the credit union, so educate your SEG leaders. According to the seven cooperative principles, members benefit in proportion to the business they conduct with the cooperative. More participation = greater return.

Which leads to the next point, all SEGs should be comfortable promoting the credit union’s products and services among its employees — be it in newsletters, on posters, or during semi-regular lunch and learns. This is an opportunity to reach members during “work” mode rather than “play” mode, which is more conducive to making decisions about financial services and products. So go ahead, promote that revamped mortgage program, auto loan special, or new insurance program. And while you’re at it, think about putting a member or two in your marketing collateral. This is the time to make your message heard, and what better way to do this than with a familiar face.

The benefits your SEG relationship provides extend beyond hard numbers, though. Every credit union wants the best board and engaged volunteers it can find. KeyPoint Credit Union in California serves several Silicon Valley companies — think Apple and Google — and is working with its SEG companies to involve SEG employees in individual committees, such as its Innovation Committee, and in its collaboration and innovation process.

“Many of our members are shaping the future … we want to tap them for where they are taking technology,” says KeyPoint CEO Brad Canfield. “We are asking them how we can take some of what they are developing in their companies or what they see across Silicon Valley and then project it here internally at KeyPoint.”

One of the biggest benefits a credit union offers is its ability to listen and understand the needs of its members. This is because they are local institutions. Their ability to think, plan, and operate locally — whether you define “local” through geographic or common bond terms doesn’t matter — is a major competitive advantage for credit unions. They are on the ground. They serve a specific field of membership. As such, they can tailor their products and services to meet the needs of their members like no other financial institution.

You'd be hard-pressed to find a way that better ties the credit union to its members than through being at the center of their medical funding. Many credit unions offer health savings accounts to SEG employees, which offer a safe, speedy way to transfer funds for medical expenditures.

In the same vein, many credit unions are also the go-to institution for retirement planning. As a trusted financial institution that has the seal of approval from employers, credit unions are offering IRAs, annuities, long-term care insurance, and other services that would require SEG employees to wade through a sea of barkers on television and in print to avoid making an ill-informed decision.

Most importantly, credit unions offer products and services that SEGs can promote as employee benefits. Low-interest refinancing on student loan debt for a credit union whose fields of membership required advanced degrees? Check. Home purchasing programs for foreign-born workers seeking the American dream and putting down local roots? Check. Financial literacy classes that help employees reach financial goals create and build a stable future? Check. These are the kinds of benefits SEGs can use as a recruiting tool to attract top talent.

Many of the nation’s largest SEG opportunities are accounted for, but that doesn’t mean there aren’t plenty of gems — both large and small — that offer many benefits for the right credit union. Looking to grow your small business services? A small employer might find value in a partnership with a credit union that offers member business loans and reasonable payroll services. Although most small companies will never reach the status of Google or Boeing, the credit union that partners with one that does will go far.

Many credit unions serve SEGs that are pillars of the community. Examples include BECU (Boeing), CEFCU (Caterpillar), and Alliant (United Airlines), but there are scores of others. By serving and developing a close relationship with these companies and their communities, these credit unions have become pillars of the community themselves itself. BECU, for example, does a great deal not only for its hometown of Seattle but also for the other communities in which Boeing assembles aircraft.

But even credit unions that don’t have the size, scope, or resources to achieve widespread recognition among the general citizenry or movers-and-shakers can become a pillar by demonstrating to all SEG members that it stands to help any who join. A credit unions whose SEG has been damaged by a natural disaster can offer a special mortgage program. Teachers’ credit unions might offer grants to school districts. Any credit union might consider how to deposit paychecks faster or offer loans speedier for SEG members.

For those credit union that serve dozens, or hundreds, of SEGs, figure out what a SEG can do for you and suggest it. For credit unions that serve a group of SEGs in a single industry, figure out what they need that you provide and tout it.

The task is to know your SEG members better than anyone else — whether health workers, teachers, company-jumping tech workers, or mobile military people — and turn that knowledge into products and services that benefit not only the members but the credit union as well. The rapport between a credit union and its employee groups is based on the understanding that what both entities want is a mutually beneficial relationship —a true win-win situation.