Members Returning Home

The English poet T.S. Eliot may have said it best: “The end of all our exploring will be to arrive where we started, and to know the place for the first time.” Members are bringing funds to credit unions in ever-increasing amounts. For the 10 years from 1992 to 2001, the annual growth of insured credit union savings was 7.07%. During the past 21 months the rate has been over 15%. Most of these funds are from existing members — new member growth during this time has only been 3%.

 
 

The English poet T.S. Eliot may have said it best: “The end of all our exploring will be to arrive where we started, and to know the place for the first time.” Members are bringing funds to credit unions in ever-increasing amounts. For the 10 years from 1992 to 2001, the annual growth of insured credit union savings was 7.07%. During the past 21 months the rate has been over 15%. Most of these funds are from existing members — new member growth during this time has only been 3%.

Why is this occurring? What does this mean for credit union strategy?

Flight to Reality

While the newspapers focus on the excessive expenses and self-dealing of corporate CEOs, it is well to remember that many on Main Street America were also enthralled by dreams of easy and ever-increasing wealth. Recent college graduates working at dotcoms talked about being millionaires, and working couples in their middle years were exploring early retirement and living off their 401(K) nest eggs. Consumers were looking for the latest double-digit growth mutual fund and financial sales people were happy to oblige this belief in quick success.

Now, as the stock market continues its third year of negative returns, balance is returning to people’s expectations about investing. Consumers are reassessing their risk tolerance and revisiting credit union options. The result is a continuing unexpected — in most cases unplanned, and in a few instances, unwanted — inflow of savings.

As members bring their savings home to the credit union, is there a larger opportunity than just more funds?

Seeing Value More Clearly

“Trees don’t grow to the sky” is the phrase often used to caution consumers that stocks go up and down in value. The message is not only about a fund or the stock market. It is a broader realization that value entails risk, reward, fees and reliability that is a cycle of events, not a straight-line outcome. The cooperative model may build wealth more slowly than some other corporate entities, but because credit unions are member-owned, there is only one group benefiting from success — the user owners.

Can this value be demonstrated more clearly now that members may be more open to looking at their credit union relationships?

I believe this is a timely opportunity, because in many ways credit unions — traditionally not in the public eye and owing to their evolution over the past decade — are a secret waiting to be discovered.

Local and Networked Value

The first level of benefits is what members can receive — in dividends or dollars saved — from their credit union. To communicate this may mean paying more than a credit union has to pay for savings to demonstrate that cooperatives meld both market requirements and member needs. This is the time to take back some of the $3 trillion in money market mutual funds, which merely pass through market rates and add very little value for consumers. Now money market mutual funds average 1.50% or less and most credit unions can afford to pay 2.0% on similar accounts. Sharing the benefit is easy.

The same philosophy could be used for selected loan promotions or other bundled pricing options to emphasize the cooperative value-creating process.
But the biggest innovation and level of benefit, and the one most often overlooked, has been the creation of “networked value,” primarily in the form of convenient and low-cost access to credit union products through national cooperatives.

Today any credit union that belongs to Co-op Network offers 12,813 surcharge-free ATMS in 49 states to their cardholders. No other financial institution can match this network.

Another example of convenience is the CUDL program, which offers “credit union value and dealer convenience.” This network of 1,578 dealers and 216 credit unions in nine states gives members the credit union’s preferred loan rates with the ease of closing the loan at the point of sale – the dealer. Other networks offer this value in smaller areas, but the gain is the same, low credit union rates and time saved in the transaction.

Another emerging network is the shared service centers, which now offer more than 780 walk-in branches for deposits and withdrawals. As local credit union networks integrate through technology, there will soon be a physical credit union presence in every state and several foreign countries.

More of these CUSOs are in development in areas such as mortgage lending, loan participations, tax preparation, and broker dealer services.

For the credit unions today that belong to these networks, their “points of presence” far exceed that of any other financial alternative.

Don’t Overlook the Internet

Credit unions have embraced the Internet as a full customer service channel. In many instances, credit unions offer more complete self-service solutions than any other organization—and continue to deploy new applications.

This evolution is shown in the concept slide below from DigitalMailer, a CUSO that helps credit unions manage their messages for members more effectively.

 

 

 

Feb. 3, 2003


Comments

 
 
 
  • Well said ! Thanks for providing the high level and strategic look at the CU Industry.
    Anonymous