The first measure of fourth quarter GDP released last week announced a sluggish 0.6% growth, below economists' estimates. Despite this economic slowdown, small businesses still represent half of all domestic economic activity (Office of Advocacy, Small Business Administration). As major banks pull back from the market due to credit issues, credit unions have an opportunity to not just take advantage on the lending side, but also on the deposit side.
If your credit union decides to pursue business services program, there must be 110% commitment from all levels of the organization. Your organization will need to address certain issues that arise. Credit unions who have recently formed their own programs indicate in interviews that the major issues arise at the branch, IT, and personnel levels.
Branches: Business Owners have More Complex Needs
With a business services program, you will see increased traffic in your branches. Many small businesses have cash and check deposit needs daily. Often times, these needs can tie up member service representatives for a significant amount of time. Small businesses involved in many consumer transactions per day will have a large number of checks to process, so branches should expect a need for some batch processing, and may also have more complex transactions involving foreign cash and currency.
Technology: Will it Work with New Products?
When implementing new products and services, compatibility with your core system is a must. Several credit unions stated that their current systems could not handle the fees that are associated with some business checking accounts. These types of fees can include per transaction or a tiered system where a flat rate is charged depending on the amount of checks deposited per month. Often times, credit unions must either expand the current offerings of their core system or partner with a third party to gain added functionality.
Personnel: Increased Need for Expertise and Training
Your staff's expertise and energy can make or break a new program. It is an absolute necessity to have the full support of the board and management team to get a program off the ground. Experience is key in developing a business services program as it is a significantly different environment from consumer financial services. Most credit unions take the route of hiring former commercial bankers, from both the product development and lending sides. Along with new hires that have experience, the front-line staff will need significant training as well since they will be the first contact to many of these small business owners and must work with them differently than the typical member.
Because of the organizational commitment that is needed to implement small business services, it is important to keep these issues in mind to make the process as smooth as possible. To learn how credit unions address the above issues and others in their business services programs, join us for “Offering Small Business Accounts: Is it the Right Move for Your Credit Union?” a webinar brought to you by Callahan & Associates.
Is starting a small business services program the right fit for your credit union?