Steep Incline: Maintain Speed

In today’s competitive marketplace, credit unions are faced with the challenge of finding new ways to drive lending opportunities.


As the country copes with the effects of the first great recession of the twenty-first century, credit unions, like most financial institutions, are challenged with finding new ways to drive lending opportunities. Although growing membership through indirect auto loans has been an effective approach for the past few years, many credit unions are now finding that re-energizing relationships with existing members is an important key to growing loan portfolios. Several factors brought about this change.

When the recession hit, credit unions were quick to realize that relying on FICO scores for loan approval, which worked well in a booming economy, was overly simplistic and downright inadequate when times got tough. The tightening of lending standards prompted credit unions to take a closer, more detailed look at individual members, which provided more insight into their lending needs. At the same time, credit unions are careful stewards of their resources so as a rule they have a lot of liquidity and are, as one loan officer recently put it, “looking to lend.”

Finally, growing membership through dealer indirect auto loans has come of age. Numerous credit unions that have nurtured relationships with preferred dealers are finding those dealerships have now become a steady source of new members. The record on what percentage of those new members become actively engaged and consider additional products is mixed, but they do keep joining.

Taken together, these factors indicate that credit unions would be best served at this time by re-energizing their relationship with existing members in order to grow portfolios. By taking a new and closer look at members, credit unions can develop new loan products as well as customize programs to cross-sell products and services.

How Can We Take Back Market Share?
In the past year, banks, captives, and other financial institutions have been aggressively seeking market share. In 2008, banks had 29.9% market share, but by July of 2010 banks had grown that figure to 35.9%. They closed out 2010 with approximately 36.1% of market share. 

Credit unions grew their percentage of the market from 18.4% to 22% by year-end 2009 and then bottomed out at 16.2% in March of 2010 before ending 2010 at 17.5%. Credit union loan officers across the country are asking: “How can we grow our share of the market? What can we offer customers that the competition can’t?”

A powerful — and distinctive — tool in the credit union arsenal is the special relationship between a credit union and its members. During these tough times, many credit unions have been re-energizing that relationship to remind members of that special bond.

For Mike Long, vice president of lending at the University of Wisconsin Credit Union ($1.3B, Madison, WI), taking care of members has always been a priority.

“We know that we’re going to have our greatest success with the people we’re already doing business with,” Long says. “Our mission has always been member convenience, and we’ve always promoted it that way.”

“What we’ve also done that’s been very successful is to recognize the members who use us as their primary financial institution,” Long continues. “Those who take advantage of our core services — such as e-Statements, online banking, checking, and savings accounts — receive a 0.25% discount on auto loans … It’s just the basic stuff — services that members use anyway — but by focusing on convenience as our most important benefit, we’ve grown by 13% in the past year.”

USA ONE Credit Union ($40M, Matteson, IL) has adopted an approach aimed at serving the greater Chicago area. The credit union has carved out its niche by working primarily with approximately 250 select employer group (SEG) companies.

“Probably 80% of our full-time SEG business development rep’s week is spent visiting these companies in order to make product presentations, conduct educational workshops, and speak directly with employees about how we can help them,” says USA ONE’s CEO Jerry Haley. “We offer a full range of services, including online banking and mobile banking, which are popular with our members.”

“We sign up about 1,000 new members each year,” Haley continues. “Approximately 20% comes through indirect auto loans. That means 80% are recruited through SEG companies and the local communities we serve.”

With overall loan volume growing, lending is working its way back into the mainstream and credit unions are in an excellent position to regain market share.

To discover how your credit union can take its lending success to the next level, join CU Direct Corporation, the credit union industry’s foremost provider of lending solutions and parent to the CUDL, Lending Insights, CUDL Retail, and Lending 360 brands, at its 2011 Lending Conference for credit unions. The conference offers credit unions valuable insight to all aspects of today’s competitive lending marketplace as well as keys to sustaining successful lending programs over the long term. Click here for more information and to register.



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