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Ready to partner with a fintech? Here’s what you need to know

With the shared goal to redefine what a multifaceted financial services model looks like to members, more credit unions are looking to partner with forward-leaning fintechs. But does this approach make sense for all credit unions?

“The biggest challenge I have seen between fintechs and credit unions is the culture shock,” said John Best, CEO of Best Innovation Group. “Fintechs are used to being lean and moving fast. They expect to have technology in place that will allow them to do this. Credit unions are a bit more slow-moving and sometimes don’t have the technology that a fintech would expect.”

During a recent web seminar exploring this topic, Capstone Managing Director John Dearing noted that over the last five years, 20 fintech companies — incuding TradeKing and Openpay — have been acquired by banks, and 40 percent of these acquisitions occurred in the last eight months. In April 2018, for example, Goldman Sachs acquired Claritymoney, a PRM app.

“We would love to have a slide next year that has credit unions on the left hand side and show all the investments that have been done through CUSOs or other partnerships,” said Dearing.

Joining Dearing was CU 2.0 founder Kirk Drake, who noted that one of the leading reasons fintechs want to partner with credit unions is because CUs have a loyal member base.

“It’s hard for a fintech to get 30,000 or 40,000 users, so there is a lot of interest partnering with credit unions,” he said.

Among barriers credit union executives face is that many fintech companies come to the table with “half-baked” concepts that “lack proof-of-concept” or a proven business model, said Drake. But he views this as an opportunity — getting in on the ground floor.

“Credit unions are risk-averse and they don’t know how to structure [fintech] deals to minimize the risk,” said Drake. And with so many new fintechs popping up, he said, it becomes difficult to pick the “winning” partner.

Whereas vendors traditionally came to credit unions with solutions designed to last five years or more, he said, fintech models are constantly evolving and may only have a shelf life of 12 to 24 months.

“Oftentimes it’s not the best tech or user interface that wins, but the business model and the market,” said Drake. “This challenges the traditional credit union vendor-management program.”

Fintech and CU success stories

Big banks are not the only FIs in the fintech game. Credit unions have thrown the proverbial hat in the ring as well, including the Boston-based Digital Federal Credit Union (DCU) and its Fintech Innovation Center.

“First and foremost, we are looking for opportunities to partner and learn from fintechs,” said David Arauno, DCU’s SVP of technology and innovation. “We are currently hosting 20 different fintech companies in our space. Some of them have alignment with our initiatives and some don’t, but regardless of alignment, it is a tremendous opportunity to learn from these entrepreneurs.”

Araujo further explained that there is “no set path for success” at the center or how best to work with fintech startups.

“We simply learn about their product, what their needs are to gain traction in financial services, educate them on our industry, and where it goes from there can vary,” he said. “We have run pilots, done proof of concepts and signed contracts with these companies.” One successful partnership born from the Center is Digital Onboarding (digitalonboarding.com), he added.

When working with a fintech company, Araujo said credit unions must keep in mind the age of company — especially when interfacing with a management team tasked with reviewing proposals.

“The companies we work with are early stage and are looking for guidance as they figure out their path to market. The CU management team has to look at the possibilities of what they are working on and be patient to help them down that path,” he said. “It doesn’t always mean a longer delivery expectation, but simply a different conversation from buying something off the shelf.”

While a guestimate, Best Innovation Group’s Best said perhaps 5 to 10 percent of all credit unions may be presently working with fintech companies. And while it would seem logical that larger credit unions are leading the charge, it’s not always the case.

“I have started seeing $200 and $300 million dollar credit unions engaging. The trend is that the current CEO is retiring and the new CEO inherits the capital that the CU was sitting on and needs a place to invest,” said Best. “Because they are smaller, they can move a bit faster as there aren’t as many services to overhaul in order to move toward a digital investment.”

Finding the best partner

During Drake and Dearing’s webinar, the pair suggested credit unions develop a strategy, be proactive, define ideal outcomes and select a market/sector to focus on, all the while remaining objective.

But for fintech companies, getting used to regulatory compliance measures that credit unions face remains a hurdle.

“Finding the right partner can be tough and time consuming you may have to go through a lot and might need to try a few to see what is the best fit over time,” said Dearing. “Being proactive and defining your ideal outcome and staying objective [is important]. Look at the passion of the entrepreneur, their background and geographic scope and technology development cycles. There are ways to prioritize and vet potential partners.”

In most cases, there are three possible partnership models: joint venture, CUSO investment and working with a vendor. While Best said one option isn’t necessarily better than another, he prefers either the CUSO or vendor approach as opposed to the “scarier” joint-venture model that is often not as organized.

Since a CUSO is formed around the fintech, Best said this generally is a good approach because the fintech depends on scale to be successful. Examples would be a payments platform or a messaging platform.

“There is a built-in customer base, ability to control some of the roadmap or direction of the organization,” said Best. “There is reduced cost due to scale and better support and there could be a revenue opportunity.”

The downside to a CUSO model is if the fintech has banking customers or other pursuits, which may result in the CUSO getting lost in the shuffle, noted Best.

“The diversity of CUs can sometimes cause issues for the fintech, such as different cores or different regulatory issues, as they are used to a one size fits all approach,” said Best. “The CUSO will be regulated as though it is a credit union and this can also cause issues for the fintech.”

Credit unions that partner with vendors such as PSCU, CO-OP and CUDirect, added Best, have the opportunity to leverage existing frameworks to work with a fintech.

“They have resources to vet the business opportunity as well as the technology and staff to support a fintech, so the credit union’s risk is reduced,” said Best. “The cons are that the vendor may not see the value in the fintech that the credit union does or may be interested, but cannot move as fast as the credit union that desires the fintech services would like.”

How to Optimize SEO for your Credit Union’s Content Using the 4 C’s of Content Marketing

When big banks control the top spots on Google for keywords like “mortgages” and “financial health”, what chance does a community oriented Credit Union have of standing out to potential members? The solution is to express the content using words that apply to your company’s own unique brand and community. Learn the steps to optimize SEO for your credit union.

If your credit union does not write content and deliver content to members through e-mail campaigns and social media, then this article is not for you.

The first thing we need to understand is how search engine traffic works. In the early days of Google, achieving the first spot for simple keyword searches such as “mortgage” was a straightforward task. The word “mortgage” in this case, is known as a “short tailed keyword” and unfortunately, would not yield very good or relevant search results today. Expanding this search to “mortgage offers at credit unions near me” will provide a much narrower and targeted result.

This specific and deliberate search is the type of traffic that credit unions need to target. The idea is that when a potential member performs a search on something like “checking accounts for families near me”, the goal is to funnel this member into a process that ultimately leads them into becoming a credit union member. A community oriented credit union should know that creating cluster content on specific topics can lead target members to their website and signup process. To understand how to best capture the ideal search traffic, we’ve boiled down the process into the 4 C’s of keywords that belong in all of the content produced by your Credit Union.

optimize seo for your credit union

Want to learn more about how to Optimize SEO for your credit union and other website tips? Click on the article below.

Credit Union Website Basics

Increasing Customer Connections Through Digital Transformation

Credit Unions pride themselves on customer service and being “customer intimate.” They are pioneers of brickand-mortar, customer-centric innovations such as branch greeter stations and branches that look more like an Apple store than a traditional bank. Providing great customer services and “knowing” our members is a large part of what the Credit Union movement is about.

credit union digital transformation

When it comes to the digital world, however, many Credit Unions remain uncertain of the best ways to use digital technology and information to enhance customer relationships. At the same time as customers increasingly prefer online transactions, Credit Unions have been forced to give up some control over the online transactional experience. Most Credit Unions simply don’t have the staffing or dollars to customize online and mobile banking systems, and therefore must accept a mostly off-the-shelf solution that is, at best, parity with the rest of the market.

Leveraging digital technology to improve customer connections requires thinking beyond transactions as customer touchpoints. It involves using data to get to know your customers on a deeper level, to learn when and where to communicate with them, and to monitor and measure the effectiveness of your communication campaigns.

Remaining “customer intimate” in the digital world requires staying relevant in the lives of your membership. That means many more touch points and communication more frequently than in the past. It also means moving away from drive-by window advertising and postcards where you can’t really be certain of the effectiveness toward the digital analogs—web site, email, social media, blogs, and videos—where you can measure response and monitor interest over time. In the digital world, you have more opportunities to show your expertise in personal or business financial management to help members make solid financial decisions. Your digital assets are available 24 hours a day all year long, unmatchable with any other channel.

CU 2.0 has developed a set of modules and processes to help Credit Unions leverage digital technologies in order to provide exceptional member service. Effective digital communication can be more complex than traditional marketing campaigns. Your strategy needs to consider the right mix of social media campaigns, blogging, videos, and ads. All of your campaigns must be linked to landing pages on your web site and set up with tracking analytics across all steps. Tracking the member journey allows the Credit Union to be on the same path, understanding what matters most for individual members, and providing information that is both timely and meaningful.

In this way, the journey to digital transformation is still member-centric. They key is to shift your focus to integrating customer data from multiple sources and being accessible to members via digital channels. Once you establish an enhanced digital understanding of members, you can make those insights available to staff, other digital systems, and even artificial intelligence and machine learning tools to enhance the member experience.

Digital transformation requires new tools and thinking, leveraging technology and automation to craft the personalized experience that our members now expect.

Want to know more about digital transformation? You may be interested in:

On the Digital Transformation Journey with Partners FCU’s CEO

MnCUN Interviews: CU 2.0’s Kirk Drake Shares How to Future Proof Your Credit Union

Consumers Say Boo To Your Digital Banking Products – Now What Do You Do?

Should CU’s Partner with Fintech Companies?

credit union fintech

A common question we get at CU 2.0 is, should credit unions partner with fintech companies. Then, if the answer is yes, how should the partnership work and which fintech companies should credit unions work with.

The answer is in fact yes. However, as with most things in life, the question goes deeper than you would initially think. For example, if you believe your credit union can develop code better, faster, and more customized than a fintech, then this article is probably not for you. If you are a do it yourself shop, maybe this is not a path you should walk down. However, if you recognize that you exist in a pretty big space with tons of players, please read on.

It is important to realize that innovation rarely, if ever, comes from incumbent vendors. Very little innovation comes out of the traditional, legacy core providers. As the internet continues to age, some of the early providers of mobile and online banking have aged with the internet to the point that they have such large existing books of business and backlogs of development that they cannot be viewed as innovative anymore.

Before we get started, we want to ensure you have the full picture. It’s important to know the difference between being a fast follower and being a company that is not afraid to fail forward fast. Being a fast follower is just a polite way of saying that you have no original thoughts and that you follow trends as soon as you find them. Failing forward fast does not mean that you court failure. It simply means that you take ideas (your own and/or from others), implement them, measure them, and move forward, whether good or bad. Despite what you may have heard, integration, while important, is NOT innovation, and waiting for a legacy provider to help you remain relevant, is not something a credit union should depend on.

Now that you understand the key concepts, here are several fundamental points to use when evaluating new technologies offered through fintechs. Be aware that fintechs are not following traditional revenue models. A basic traditional model involves a credit union paying their legacy provider a large capital outlay to acquire the solution then 20% maintenance on that solution in perpetuity. Oh, and don’t forget the 3%-7% CPI increases each year. Think about that, if you have been on a core solution for 12 years, how much are you actually paying? I would have to say it is much more than the market would bear today. Meanwhile, fintech companies, at least the good ones, would rather participate in your success. When evaluating a fintech solution, pay attention to the revenue model. If the fitech gets paid when you make money that is a winning solution. If the fintech want a large upfront payment and “maintenance” or “per application” fees, be leery. Almost all the fintech companies that CU 2.0 works with have a model in place that pays them based on the success of the credit unions that deploy their solution. For example, a provider of alternate loan decisioning and offers should only take a piece of the loans made when they are paid. The per application model is dead. This is just one example of hundreds of fintech ideas out there. Do your due diligence before partnering up with a fintech.

If you are a credit union evaluating whether to adopt or partner with a fintech, choose a fintech that wants to participate in your success and your members success.

Want to learn more about what fintechs are out there? Click here to view the CU 2.0 Fintech Database.

How To Use Social Media Effectively For Credit Unions

social media strategy for your credit union

Social media has proved to be an important avenue for credit unions to reach new audiences. Effective social media strategy for your credit union also allows your organization to become more targeted with its marketing strategies based on the information gathered through these social media platforms. Read on to learn more about how to maximize the social media strategy for your credit union.

Social Media’s role in your credit union’s marketing strategy will continue to expand, looking to capture the attention of millennials. The well-prepared credit union marketing strategist is taking all these trends into account and has a core processing system in place that can gather and process member data for personalized marketing/member experiences and allows for the integration of new technology through open architecture.

Furthermore, a successful marketing strategy for a credit union will incorporate an integrated social media campaign across multiple platforms and media formats. It will utilize members purchasing habits and other data to create a personalized marketing experience for each member.

Sounds simple enough right? But what actual steps can your credit union take to effectively use social media today? When well executed, a successful social media strategy goes beyond tweeting your credit union’s rate offerings and waiting for a member to come in the door. Social media can be a powerful acquisition tool, a tremendous means of member engagement and a powerful force for community outreach.

Here are four steps necessary for your credit union to effectively use social media.

  1. Plan: Nothing happens accidentally on social media. If you have ever looked at a competitors’ social media presence and wondered how they are magically getting so many followers and likes, it isn’t magic. There was a plan put in place and a strategy developed that has been followed and executed over time. Doing social media because everyone else is or because someone went to a conference and heard a keynote on the topic isn’t a plan. Your credit union’s social media strategy must align to your credit union’s business goal(s). If you’re strategy is simply to post some ads of your current rate offerings at the credit union or random links to content that your members aren’t truly seeking, then seriously don’t bother. Your credit union won’t get any value out of it and it will become a painful process that an unlikely member of your marketing team dreads checking off on his/her weekly checklist. Decide what the priority of your credit union is. Do you want to drive loans? Is your priority member growth? Is your main interest engaging your current members to capture additional wallet share? Define your goal and then plan your credit union’s social media strategy accordingly.
  2. Measure Your Engagement: If you post something and no one likes the post, did it count? While an obsession with your credit union’s number of followers and number of likes can often just be vanity metrics, it is important to truly measure engagement. Engagement is a critical measure in determining if you are posting content that is truly relevant to your membership. Sky high engagement won’t happen overnight. If your members aren’t used to hearing from you, it will take some time for your credit union to warm up your base. Some great ways to start this are with community spotlights of members, contests/polls within the group, and Monday motivational quotes. Once your members see value in paying attention to what your credit union is posting, then lean in with hyper relevant content. No member wakes up and wants to shop for a car loan. The member wants to buy a car. The loan comes next. So post something about tips for buying a new car. Did we pique your interest? Don’t have the staff to dedicate to this task? Click here to learn more about a service that does this for you!
  3. Pick Your Platforms: Sure, it looks fancy to have a footer on your website pages that has Twitter, YouTube, Vimeo, Facebook, etc. However, if you are not actively tweeting, posting on Facebook, and creating video content, then all these platforms are like splitting the baby. Decide where your credit union wants to focus and then excel on those platforms. You can have an amazing Facebook strategy for your credit union and high engagement, but if a member clicks on the twitter icon at the bottom of your page and your last tweet was from 2000, then none of that Facebook work matters. Pick your platforms and excel at them. There is no shame in not being on every single platform available.
  4. Utilize Influencers Effectively: One of the easiest ways to get going on your social media site and boost engagement is to effectively utilize influencers in your membership base. If you are a credit union that serves Firefighters in your area, do you think the local Fire Chief is someone that your membership base may follow and be interested in? Could that be an influencer that you could effectively use to promote engagement? Absolutely.

Social media is not a secret sauce that just some credit unions have gotten lucky with and some have not. There is a strategy and method behind your credit union’s success at social media. Start with a strategic plan that focuses on achieving your credit union’s business goals and build from there.

Want to learn more? Click here for the CU 2.0 Facebook Guide.

You can also learn about how to effectively use influencers on Facebook for your Credit Union here.

5 Lessons Learned from AXFI 2018

This week I had the honor of speaking at the 2018 AXFI (Analytics and Financial Innovation) Conference for Credit Unions in Minneapolis. I spoke on the Credit Union 2.0 DREAM methodology. First off, this is a great event that attracts an abundant group of Credit Union thinkers, innovators, and has truly great content. Here are the top five takeaways that I learned at this event!

  1. Artificial Intelligence is coming. We cannot hide from this. There were several great presenters including Lendified and Active.AI. We are starting to see a large number of ANI (artificial narrow intelligence) solutions hit the ground on things like small business loan underwriting, assessing credit risk, and chatbots that communicate with your members in their language.
  2. Rate Reset’s new product “Knock Knock” is winning solution competitions at tons of shows. After taking the NACUSO Next Big Idea award 6 weeks ago, Rate Reset wowed the Killer Fintech Speed Rounds at AXFI with its ability to retain existing members and products while also providing a great digital engagement experience for new member product offers.
  3. John Best of BIG demonstrated and taught how to use CU Ledger. Credit Union programmers went through two workshops and got to see firsthand how block chain technology can help credit unions secure their member identities while providing a better experience.
  4. The OnApproach Data Analytics platform is really driving innovation. There were numerous sessions where data scientists showcased great collaborative solutions for problems from CECL, member profitability, Data Lakes, to when members might be leaving. Both the collaborative environment as well as the large number of solution providers on the platform really showcased the power of CUSOs and teamwork.
  5. Analytics has a role in Cyber Security as well. Bob Miles, CISO Practice Manager, from Ongoing Operations, LLC, demonstrated key strategies and tools to find key member information on your platform, measure the risk, and help quantify and prioritize cyber tasks so that your Credit Union can minimize any potential impact from a hack or cyber event.

Overall, the AXFI conference is a terrific conference that delivers key technology strategy with hands on tactics for the industry. It attracts innovative thinkers in the industry and provides cutting edge content.

QCash Brings Payday Loans to Credit Unions 

By Robert McGarvey 

$30 billion annually – that’s how big Pew said the payday, pawn auto title, etc.  loan market is in America.  When people need a loan, and everybody else has said no, they go to alternative lenders. That’s 10 to 12 million Americans every year. 

They pay through the nose too. Up to 400% APR.   

But what if credit unions could get involved. And what if credit unions could offer more consumer friendly options. 

Enter QCash, an innovative, small dollar lending platform that grew out of WSECU (Washington State Employees Credit Union) and also benefited from counsel via Filene. 

Ben Morales, CEO of QCash, said that QCash in effect brings WSECU back to its roots. The first loan the credit union made, around 60 years ago, was $50 to a member to buy new tires. 

That is exactly the kind of helping hand credit unions were formed to offer and, said Morales, QCash is a platform designed to help many more credit unions profitably offer small dollar loans to members, to the benefit of the member and also to the credit union. 

The problem: many credit unions have abdicated small dollar loans, said Morales, leaving the market to alternative lenders.  Which often means predatory lenders. 

Said Pew: “The average payday loan customer borrows $375 over five months of the year and pays $520 in fees.” 

Pew added: “banks and credit unions could profitably offer that same $375 over five months for less than $100.” 

Pew continued: “banks and credit unions can be profitable at double-digit APRs as long as applicable rules allow for automated origination.” 

That’s exactly where QCash comes in.  What it offers is an automated platform where the loan applicant answers a very few questions and, in under 60 seconds and with just six clicks, a decision on the loan is rendered. 

That speed is possible, said Morales, because the credit union already knows a lot about the member. There’s no need to ask the member questions where the answer is already known and, because QCash accesses the core, it knows plenty about the member. 

That speed and simplicity is a big plus for loan applicants.  Many fear that applying for a credit union loan means a visit to a branch for a face to face but QCash puts the process online or in the mobile app. That makes it easy for the member and also eliminates much of the embarrassment potential. 

About 70% of loan applications are approved, said Morales. 

Add it up and QCash is a good deal for the appropriate member. 

Why isn’t it offered at more institutions? 

The grumbles about offering payday loans at a credit union are many. There are complaints that this isn’t what a credit union should be doing, that the borrowers will default, that it’s too expensive to process loan apps to bother with small dollar loans to imperfect borrowers, etc. etc. 

QCash proves a lot of that wrong.  Last year QCash – which presently has five active credit unions involved with several more in the go-live queue – processed around 35,000 loan apps.  It has a track record.  The chargeoff rate, said Morales, is around 10 to 13%.  “That’s why you charge as high as 36% APR,” he said. 

He added that some QCash institutions charge significantly below 36%. Nobody presently charges more. 

Morales acknowledged that some in the credit union movement are squeamish about the idea of charging members 36% APR – but he pointed out that, for this member, that usually is a very good deal, much better than the alternatives that might be available. 

Point is: this is helping members. Not hurting them. 

Even so, not every institution involved in QCash is aggressive about marketing it, Morales acknowledged, perhaps because of some lingering concerns about being seen to offer payday loans. 

That’s something the reticent institution just has to get over. Because that’s the better path for the member. 

An obstacle to credit union implementation of QCash is that right now doing so requires significant inhouse technical talents and credit unions below perhaps $500 million in assets often don’t have that. 

Small credit unions may also have problems in providing access to the core – frequently because the cost of needed middleware is high. 

Morales said such issues represent a challenge to QCash to “perhaps adapt its product to overcome these issues.” 

Point is: QCash is working on making its product readily adaptable to a growing number of credit unions. Morales said QCash hopes soon to offer QCash to credit unions without regard to size and scale. 

Fees from the QCash side in implementing it run $15,000 to $20,000. 

Bottomline for Morales: going after high interest, predatory lending should be a credit union differentiator – and QCash puts those targets in range.  “We can do something about this,” said Morales. 

“We can make a difference for our members.” 

Credit unions could rock their way up in the public consciousness and put on a good guy aura in the process of taking on predatory lenders. 

He added: “The momentum is there. We just have to get more credit unions off their butts.” 

Credit Union Data Analytics: Who are your best members? :)

Our “A” members are the ones who know the difference between a credit union and a bank, believe it, feel it, and espouse it. They bring us all of their financial services business and tell all their friends. If you are interested in what their data tells you about them then this post in Credit Union 2.0’s “Almost 99 Small Data Credit Union Hacks” series will be helpful.

This blog is the ninth and final part in Credit Union 2.0’s “Almost 99 Small Data Credit Union hacks” series and is based on the book Credit Union 2.0 – A Guide for Helping Credit Unions Compete in the Digital Age which covers in depth both big and small data for credit unions. There are six types of data that your Credit Union should be aware of:

  1. Digital Analytics – Desire
  2. Profitability – Fit
  3. Wallet Share – Depth
  4. Transaction – Triggers
  5. Design Data – Predictive
  6. Execution – IFTT (if this than that)

The key here is patterns. Once you sniff out the predictive behavior, you can be proactive with how you interact with the member.

Here are some ideas on where to look for your “A” member patterns:

Data What to do with it?
Favorite Grocery Store Special promotion with that store
Favorite Vehicle Special promotion with the local auto dealer
Favorite Coffee Shop Hang out there too – send them a cup on you!
Favorite Online Retailer Special Promotion
Favorite Local Small Merchant Hang out there too
Favorite Gym Special Credit Union deal
Who They Follow on Facebook Could this be a potential guest blogger on your site? Maybe there is an opportunity for you to update your content to be more relevant.
Where They Work Follow their leadership online
When They go to Branches Better service hours
Who Their Favorite Tellers/Call Center Reps Are Understand why
What Life Stage They are at What is next for them and how can you help?

 

Knowing your “A” members inside and out and further tailoring your services will help those members bring their friends. You want your “A” members fiercely loyal and believing in the credit union difference. Show those members the difference every day and hang out with them and their friends.

Want to learn more about how your fellow Credit Union leaders are using data? We invite you to join our Credit Union 2.0 Strategist Group where over one thousand industry leaders comment on new news and trends while sharing and learning from one another.

This is the final post in a nine part series. If you want the full “Almost 99 Credit Union Small Data Hacks Guide” click here!

In case you missed it:

Click here for part one of the data analytics series.

Click here for part two of the data analytics series.

Click here for part three of the data analytics series.

Click here for part four of the data analytics series.

Click here for part five of the data analytics series.

Click here for part six of the data analytics series. 

Click here for part seven of the data analytics series. 

Click here for part eight of the data analytics series. 

Credit Union Data Analytics: Who are your best members?

Our “A” members are the ones who know the difference between a credit union and a bank, believe it, feel it, and espouse it. They bring us all of their financial services business and tell all their friends. If you are interested in what their data tells you about them then this post in Credit Union 2.0’s “Almost 99 Small Data Credit Union Hacks” series will be helpful.

This blog is the ninth and final part in Credit Union 2.0’s “Almost 99 Small Data Credit Union hacks” series and is based on the book Credit Union 2.0 – A Guide for Helping Credit Unions Compete in the Digital Age which covers in depth both big and small data for credit unions. There are six types of data that your Credit Union should be aware of:

  1. Digital Analytics – Desire
  2. Profitability – Fit
  3. Wallet Share – Depth
  4. Transaction – Triggers
  5. Design Data – Predictive
  6. Execution – IFTT (if this than that)

The key here is patterns. Once you sniff out the predictive behavior, you can be proactive with how you interact with the member.

Here are some ideas on where to look for your “A” member patterns:

Data What to do with it?
Favorite Grocery Store Special promotion with that store
Favorite Vehicle Special promotion with the local auto dealer
Favorite Coffee Shop Hang out there too – send them a cup on you!
Favorite Online Retailer Special Promotion
Favorite Local Small Merchant Hang out there too
Favorite Gym Special Credit Union deal
Who They Follow on Facebook Could this be a potential guest blogger on your site? Maybe there is an opportunity for you to update your content to be more relevant.
Where They Work Follow their leadership online
When They go to Branches Better service hours
Who Their Favorite Tellers/Call Center Reps Are Understand why
What Life Stage They are at What is next for them and how can you help?

 

Knowing your “A” members inside and out and further tailoring your services will help those members bring their friends. You want your “A” members fiercely loyal and believing in the credit union difference. Show those members the difference every day and hang out with them and their friends.

Want to learn more about how your fellow Credit Union leaders are using data? We invite you to join our Credit Union 2.0 Strategist Group where over one thousand industry leaders comment on new news and trends while sharing and learning from one another.

This is the final post in a nine part series. If you can’t wait for next week and want the full “Almost 99 Credit Union Small Data Hacks Guide” click here!

In case you missed it:

Click here for part one of the data analytics series.

Click here for part two of the data analytics series.

Click here for part three of the data analytics series.

Click here for part four of the data analytics series.

Click here for part five of the data analytics series.

Click here for part six of the data analytics series. 

Click here for part seven of the data analytics series. 

Click here for part eight of the data analytics series. 

The Vanishing Credit Union Gets Bigger

By Robert McGarvey 

For Credit Union 2.0  

The April CUNA Mutual Trends Report drops a paradoxical bomb that leaves us confused: are credit unions getting bigger? Or are they vanishing? 

First the good news: more of us belong to credit unions, reported CUNA Mutual.  “Credit union membership growth was on a tear during the first two months of 2018, adding 850,000 new memberships versus the 650,000 reported in the first two months of 2017.” 

CUNA Mutual went on: “Credit unions should expect membership growth to exceed 3.5% in 2018. This will push the total number of credit union memberships to 117.6 million by year end, which is equal to 33% of the total U.S. population.” 

Roll back to 1960 and, per NCUA data, just 6 million of us belonged to federal credit unions.  A similar number belonged to state chartered institutions. That’s 12 million total, out of a US population of 180 million.  That’s about 6.7% of us, far below today’s one in three. 

Plainly, a lot more of us belong to credit unions now, probably because of expanding FOMs and also because many credit unions offer tempting deals – for used car loans, for instance, and in some markets home mortgages – that bring in members at least for those specific products. 

More credit unions also are working smarter and better at communicating that their membership is pretty much open to all. There remain some of us who believe they can’t join a credit union because they don’t belong to a union – but those numbers are shrinking. 

Member growth is good.  But do the CUNA Mutual data mean the credit union movement should pop open champagne and toast the good times? 

Maybe not. 

At least not just yet.  There’s more to digest in the CUNA Mutual data dump. 

Toward the end of the report, CUNA Mutual serves up these disturbing numbers: “As of February 2018, CUNA estimates 5,757 credit unions are in operation, down 240 from February 2017. The pace of consolidation in the credit union system is accelerating due to the following factors: retiring baby boomer CEOs, rising regulatory/compliance burdens, low net interest margins, rising concerns over scale and operating efficiency, rising competitive pressures, and members’ demand for ever more products, services and access channels. NCUA’s Insurance Report of Activity showed 9 mergers – 7 mergers were due to ‘expanded services,’ 1 for ‘poor[Text Wrapping Break]financial conditions,’ and one for ‘lack of growth’ – were approved in February with a merging credit union average asset size of $13 million. This is a fewer than the number of mergers reported in February 2016 with a merging credit union average asset size of $10 million. We are forecasting the number of credit unions will decline 250 in 2018.” 

Do the math. If the current rate of consolidation continues, by 2028 there will be a bit over 3000 credit unions. 

In 1960 there were about 10,000 federally chartered credit unions, per NCUA.   

As for the membership growth, CUNA Mutual sees it continuing, sort of.  “The membership gain was partly driven by the 502,000 new jobs created during January and February, according to the Bureau of Labor Statistics, and by the tremendous growth in credit union indirect auto lending. During the last few years credit union membership growth has been highly correlated with job creation with the seasonally adjusted annualized growth rate exceeding 4% over the last year. With job growth expected to slow slightly in 2018 to 2.2 million, we forecast credit unions to pick-up an additional 4.0 million members.”  (Emphasis added.) 

Many credit union executives, at least privately, of course grumble about indirect car loans because the “members” they bring in often limit their memberships to the car loan and they aren’t especially profitable. 

Add this up and what’s the meaning? Credit unions need to do a much better job of expanding their relationships with members.  It is great to have an expanding number of members, it is not so great not to be creating more solvent credit unions. 

The truly good news is that if one in three Americans belong to a credit union that is plenty of bulk to use to seek to grow the institutions organically.  For instance: get that indirect car loan borrower using a sharedraft account and a credit card and the credit union is onto something wonderful. 

The alternative is to join the thundering herd of dying credit unions, many of which are like wildebeest in the Tanzanian Great Migration, there essentially to be picked off by predators. 

Parse the CUNA Mutual data and just maybe the message is a double edged sword: grow membership, especially the right membership, and success may lie ahead. Or shrink into extinction. 

That is the stark choice in front of today’s credit union executives.