This piece is based off of a roundtable discussion at the CU 2.0 Brainstorm Event in January 2022. It’s not intended to be comprehensive—rather, it will provide a quick look at emerging trends in fintech lending strategies for credit unions.
Loans are the backbone of credit union income, yet fintech and neobank competitors are doing them better. What can credit unions learn from other lenders? And how can they incorporate those solutions in their own strategy?
Expert panelists from Homepace, equipifi, Quilo, and Total Expert join the CU 2.0 Brainstorm Event roundtable to share their insight:
Register for our July Brainstorm Event here.
Expanding the Home Lending Suite
Joe Ciancolo, CEO of Homepace, notes that traditional lenders offer rather basic home lending options. There are mortgages, HELOCs, and refinances, and usually little else.
Ciancolo describes how Homepace offers Home Equity Investments (HEIs) to fill a gap in loan coverage. HEIs allow borrowers more flexible buying options without putting the credit union at additional risk. Adding HEIs into a lending portfolio allows credit unions to:
- Utilize excess balance sheet capacity;
- Provide members with a new homeownership opportunity;
- Offer members increased leverage for lower payments (e.g. effective 90 LTV w/ an 80 LTV payment); and
- Compete with banks on something other than rate.
Because HEIs are an investment in the home, it reduces the risk posed by the borrower. Members with lower credit scores, self-employment, and more are able to qualify for better, safer loans due to the lending model.
Personalization Is Paramount
J.J. Slygh, Principal Product Marketer at Total Expert, says that personalization is key. We couldn’t agree more.
It’s too easy to focus on function, Slygh notes. The branch experience has always been personal, yet through COVID-19 and digital transformation, the focus was on providing branch functions remotely. Lost in the shuffle was that personal touch.
To address this, Slygh suggests centralizing data and developing a data strategy. A data strategy will allow credit unions to understand their members based on what the members want rather than on what the credit union thinks the members want.
Not only will personalization lead to better sales, but it will also lead to higher member satisfaction and retention.
Members Are Borrowing from Other Lenders
Don Quilo, Co-Founder and Chief Evangelist at Quilo, references a McKinsey report that paints a dire picture for credit unions and even big banks. Fintechs are taking members and customers left and right, one payment at a time.
Buy Now, Pay Later (BNPL) is often a point-of-sale (POS) payment option. Hop onto Amazon, Best Buy, or Home Depot, order something, and look at your payment options. You’ll see BNPL options from Affirm, Klarna, or PayPal.
These installment loans are fast and all-digital. They don’t require paperwork or hard credit checks. They’re instant and convenient.
Credit unions that offer BNPL give themselves a chance to compete with these POS lenders. Credit unions that don’t will continue to see their members borrow from other lenders, losing revenew one payment, one member at a time, until it’s too late.
Additional Discussion
Unfortunately, the Brainstorm Event missed Bryce Deeney, Founder and CEO of equipifi. Equipifi offers BNPL through the credit union—even after a purchase is made.
Audience questions came in quickly. The first query asked what credit unions need to do to succeed with new loans. The answer came just as fast:
Streamline and make it digital.
If you make members jump through hoops for a loan, they’ll find another lender. If you make loans faster, easier, and more convenient for your members, you’ll win. If you only compete on rate, you’ll lose to the fintechs that compete on service.
Join the Conversation
CU 2.0 hosts biannual Brainstorm Events featuring expert panels of credit union and fintech leaders. Topics range from marketing challenges, leadership strategy, and data analytics insights, to emerging technologies such as artificial intelligence (AI) and blockchain/DeFi.
Each session features ample discussion and networking time. Save your spot at our next one here.
