Credit Union Geek

Marketing, Strategy, and The Force by Joe Winn

Tag: loans (page 1 of 2)

Cash Out Needs Cash In

None of us want to see another lending crash. With today’s NCUA and FDIC insurance programs, money won’t be lost, but investments, collateral, and jobs are always in limbo.

How many of you know someone at a credit union which underwent a managed merger, either as the takeover entity or the one being absorbed? It accelerates a consolidation of the market, sure, but I don’t need to explain to any of you the hardships endured.

This post arises from a situation we faced during a recent partner planning meeting. The credit union had less-than ambitious goals for their auto lending growth. “Odd”, we thought. It was not until later in the meeting that we learned some background on their numbers.

Ever hear the phrase, “too much of a good thing”? This credit union was living it. They had been quite successful recently in their lending, so much so their cash reserves were depressed. The institution no longer had large sums of cash to lend and chose to devote marketing resources on growing their share account values. Turns out it isn’t an uncommon problem, as reported by CreditUnions.com

What a wild challenge! It got me thinking. How can a credit union build cash reserves which are secure for a period of time, yet provide a value to their members? While, of course, having a low cost of attainment and maintenance?

I’m no financial expert (if my schooling had finance, I don’t remember). However, before I became more involved in investing, my go-to “safe bet” was a Certificate of Deposit. One year, three years, even 5 years; it was ok, since the money was safely locked away and earning a fixed interest.

Might CDs be a cost-effective strategy for growing cash reserves? No debit card required, the cash has a guaranteed term, and the member is happy to get more than 0.00014% interest.

Granted, I grew up in a world of Ferengis hoarding gold-pressed Latinum and a Starfleet which did away with money hundreds of years in the past. Perhaps I’m Scotty talking into the computer mouse in confusion.

Disclosure: As an independent agent working with credit unions, forced mergers are usually bad for our business. If our partner is the one being absorbed, we can probably bid their alliances goodbye. However, if it’s the other way around, we may find the potential market expanded. In truth, we would much rather expand our business through organic growth and greater credit union partner success. So, credit unions, please use your best judgment on maintaining a conservative loan to shares ratio. We are but lowly partners and should never be looked to for financial management advice. Besides, I’m a geek Millenial/Gen Y. Everyone knows you can’t trust us.

Disclosure 2: Image from Star Trek: DS9. Source: http://www.adafruit.com/blog/wp-content/uploads/2013/03/quark_600.jpg

Say My Name!

Last March, I composed a post called A Loan By Any Other Name. The thesis was that as long as your members embraced your services, who cared what they called them? You could be, “that car pay thing”. As long as the auto loan was paid each month, specifics didn’t matter. I’ve decided to revisit the topic after learning more about partnerships and the co-op environment. Whereas in that discussion, I addressed product names, here we will look at the name use of the entire institution.

What’s in a name? I suppose about the same as a motto. What’s the motto? Nothing, what’s a motto with you? (I can’t resist my Disney references)

Nearly all of our partner credit unions have undergone a name change at some point in their history. Sometimes, it is to reflect a new affinity group or open charter. Other times, it is to clarify their mission to the membership and community. Most are good, some, fantastic. Is there an inherent benefit to a stylized name over “Such and Such Community Credit Union”? Depends on market coverage, size, and other factors better for your board to address than me.

The important part of your name is that it gets used, and in the right situations.

Think of a company with which you’ve had unsatisfactory dealings. Now say their name out loud. How do you feel? Uptight, frustrated, angry? What about a company you love? Don’t be shy, speak up! Better? Perhaps even the sound of their name made you smile.

Which reaction do your members have when vocalizing your credit union? Or worse, do they not even know?

Your members may see your name in different ways. Some, as a bill pay entry only. Others, their financial family. With a bit of networking on your end, that name can gain some serious value!

If a member uses your name in a positive light, that’s a referral, and it holds tangible value. Building on the stories in “Credit Unions, Spelled C-o-m-m-u-n-i-t-y“, helping each other comes by working together. Seek out responsible businesses (and fellow cooperatives) in your local area. Work out incentives your members can receive just by saying your name. Perhaps it’s 10% off dinner or a complimentary admission to a local museum. In return, offer new member programs for the staff or volunteers at these venues. Be creative in the arrangements! At the end of the day, both sides benefit, and your name spreads with a smile.

The next time they say your name could be for a home mortgage.

Image credit: lifeingroup5.com

Oh No! Millennials Aren’t Doing What We Expected!

The average age of a credit union member is 47. So it stands to reason the industry has a love affair with those of a younger demographic. If only they would talk about it!

Truth be told, a day cannot go by without seeing at least one discussion of Millenials and credit unions. Whether it be embracing technological solutions or offering a streamlined approach to lending, everyone has the answer to connecting with this essential generation.

There were challenges, however. Millenials don’t buy homes (mortgages), they don’t use credit cards, avoid owning cars (auto loans), and have no intention of changing. Like the disappearance of Tamagotchi pets, the needs of a generation had changed. Face it, it’s hopeless to even bother being in the banking industry anymore. We’ll be lucky if we can hold some of their meager savings.

Except all of this turned out to be false. When the average Millenial left school, they walked into a global recession, high unemployment, a banking sector in disarray, Wall Street in free-fall, and continuous threats of government shutdowns. Not an encouraging environment to make a stand!

So, they waited. Putting off moving out and getting new wheels for a solid career path, you can almost call them the Hesitant generation. Sure, adoption of technology, in every form, was rapid, but they also were the first to grow up with the Internet. It was a given they would be comfortable amongst cyberspace. The real world? Not so much.

Until things improved. Like now. Credit is more available and companies are hiring. Growing incomes situated them in up-and-coming urban centers. Big cities, sure, but also the smaller metro areas (like our own award-winning Fort Lauderdale) are experiencing dramatic influxes of young professionals. “Yeah, but in the city, they don’t drive, and they rent condos, so nothing changed.” Except not.

Millenials have grown into the second largest car buying group, behind their parents, the Boomers. You were right, they want the technology, and cool for these people represents efficient and modern. Out of reach of most buyers, the Tesla Model S still stands as the pinnacle of “cool”. No wonder other carmakers are pushing their own plug-ins, electric, and other forward-looking models.

They’re also buying homes. Renting was a necessary evil, and also helpful for a rapidly-shifting work environment. Now, denizens of the Millenial generation are able to “settle down” just a bit, and that comes with buying property.

Credit card usage is down, that’s accurate, but debit cards are embraced wholly. I see this as a financial literacy issue more than anything, which credit unions are ideally suited to address. Also mentioned in a recent post was the activities of CU Student Choice, helping CUs become financiers of student loans.

So this Millenials group…where do credit unions fit? Fund student loans, help them get started with debit cards, for a start. Be there for their new car loans, then help through the first mortgage. By providing time-honored service, coupled with the offerings people today expect (mobile banking, remote check deposit, online loan application, and compatibility with the latest must-haves), any credit union would be setting themselves up for a generation of success!

Sources: http://www.chicagotribune.com/classified/automotive/sns-wp-blm-news-bc-autos-millennials25-20150425-story.html, http://www.cuinsight.com/make-new-friends-reaching-the-younger-demographic.html

Image credit: https://bluesyemre.files.wordpress.com/2012/12/generation-x-y-z.jpg

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