CU Lending Culture Must Change with the Times

CUNA Mutual Group Online Discovery Conference
November 22, 2011 | COMMENTS

The U.S. lending industry is evolving rapidly as two enormous generations—the baby boomers (born 1946 and 1964) and Gen Y (born approximately between 1980 and 2000)—near key phases of their lives. The first wave of boomers is retiring as Gen Yers start their careers and families. All generations are fighting economic headwinds from the sharpest economic downturn since the Great Depression.

In this environment, exactly which lending products and technologies should credit unions explore?

Dan Murray, vice president of lending product services for CUNA Mutual Group, suggests examining your credit union’s lending culture first, and make sure it’s built to adapt to changing conditions.

“Lenders have to come to grips with the key differences between baby boomers and Gen Y,” Murray says. “Gen Y, for example, doesn’t seem to be in a hurry to get married and create new households.”

The nation generated only 357,000 new households in the year ending in March, 2010, down from an average 1.3 million over the previous decade, according to the U.S. Census Bureau.

The consequences are serious for lenders because Gen Y (84 million) is even bigger than the boomers (80 million).

“Your credit union needs a specific strategy for growing membership, and especially for gaining the loyalty of younger members as they enter their big-ticket borrowing years,” Murray says. “If your board doesn’t have a committee devoted solely to membership growth, it should create one. Use outside marketing expertise if you need to.”

Mobile banking overtaking online?

The rise of ATMs, debit cards, and direct deposit intersected with the decline of branch banking around 2005. Another intersection appears to be coming in 2014 or 2015, when mobile banking will begin to pass online banking.

Mobile banking’s rise has been steeper by far than online or any other channel. From its beginning in mid-2007, nearly 20% of U.S. consumers adopted mobile banking by 2010, and that’s projected to hit 60% by year 2015.

Cultivating multiple-relationship members is more important than ever, but these new channels make it more difficult, Murray points out.

Already, almost one-third of mobile banking users checked their account balances at least 10 times within the past three months, according to a December 2010 survey by the research firm Aite Group.

As people rely more on mobile banking to view account balances, move funds, pay bills, and apply for loans, lenders must find ways to turn these services from mere conveniences into more loans or non-interest income.

For example, a credit union’s mobile banking suite could help members research and secure a loan while standing on a car dealer’s lot. This could save members considerable expense in interest and payment protection products while avoiding a long sit-down with the dealership’s finance rep.

Adapt cross-selling to new channels

Even sticky services can’t build loyalty if members don’t know these services exist. And credit unions can’t rely on traditional advertising alone to reach specialized target audiences. Credit unions must adapt to cross-selling via remote channels in addition to face-to-face situations, Murray says.

“At every opportunity—either remote or in-person—lending staff will need to tell members how the credit union can save them money on loans, or help them protect their family from financial hardship,” he says. “We’re not talking about old-school, hard-sell tactics, here. We have to learn to present the information simply and quickly, so members can make informed decisions.”

Each credit union should continually examine its members’ specific life-stage needs and technological comfort levels, says Murray. “This is essential to an innovative, engaged lending culture that can anticipate relevant products and delivery methods.”