Three ways for credit unions to thrive in a slowing economy

It’s no secret that strategies and tactics need to be constantly revisited, and nearly every industry must reinvent itself regularly to deal with emerging trends and market shifts. The credit union and banking sector is no different.

There are many different opinions in terms of where the economy is headed and its implications. Rising interest rates, high inflation and a waning stock and crypto market have all had an impact in consumer sentiment and business planning. Jamie Dimon has been quoted as saying that there is an economic hurricane that is headed our way. Regardless of the accuracy of these predictions, it is prudent to think through strategies and tactics for these times and execute on the appropriate ones. The following three strategies have worked across industries and can serve as a blueprint to navigate these changing times:

1. Enrich the lives of your members by providing personalized offers with products that they need now, in a way that is easy for them to consume.
2. Reduce the manual effort in the back office in order to increase your margins.
3. Reduce your risk and increase ROI from digital investments by filling gaps in your existing systems with low risk point solutions and core system extensions.

Let’s unpack each of these and layout the specific tactics to accomplish them.

1. Enrich the lives of your members by providing personalized offers on products they need now

Make it about your members, always, and in all ways! Fred Reichheld was the inventor of the Net Promoter Score (NPS) when he was at Bain and Company. Fred in his book ‘Winning on Purpose’ shows how enriching the lives of members is the best way for short-term and long-term growth and success. In these times, it is important to understand which products may apply to which members based on their life situation, credit situation, employment situation and net worth. The needs of your members are shifting rapidly given the economic climate; to thrive in this season, you need to quickly focus on the products that your members are looking for at this current time.

With home prices and home equities still high, with inflation cutting into the savings of working families and with rising interest rates, consolidation of loans through Home Equity Line of Credit is one such product. The Wall Street Journal article recently published an article titled “Mortgage – Application Index Falls to Lowest Level in 22 years”! At the same time, HELOC demand is surging with reports of a 3X volume increase compared to the peak mortgage volume last year.

Savvy credit unions are quickly making it easy for members to access HELOCs products using templated digital HELOC application flows. They are using best-in-class approaches to quickly pre-qualify and deliver personalized offers to members around their immediate needs.

Other products that are becoming quickly relevant for consumers include Personal Line of Credit, Debt Consolidation Loan and Auto Loans. Similarly, account opening and loans for small businesses, solopreneurs and gig economy workers (sole proprietors, LLCs) is gaining traction with sudden layoffs and hiring freezes.

2. Increase your margins through targeted automations

While top line growth is important, in times of uncertainty, keeping a close eye on margin is equally important. Manual and repetitive tasks around review, verification and document collection not only affect margin, they also affect staff workload and the bandwidth that is available by the team to work on high priority initiatives. At a time when experienced staffing is hard to find, the appropriate use of targeted technology can significantly improve margins and increase the bandwidth of staff to work on growth initiatives. The following manual processes can be automated to improve margin and gain staff bandwidth:

• Automated KYC through the use of ID verification, Facial Detection and Liveness checks
• Automated follow-up on incomplete applications through analytics driven emails and SMS campaigns
• Automated address verification
• Automated income verification
• Automated document collection through Robotic Process Automation
• Automated data integration with Core and LOS systems

3. Reduce your risk and increase ROI from digital investment by filling your digital gaps:

‘Fill your Gaps’ by deploying core extensions and point solutions that address the immediate needs of your staff, and your members is a great way to minimize your risk and your investment. When done correctly, these can produce immediate results in weeks without consuming your staff’s bandwidth and crushing your budget. Ripping and replacing a mobile or banking system or an LOS or core system is a risky proposition. At best, it is a costly and time-consuming effort that consumes your organization for months while improving your member experience; at worst, it can destroy your credit union and do incredible damage to your brand. A recent news report shares the member impact from a multi-day outage caused by a mobile and online banking replacement.

Here are a few examples of how credit unions are augmenting their core system and Loan Decisioning Systems by incorporating extensions and adapters:

• Adding branded digital application flows that use best-in-class approaches to ensure that the member has the best experience (while also providing out of the box connectivity with the core/LOS)
• Enhancing automated document collection for their consumer (or commercial) loan applications
• Automating KYC for digital account opening and first deposit for consumers (or commercial clients)

So how does this apply to your credit union?

Doing more with less is going to be important in the days to come. Expanding your revenues without increasing your team member’s workload is key to success.

The best approach depends on your credit union. It depends on your existing membership needs, product offerings, margins, and staff bandwidth. Depending on your situation, any one of the above approaches could work and as the results become measurable, other approaches could be adopted. It is important to balance your business objectives against the anticipated effort and pick the one that provides the best anticipated result for the lowest possible effort.

If you have questions or would like to get some industry perspective as you consider any of these strategies, feel free to reach out. We’ll be happy to compare notes and share our learnings.