Consumers are turning to credit unions for a number of reasons: personalized service, commitment to their local communities, and affordable rates. Learning and building upon each of them within your credit union will help you attract, retain, and grow your member base.
After all, credit unions are community-focused financial institutions that offer much the same products that traditional banks provide, except they serve on behalf of a not-for-profit mission. When members belong to a credit union, they are valued co-owners who receive profits or re-invested financial advantages through lower costs and dividends.
Members have often received reduced annual percentage rate (APR) loans, higher savings account yields, interest-earning checking accounts, and other financial service advantages traditional banks don’t typically offer, refuse to offer, or simply cannot match.
In addition to advantageous interest rates, credit unions provide other exclusive ways to support their membership. Particularly in these times of financial instability, need, or financial crisis, credit unions can and should be able to provide fast and efficient financial health services to help their members maintain and build on their financial health.
If you haven’t implemented the following credit union services or strategies, you may be missing out on a chance that can make the difference in the financial lives of existing or future members.
Easy financial access to affordable credit for members
For those members or consumers who find it hard to qualify for credit, credit unions can offer improved options for acquiring small dollar loans.
Credit unions offer small dollar loans which are often unsecured and do not require collateral to execute. When members apply for a small dollar loan through their local credit union, they consider your 360-degree relationship with your institution, consistent engagement, and occupational history along with their creditworthiness.
Many industry insiders have finally come around to the fact that the credit union’s evaluation of small dollar loan applications can’t simply hinge on some arbitrary credit score. The credit score metric simply does not tell the whole story anymore, if it ever did. With the advent and advancement of the fintech industry there are better, more evolved tools we can implement into the credit union arsenal of products and services that can serve both credit unions and members on a practical, everyday manner.
The foundational characteristic about the credit union movement is the institutions’ singular relationship with their members. It’s why QCash is such a strong fit for credit unions; our software-as-a-service, mobile small dollar lending platform integrates seamlessly with your credit union’s core banking platform to take advantage of our proprietary relational-underwriting engine. The decisioning engine takes a 360-degree evaluation of each small dollar loan applicant. In just six clicks in 60 seconds, if approved the applicant’s funds are deposited directly into their chosen account, ready for whatever life emergency comes along.
One prominent example relevant to the last two years was the Paycheck Protection Program (PPP) and how important it has been to middle- and low-income workers let go from their jobs or put on furlough. During the outset of the pandemic in 2020-2021, credit unions issued a significantly higher number of PPP loans than traditional banks. According to the Credit Union National Association (CUNA), credit unions continued to lend and even increased lending during the Great Recession and current COVID-19 pandemic. By contrast, traditional banks are inclined to pull back or even reduce lending during crises.
As a result, between year-end 2019 and September 2020, credit union membership increased 3.37 million while credit union portfolios rose 6.6 percent, according to CNBC.
When the state of Michigan mandated shutdowns in March 2020, painting contractor Skyler Fort turned to his northern Michigan credit union, 4Front Credit Union, for help with a PPP loan. Many people around the country have gone to their financial institutions for PPP loans, but Fort chose 4Front rather than a bank “based on the more personal feeling.”
While Fort had previously done business with banks and had bank relationships, he transferred his accounts over to 4Front. In the end, the $55,000 loan helped his painting business keep its five full-time employees and retain its other 14 contractors as business ramped up that summer.
Fee forgiveness and Skip-a-Pay programs
Early in the COVID-19 pandemic, the consumer economy’s focus deviated to provide generous loan forgiveness programs and other avenues to assist individuals and families who were falling behind on their bills and other financial commitments.
“This is a great opportunity,” says Douglas Boneparth, certified financial planner and president for Bona Fide Wealth, “to go back and examine your cash flow so you can figure out where to deploy the money you were previously spending on your loan payments.”
Credit unions also lean toward waiving fees on accounts if members are having difficulty supporting their balances or making their payments on time. “Credit unions tend to have fewer fees and lower fees than banks, but they’re quick to waive the fees they do have,” says Carrie Hunt, president and CEO at the Virginia Credit Union League. “Credit unions are very quick to put their members first and modify their products and services for people who are in need.”
Take the initiative on financial inclusion and diversity
The mission continues for our venerable not-for-profit credit unions in providing credit and other needed financial products and services to the communities they serve. Within that longstanding mission, they serve a healthier representation of diverse communities and better positions of leadership for women.
Maintaining the progress of minority depository institutions (MDIs) also helps federal regulators like the National Credit Union Administration (NCUA) and the Federal Depository Insurance Corporation (FDIC) ensure that underserved communities obtain access to credit and other valuable financial services. Such federally-insured institutions ensure that 51 percent of the voting stock is owned by minority individuals or more than 50 percent of the board of directors includes minority chairs.
The importance MDIs play in providing an accessible and safe financial institution for minority communities cannot be understated: 528 credit unions are classified as MDIs, compared to 149 banks, and 51 percent of credit unions have CEOs who are women, contrary to just three percent with banks.
Advocate digital banking for credit unions
Forward-thinking credit unions across the United States are enlisting the help of new digital leaders and fintech to adapt to contemporary and upcoming consumer preferences and necessities.
Being not-for-profit entities, credit unions have gained an undue reputation for coming up short on such advanced resources and financial technology compared to traditional, profit-seeking banks. For the credit unions who aren’t on board yet are catching up fast; PYMTS found that approximately two out of three credit union executives agreed that they need to build out their digital offerings in order to remain “economically viable” by 2023. Over half, 57 percent, of those same executives understood that adoption of those digital assets was on their organizational roadmap.
A recent study by BAI Research found that more than 50 percent of consumers have used “digital banking applications more since the start of the pandemic. Additionally, 87 percent of consumers plan on maintaining their increased usage after the end of the pandemic.”
Financial industry strategist Jim Marous states it plainly: “Financial institutions must be able to deliver an easy-to-navigate, seamlessly digital platform that goes far beyond a miniaturized online banking offering.”
Bolster financial literacy in credit union communities
Credit unions have a time-tested and approved tradition of offering special community initiatives to help their members and local consumers improve their financial literacy and general education goals. TopLine Federal Credit Union, located in Plymouth, Minn. just outside Minneapolis, recently sponsored a student-led financial literacy research project in their community. They partnered with a group of students from Wayzata High School’s Compass Program to research financial literacy awareness in youth while creating financial tools to improve it.
“We are passionate about helping young adults understand the basics of personal finance, acting as a resource to help them make healthy financial decisions and creating awareness for credit unions as financial partners,” said TopLine’s Vicki Erickson.
Findings from the project were presented by the students based on the research conducted on the existing awareness of financial literacy from the school’s student body. Potential growth areas were identified within the young adult age group, and the Compass team then developed concepts and practical strategies to raise awareness around potential credit union resources.
Such regular community engagement initiatives and events offer an advantage difficult to beat when it comes to building and maintaining a trusting relationship with up-and-coming young adults. The member service mindset and financial products appear to have a powerful effect on credit unions’ customer satisfaction scores. Consumer Reports has 96 percent of credit union members claiming they were “highly satisfied” with their financial services, while the three largest national banks registered 80 percent.
Whether in rural or urban settings, credit unions represent a staunch presence in the lives of more than 122 million Americans. The industry’s standing and continuing mission of providing credit to individuals or the underserved in need gives your credit union the advantage of offering lower rates on any number of products and services including small dollar loans and savings accounts. Moreover, credit unions are uniquely positioned to mentor underserved members or young adults just entering the financial world.
QCash wants to be a big part of what attracts existing and future members to your credit union. For more info on our mobile small dollar lending platform, go to http://qashfinancial.com.
