SAN DIEGO -
If credit unions want to grow, the key isn't to focus on growth but to rethink and rededicate themselves to giving members what they want.
And what they want is best price, service, convenience and selection, according to Rudy Hanley, CEO of Orange County Teachers FCU, who led a session on growth strategies at the California and Nevada CU League's Annual Convention. The trick, he said, is balancing providing those things to members while reducing expenses, maximizing spread and growing fee income and net income.
"Members want high dividend rates, low loan rates and no fees. But if a credit union does that, the spread will go down. Credit unions must do a balancing act. We have to balance both for the short term and the long haul."
Hanley listed four strategies for CUs to follow to generate long-term growth: focus, align, avoid fads ("Fads are always dangerous") and differentiate. He said focus is a concept that everyone believes in, but few wish to make the necessary sacrifices to achieve.
"If a credit union focuses on one thing, it must be significantly better than other financial institutions to be noticed," he said. "But then, the credit union won't be as good at other things."
ING, for example, has tremendous focus on attracting savings deposits with high rates, and it has scale, Hanley said.
"We can't compete with them, and we can't be all things to all people or even a lot of things to a lot of people. Credit unions should do what they can do extremely well and focus on that. Our credit union does not do business loans, but they might work for other credit unions."
If a CU chooses to make service its priority, it must overreact to problems and mistakes, he added. "One mistake many of us make is assuming there is only one solution for everyone," he warned. "The truth is, it is just one more perspective. There is no one magic answer."
Credit union member growth has been up and down for two decades. Hanley said some CUs get lulled into thinking "we are having a bad year this year, but next year will be better." In some cases that approach turns out to be true, but he noted the highs are not as high as they were 15 to 20 years ago.
Differentiation has become a key growth challenge for credit unions, Hanley said. Specifically, he cited competition and changes to affinity. "The competition has changed tremendously. Two decades ago, commercial banks were commercial banks-they loaned money to large corporate America. Prior to 1980, Citicorp was not interested in consumer loans. But today, big banks are doing auto loans, credit cards and other consumer products."
Affinity, he continued, used to "set credit unions apart" when they were defined by the name of their single sponsor.
The widespread use of community charters and names that "do not mean anything" have cut into that clear-cut identity, he asserted.
Some members will tell their credit union, "I don't want you to grow. Growth is bad," Hanley said.
On one hand, he acknowledged, growth does have negative aspects-such as it creates challenges of meeting the needs and expectations of members.
"People associate bigger with better, but that is not necessarily the case. There must be balance," Hanley recommended. (c) 2007 The Credit Union Journal and SourceMedia, Inc. All Rights Reserved. http://www.cujournal.com http://www.sourcemedia.com
