Credit unions have historically been technologically savvy, but when it comes to commercial services, banking institutions lead the charge. Many CUs have begun developing strategic plans for 2004 and beyond and one item high on the to-do list is implement commercial services, which have been offered in limited version for years.
Members have opened small business checking accounts and have taken small personal loans for business needs. But with the changes in the industry, CUs now have the authority to create competitive commercial services for the community while also boosting income opportunities and further expanding member services. However, the biggest obstacle I have seen CUs encounter is that, although they want to offer commercial lending and deposits, many aren't sure where to begin.
From developing the right products and services and taking them to market to training staff and changing an operation's culture, there are many things to consider while planning the implementation and rollout of commercial services. And how you develop your commercial services program can be the difference between outstanding success and dismal failure. Establishing a comprehensive, forward-looking plan for your business banking rollout is a great place to start.
Follow these five steps to jumpstart your success:
* Hire business banking expertise. Credit unions must build the depth and breadth of experience in the areas of business lending, deposits, payments, sales, and operations. In order to support such a program, a CU must be willing to seek out and invest in the appropriate staff if that expertise does not already exist in-house. It is paramount that a CU build the right commercial executive team at the outset. Look for individuals who have 10-plus years of experience on both sides of the fence-sales and operations. In addition, CUs entering business banking should keep this in mind: This is new territory. Your tellers and Member Service Representatives are not accustomed to meeting a member's commercial needs. A good training plan is a must for your staff to understand the differences between retail and commercial services. The result will be a smoother transition into the commercial market.
* Operate at industry best-practice standards. Commercial services require substantive changes in several areas of a CU, including culture, institutional risk profile, product set, and member demands. To operate at industry best-practice standards, a CU must take adequate time to define its strategy and understand the products it will be offering.
* Document policies and procedures. Before going live with the first commercial service products, CUs need to ensure that they have documented policies and procedures to mitigate some of the impact of the changes referenced above. Look at how current products will integrate with new solutions. And for new policies, let NCUA be your guide. The organization has rules for all policy requirements.
For more information, visit www.ncua.gov.
* Ensure commercial deposits expertise. As CUs implement business banking, the tendency is to focus most of the implementation effort on loans. But the biggest mistake is to neglect the planning and management of commercial deposits. CUs should ensure that their commercial services divisions have the right balance of operational and sales expertise in the following areas of commercial deposits: account analysis, sweeps, zero-balance accounts, ACH originations, sub-account relationships, and cash services.
* Plan commercial services expenditure set up with ROI/business modeling. Many CUs make the frequent mistake of asking the following question too late: "What will be the ROI?" As a result, CUs often make expenditure decisions too early in the process without running the decisions against an ROI or capital budgeting model to help validate the decisions. ROI is typically vague, so work with your CFO or other financial executives to create a business model and a customized ROI. With a benchmark, it's easier to gauge progress.
When planning expenses, consider new products, such as Small Business Administration lending. Earlier this year, the SBA decided to allow CUs the opportunity to offer SBA-backed loans to members. Credit unions have the ability to make business capital more accessible to members, according to the SBA. Now it can't be ignored that CUs play an important role when it comes to reaching an assorted pool of prospective and existing small-business owners. Take all of this into consideration, and don't not forget about your core system.
All the policies and procedures will do no good if you can't service the commercial needs of your members. It is important to ask yourself, "How can my existing system handle my members' commercial needs?" Include your core system provider in your strategic planning. They may have opportunities that you never realized existed.
There are many things to consider when approaching the commercial services market. It's not just creating some new products and tagging the word "commercial" to them, it's understanding the complexities of the commercial market and the needs of your members. Dedicate the time and the effort to complete due diligence in setting up your commercial programs. If done correctly, it's a winning partnership that you and your members will enjoy.
Jim Reddish is the CU product manager for Aurum Technology, Plano, Texas. He can be reached at www.aurtumtechnology.com, or 877-482-8786.
