PUT CAPITAL TO WORK
Rethink How Much Capital Is Enough
MADISON, Wis.-Growth comes from within. It may sound like a corny New Age-ism, but CUNA Economist Mike Schenk said credit unions that are struggling with stagnant growth typically overlook one of the most effective strategies for growing their businesses.
"As a starting point, credit unions should take NCUA at its word and begin to discuss where the credit union stands from an earnings and net worth perspective," Schenk suggested. "They need to rethink how much capital is enough, how much earnings is enough, and maybe that 1% ROA isn't the magic number we've made it out to be."
If a credit union is willing to do a little soul-and Call 5300 report-searching, they may find that have exactly what they need to revitalize their growth right at their fingertips.
"They can then conclude that they have the flexibility to bring capital and net worth down a bit and use it to build more branches, offer better rates, invest in technology, a myriad of things to attract people," he counseled.
Part of making that happen may require reevaluating the credit union's approach to governance, as well. "There are certain legacies that come with governance," he observed. "There is a natural reluctance to let [capital and net worth] fall when it took so much time and effort to build them up, but a credit union with 15%, 12%, even 9% may want to consider that they have too much capital and use some of it to reinvest in growth and remain relevant."
-Lisa Freeman
RECOMMIT TO CARDS
Plastic Is Powerful Growth Magnet
SEATTLE-For Pemco here, helping to drive growth goes beyond just providing card processing services-it includes keeping the credit union in the card business.
Case in point: later this year it plans to begin offering a credit card portfolio performance analysis service.
"Our analysts will examine a credit union's portfolio and determine what it might take to make a profit. If a credit union can see they can make their credit card portfolio a profit center, they won't want to sell it to another company to manage," explained Scott Perry, director of marketing. "In the past, credit unions did not know if their credit card portfolios were profitable, they just knew they required some resources. So, rather than managing those portfolios, they sell them for a chunk of change in the short run, but in the long run, they are missing out on the potential to make a profit. We are giving them an opportunity."
It is also seeking to provide opportunities to better market card programs. In May, Pemco will introduce a campaign called "It's So About You," which will allow credit unions to not only market to, but also educate the youth market how to use credit cards responsibly. "Many high school teens soon will be in a position to use a credit card. We want these people to know their credit union has just as much to provide as any other financial institution," said Perry.
It also provides considerably more materials for other programs, including lobby posters, statement stuffers, letterhead, counter tents and other marketing support aimed at boosting card usage and/or a rewards campaign. "If the credit union has a rewards program for their credit cards, they don't have to hire a graphic designer," said Perry. "We provide the materials and the credit union can put their logo and their message on the materials by signing up online. As far as we know, we are the only company doing something like this, as it just started this month. Not every credit union, especially the smaller ones, has marketing muscle, so they can use us as their marketing consultants. The downloadable materials are free to our customers."
In addition, content is available from the company's marketing roundtables on its website, and Pemco has recent partnered with Alaska Options to allow it to offer lower ATM networking fees.
-Michael Bartlett
DELVE INTO BIZ SERVICES
Merchant Capture Gets Foot In Door
DULUTH, Ga.-One of the richest opportunities for growth in credit unions today is member business services, and a great way to attract business members is to offer merchant capture, one company is stressing.
"The move towards merchant capture is a whole growth strategy for credit unions, because it allows them to go after the business customer and really get them in the door," said Vijay Balakrishnan, COO of VSOFT, which provides a variety of image capture solutions to about two-thirds of the nation's corporate CUs.
Telling potential business members that their transactions can be captured at their own site and then electronically delivered to the CU is a powerful selling tool, Balakrishnan suggested. Lisa Coffey, VP-item processing at Southeast Corporate, Tallahassee, Fla., agreed. "Merchant capture will make credit unions competitive for small business accounts," she said. "A big factor when a business decides where to bank is the location of branches to make deposits. With merchant capture, you eliminate any geographical limitations."
Thus far, natural person credit unions-and even many banks-have been slow to jump on the merchant capture bandwagon. "But now is the time," Coffey urged. "If your corporate can provide it in a cost-effective manner, now is the time, because once a business has bought into someone's system, it will be very difficult to get their business."
One of VSOFT's clients, Southeast Corporate, is working with several natural-person CUs on a beta test of its merchant capture solution.
-Lisa Freeman
SPEED UP YOUR SERVICE
Automation Moves Members Along
FRISCO, Texas-When it comes to growth, credit unions feel a need for speed. "Net new member acquisition is a strong focus for many credit unions. The kind of tools they are looking for...are in the automation area," said Sara Brooks, SVP-Strategy and Offerings Development at IntegraSys. The ability to apply for membership, open and fun accounts, and apply for loans online in an easy, end-to-end process is key to growth, she said. "We help walk these new members through the process of moving their primary financial institution over to the credit union."
IntegraSys Product Manager Dan Urscheler added that credit unions need "tools that allow them to analyze how an entire household relates to the credit union" in order to better target their marketing.
Other growth strategies they suggested:
* Consider expanding members' access to you through shared branching home banking.
* Streamline your lending. "The lending process is all about speed," she said. Automating the loan origination process takes you there.
* Consider using relationship pricing models to encourage existing members to do more business with you.
* Provide tellers with education and tools to become "advice givers" so they can cross-sell.
* Recommit to the credit card, an area that continues to show growth opportunities.
-Michael Bartlett
MEASURE FOR SUCCESS
Benchmarking Isn't Just About Rates
ATLANTA-By definition, growth requires measurement, and sometimes that's exactly what credit unions are lacking.
"Credit unions spend a great deal of time looking at their competitors rates, but we have found there is so much more to it than that," said David McConney of Harland Financial Services. "They see this type of benchmarking and measuring only as a pricing strategy as opposed to a growth strategy."
CUs need to look beyond just benchmarking rates but also compare themselves to their competition in other areas, membership growth and membership attrition, for example. "They need to understand the side of the business that has to do with attrition and retention."
Another important growth component: leveraging sales and service. To do it, credit unions need to understand both how and where their members interact with them. This allows them to target their members based on that information. Once a CU has the products and services, as well as a means of measuring them, in place, the next step is educating your staff. "You must train your staff on what all you have to offer and on the tools available to them," he advised. "There is often a disconnect between the IT group and the marketing group. You need to be able to see technology not merely as technology but as a way to run and grow your business." And there's a way to do just that. "We have found the credit unions who require IT to justify the ROI tend to have the most efficient and effective deployment of technology."
-Lisa Freeman
