Make The Most Of Coming Chaos, Inactive Accounts

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DES MOINES, Iowa-Credit unions looking to grow in 2011 need to be focused on transformational change, including addressing inactive accounts.

That is the advice from Jeff Russell, EVP of The Members Group, who added as CUs examine their business model they should know the time for "incremental tweaking" is past.

"We need to reinvent how we look to members and potential members this year and in the years to come," he said. "Now is the time to make investments to gain market share. Certainly there are economic pressures on credit unions, but credit unions need to move off the 6% market share they have had for decades. There is so much competition between cookie-cutter financial services providers, so how can credit unions distinguish themselves? Credit unions must go deep into the market to serve people better than they can get anywhere else."

On a tactical level, Russell said there is an opportunity for CUs to turn inactive checking and debit accounts into active accounts. The federal rules regarding interchange are still to be determined, but with fees likely to come back into play consumers are going to close their inactive accounts.

"For a credit union, those inactive accounts are the best leads they have," Rusell observed. "They are qualified leads. There will be chaos in the months ahead, but it can be used to gain market share. Credit unions need to find ways to activate those accounts, possibly through incentives."

When credit unions are focused on a message, such as getting members to opt-in to overdraft protection, they do well, Russell noted. And while he absolutely believes that 2011 will be the right year with major opportunities for credit unions to gain market share, credit unions should know that it will not necessarily yield massive loan growth in 2011.

"But it will show up in 2012 as people think of their credit union as their primary financial institution and come to it for loans. Moving a checking account is not easy, so this is a once-in-a-lifetime opportunity."

One example of how The Members Group is helping its credit union clients grow is Dwolla, an alternative payments platform, similar to PayPal, that TMG is rolling out to credit unions.

Russell said Dwolla will help members perform person-to-person payments, pay their landlord or use Facebook/Twitter to make payments.

"The transaction cost is just 25 cents, which is much less than the merchant discount cost to accept a credit card transaction. And most landlords don't accept credit cards."

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