New Revenues Lie In Current Products
BIRMINGHAM, Ala.-The answers to enhancing the bottom line don't lie in new initiatives. Instead, solutions can be found in existing products and processes.
For Dennis Dollar, those opportunities are checking account penetration, student lending, bankruptcy management, and credit cards. "We have to be willing to reopen some doors that we have previously propped open, but not opened fully."
According to the Dollar Associates principal, the biggest opportunity may lie in checking. "Forty-two percent of the average credit union's membership utilize the credit union's checking account as their primary checking account. That says the average credit union has 58% of its members who are captive checking account prospects. With the assault on overdraft and interchange revenue, credit unions are positioned to make up for some of that loss through more volume."
Savings, too, come from better management of bankruptcy cases. Credit unions lack the economies of scale, and fortunately the numbers of bankruptcy cases, to be as efficient as banks at managing bankruptcies, stated Dollar. "Because of the banks' bankruptcy volume they save more on legal costs and do a better job at automating this process, whereas credit unions typically handle the matter in-house or with a local attorney."
Dollar pointed out that several of his clients are turning to third parties to manage bankruptcies and are saving money and improving bankruptcy collections.
This year CUs also have the opportunity to significantly expand their credit card portfolios thanks to the consumer protection laws, asserted Dollar, who believes business can be taken from banks by creating "consumer-friendly cards."
Separately, due to the rapid rise in tuition prices, student lending can be expanded since many families need supplemental loans outside of grants and federal loans, Dollar added.
Individually, none of the recommendations make up for the loss of overdraft revenue and looming interchange revenue reduction, Dollar said. "But collectively they can allow the credit union to close that gap."