Financial institution consumers are changing, and credit unions must adapt if they expect to compete with banks.
That was the message from Chris Oldag, senior vice president of lending for San Francisco-based Patelco Credit Union. Oldag led an educational session at the CUNA Lending Council conference here.
According to Oldag, consumers are becoming more skeptical, less loyal. Consumers have become more anxious, are no longer forgiving, and are no longer delegating but demanding control of their financial lives. "And thank God for that. Now it is time to step up and be responsible," he said.
Trust is becoming elusive, Oldag asserted. He cited a Forrester study that found half of respondents recently switched financial providers. One-third switched twice due to dissatisfaction.
So how does a financial institution hold on to customers or members? "By customer advocacy-doing what's right for the customer, not what's best for the bottom line," he said.
There are many ways for CUs to "reinvent" the consumer lending experience from the member's perspective, Oldag said. For example, people prefer an easy loan application; so don't make them duplicate information that is available on their credit report. In addition, CUs should be closing loans remotely by using the Internet, telephone, mail, fax machines and indirect auto dealers.
"Do paperless loan processing to save trees. Consider a verbal verification of the information in the person's credit file. Discuss terms and conditions, and advise the member all terms will appear on the statement," he advised. "Don't worry about creating loan files and getting wet signatures. Financial institutions have boxes of voluminous loan files from borrowers who have defaulted."
For disclosures, Oldag recommended compiling a sample booklet to give to people, while having the information available online. Members would be asked to verbally consent to this method, and a note would be made on their electronic file.
"This is a minor business risk versus a huge efficiency gain," he suggested. "It allows credit unions to offer vastly improved member service. The big banks are doing this, so think of ways to do it."
One often-overlooked marketing method is pre-approvals. Oldag urged credit unions to place a hypertext link on electronic statements informing members they are pre-approved for a car loan. The loan amount should be based on the credit score, and the offer should have an expiration date.
Arming The Member
"When the member clicks on the link, a screen comes up with a new car rate and a used car rate. The member can use the printed page for any car at any dealer," he explained. "That way, the member is armed and not at the mercy of the dealer."
Look for ways to market, Oldag urged. If your members are spending large amounts of money at Home Depot, they might be interested in a home equity loan. If they spend large sums on car repair on their credit cards, they might be ready to get a different vehicle.
Another car-related opportunity is a second-chance auto refi. For instance, he urged use of pre-screened data or a newsletter to urge members to move their auto loans to the credit union. Use charts to show the difference in finance charge and have "amount saved" samples, he advised.
"Marketing is very important. Oil changers use thermal window stickers to remind people when to come back-credit unions should do the same," he said. "Offer members a free financial checkup to see if you can save them money. Pay a $100 finders fee to a member who brings you an auto loan from a competitor."
Change Your Thinking
Oldag recommends CUs "change their thinking" on rates. Be prepared to meet or beat the rates of your competitors, he said. Post information on the home banking sign-in page, on statements and on teller-viewable screens. Send direct-mail reminders of promotional rates or sales events.
Credit unions also must be adaptable enough to match delivery systems and demand by being prepared to handle evening and weekend car purchases.
"Loyal members are the best marketing tool, so be a member advocate," he said.
