Relationship Pricing Boosts Eficiency At Gateway
ST. LOUIS — Relationship pricing has reduced Gateway Metro FCU's membership by more than 5,000 over the last five years, yet it has also boasted assets by $16 million.
Delineating between "committed" and "non-committed" members, and setting pricing accordingly, has made the $180-million CU more efficient and more profitable. It's a solution community-based CUs should consider as revenue streams are challenged, said David Barton, who recently retired after running Gateway Metro for 17 years (see related story). He has been succeeded by Larry Pixley.
The Goal: Increase Efficiency & Profitability
"We have always worked to make the credit union more efficient," said the former CEO. "The biggest improvement came when we started treating committed members and non-committed members differently. Committed members-those who treat us more like their primary financial institution-earn higher rates on CDs and receive lower loan rates than non-committed members-those who may have come to us through an indirect auto loan, for example, and do not use other services."
That approach, started five years ago by the 18,000-member CU, not only has increased assets with fewer members, but boosted checking totals and the number of members who consider Gateway their primary financial institution. "At the end of 2005, only 33% of our members had checking and direct deposit. Now that number is 50%," said Barton, who noted that checking and direct deposit are the requirements for a member to be considered committed.
Committed members receive: higher CD rates, such as 1.10% APY for one year and 2.40% for four, opposed to .25% and 1%, respectively, for non-committed members; 6.02% on checking deposits up to $1,500 (e-services are required), compared with .10% to .20% based on balances; are able to open a 10% Youth CD; and receive a 50-basis-point reduction on loans.
Barton acknowledged that many non-committed members have left. "We are giving members a clear choice-do I want to be committed to the credit union or not? It is not our goal to chase away members, the first objective is to convince more members to become committed, and we have been successful in doing that."
What's Behind 'Non-Committed' Members
Barton contends non-committed members are the result of burgeoning fields of membership. "In the earlier days there was a joint commitment. The credit union, of course, was committed to its members. But because most credit unions were located at their sponsor, employees felt a greater commitment to the credit union. As the industry has become community based, many members do not have the same kind of dedication they had 30 years ago."
Barton added that the economic and regulatory pressures will eventually "bring credit unions full circle. We are getting back to that same commitment members had when the credit union only served their employer. We are getting back to what the credit union should be."