LAKE MARY, Fla.-Harland Financial Solutions believes credit unions have room to add fees and not upset their members in the process.
Sam Kilmer, VP of market development, offered a few solutions to improve non-interest income, and small business lending, particularly with the possibility of the MBL cap being raised, is a key area.
"From a small business lending perspective, SBA is one area of promise for non-interest income, interest income, and serving members," said Kilmer. "With an SBA loan there is a guaranteed and non-guaranteed portion of the loan. On the non-guaranteed portion, a CU can earn interest as they maintain it on the books. As to the guaranteed portion of the loan, there is an active secondary market where the CU can sell that portion to earn both a significant premium on the sale and a servicing fee."
The loan sales also allow a CU to serve a relatively larger number of member business needs within any given MBL cap, added Kilmer, noting Harland's LaserPro supports SBA lending origination, while its Servicing Director and PhoenixEFE solutions support SBA servicing.
Business depository accounts, reminded Kilmer, bring banks fees that CUs who service businesses don't receive since many run the accounts through their traditional products. "Credit unions should change that."
Reworking Share Drafts
Reworking share draft packages to incorporate more value-oriented bundles and relationship pricing can hike revenue. "FIs can use product repricing scenarios that gauge household relationship risk by using business intelligence solutions," said Kilmer, noting Harland's Touch Analyzer product.
Kilmer addressed how one credit union reviewed its fee structure two years ago that resulted in repricing and substantially improved fee income. "This didn't heavily impact the broader membership, but just corrected an environment where membership wasn't a win-win for both the member and the CU," said Kilmer.
Kilmer said most credit unions attempt to avoid fees whenever possible. However, members sometimes use services differently than the CU anticipated. "For example, some credit unions might find their members using a savings account in lieu of a share draft account for heavy transaction activity, especially at the ATM. Making some changes to the fee schedule can have an impact on earnings with little member attrition."
For info: www.harlandfinancialsolutions.com.
