LAS VEGAS-For more than two decades American consumers borrowed rather than saved, and now that behaviors have reversed themselves, one economist wonders if credit unions will have to rethink their strategic focus.
Rob Johnson, executive vice president and principal with C. Myers Corp., a Phoenix-based consultancy that provides ALM services, said from 1984 to 2006 the personal saving rate in the U.S. made a long, steady decline. But that's no longer the case.
"Credit unions are built to rely on loans," he said. "If things are changing and people are going to save more rather than borrow, credit unions will have to come up with new ways to attract loans. "Or, they will have to change their model to rely less on loans."
Johnson, who predicted fee income will likely continue to decline due to projected loss of interchange income in a post-Durbin world, offered six keys to success for credit unions:
1. Strategic Clarity. Knowing why (the purpose of the credit union), who (target market?), what (value proposition) and how (to deliver the value).
"It is not a right to be in business," Johnson told attendees of the National Directors' Convention here, "it is a privilege. It has to be worked at. That is why a company needs a purpose. And it is especially important for a non-profit to have a purpose. The credit union must be good at enough things to attract people, and it must be sustainable."
2. Making "No" Decisions. "Say 'no' to things that are not aligned with the credit union's strategy," he advised.
3. Information Equity Is Important. This covers a variety of topics from making good credit risk assessments to appropriate pricing for products and services the CU provides.
4. Mass Customization.
5. Make It Easy. Johnson said CUs must become more "Amazonish." Amazon has a recommendation engine for its shoppers. When someone buys a camera the engine automatically suggests purchasing an extra battery, a memory card and a tripod.
Fully 30% of Amazon's sales come from items suggested by the recommendation engine, he noted.
"Amazon knew it had to understand what people's needs are, and it had to make it easy," he said. "Because it is easy, the process is efficient. Credit unions have not revamped their member acquisition process or the lending process. People don't want to be bombarded with information, but it works when their credit union anticipates their needs."
6. Talent, Talent, Talent. CUs need people who can solve problems, think strategically, have passion and connect with members. None of the other five keys work without talent and passion, Johnson warned.
