Understanding Why Members Borrow-And Why They Don't

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With loan-to-share ratios at decade lows, one of Member Research's recent national surveys revealed that increasing lending activity ranks among directors' top three strategic priorities.

Loan research can reveal why consumers choose a particular credit union, and more critically, why they don't. The answer to lost business may lie in slow processes, stringent lending parameters, perceived inexperience, lack of competitiveness or other factors. Without empirical data, however, managers are left to guess-and guesswork is slippery footing in strategizing loan growth.

The prerequisite for increasing lending activity means knowing exactly:

* Why members do or do not apply for loans.

* Why they do or do not complete the funding process.

This vital information can come from telephone, mail or focus group loan surveys. Such research can identify reasons for failure and show opportunities for growth. Is the problem more of an operational and procedural nature (e.g., cumbersome processing, slow approval, uninformed employees or uncompetitive rates) or more communications-driven (misperceptions and ineffective marketing)?

Finally, loan surveys can also indicate where members do business outside, to further address threats and identify targets. In one example many members used promotional credit card rates to fund vehicles, bypassing traditional sources altogether.

While every lender has to offer a competitive rate to be "in the game," few if any financial institutions can win sustainable and profitable new loan business on price alone. Loan research can identify opportunities that go beyond price, and help find ways to appeal to targeted members in ways that a credit union can uniquely provide. Whether internal or outsourced, loan research can help diagnose, treat and energize lending activity... and help restore a healthy balance to ratios and the credit union.

Neil Goldman is President of Member Research. For more information, please call (310) 643-5910 or send email to ngoldman memberresearch.com.

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