Xceed Financial's Plan: A Community of SEGs

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EL SEGUNDO, Calif.-For $718-million Xceed Financial CU, its strategy of being a "workplace credit union" rather than opting for a community charter has proven to have much more upside than downside.

Teresa Freeborn, Xceed's president and CEO, said eschewing a community charter has been good for the former Xerox CU because being SEG-based allows it to "fulfill a niche strategy-one where we truly know our members and their needs."

"We are focused. Highly focused," she said. "When I speak to some of my counterparts they are trying to be all things to all people. It is so much easier for us because we are focused on our business partners. We don't sponsor an activity unless it speaks specifically to one of our SEGs."

This focus shows in Xceed's marketing and communications efforts, Freeborn asserted. She said the credit union is able to save "a lot of money" by not having to buy mass media. Instead, it takes those would-be advertising dollars and creates unique promotions for its partners.

There is "far more upside than downside," she declared. The downside is some consumers "feel excluded" before they get to the door. But to Freeborn, that exclusivity is "special."

"It flies in the face of the whole inclusive thing, that anyone can join, but we don't talk about that. Many credit unions talk about demographics and not getting younger members, but the new hires at the companies we work with are in their 20s, just by the nature of the workplace. As long as we make sure we have everything that wows them, we are doing our job."

In the first quarter of 2011 Xceed Financial posted net income of $207,000, a welcome return to the black after three years of losses. It had a $918,000 loss in 2008, when it placed $4.6 million into its allowance for loan losses, followed by a loss of $18.5 million in 2009 as it paid $4 million to the NCUSIF and put another $10.8 million in ALL.

In 2010 Xceed had a loss of $2.2 million before assessments. It paid $744,000 to the NCUSIF and $796,000 to the corporate stabilization fund, leaving it with a loss of nearly $3.8 million.

Why Fight Perception?

Xceed was chartered in 1964 as a credit union for employees of Scientific Data Systems. SDS later was acquired by the Xerox Corp., which became the CU's primary sponsor. Over the years it added other large employer groups, such as Office Max, ACE, Realogy and Wyndham. It also added any new Xerox acquisition, as well as other small to mid-size companies that fit our "tech" membership.

In addition to its SEGs, the-then Xerox FCU added "underserved" charters in some of its markets. When Freeborn arrived in 2006, the credit union had implemented a hybrid approach where it was a community CU in some markets as a result of the underserved charters and SEG-focused in other markets.

"I knew for us to stand out and be successful we had to make a radical change and in a sense return to the roots of where credit unions got their start," she recalled. "The research keeps telling us that consumers think they have to be part of a workplace to join a credit union, so we figured why fight that perception?"

It is "incredibly challenging" to compete with banks as a community credit union, she said, especially in a large metropolis such as Los Angeles. As a "workplace" credit union, Freeborn said, Xceed Financial has been able to partner with its employer groups and get to know them in a way it never could "know" a community.

"It has been a highly successful strategy for us," she said. "There definitely was discussion of a hybrid or combination approach, but since we created this new strategy we have not looked back once. We are committed to this strategy and will continue to expand on it by enhancing the programs we offer to our existing SEGs, as well as continue to add new SEGs."

A big part of this strategy is taking a "very deliberate approach" to being top of mind with its SEGs. Freeborn said Xceed takes care to develop personal relationships with management at all of its partners, so when one wants to do a program, the people there will think of the credit union.

Like Us? Get Your Company To Join Us!

For those times when someone comes in off the street and wants to join the credit union, Xceed Financial has sufficient SEG representation in its markets there is a "pretty good chance" the person can be accommodated, Freeborn said.

And if not? "We think of it as being like the Aflac commercials: if you like what you see, ask your company to become one of our SEGs."

According to Freeborn, when Xceed is looking to expand its list of partners, an "ideal" SEG must have several qualities: it should be based in one of Xceed's geographic markets, it should be involved in the technology sector and it should have 100 or more employees.

"I don't feel there has been a downside to this strategy," she said. "We are so very focused and that focus permeates our entire credit union. Our goal is to deliver the best financial services through cutting edge technology, financial education and a unique personal banking program to working adults. We don't believe we could invest in these programs the way we do today and deliver the way we do in the workplace if we were a community credit union."

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