It's Time to Embrace the Opportunity in Crisis
There can be no doubt we are in challenging economic times. The question is, "How will we navigate these times?" I truly believe we have the opportunity to do much more than just survive, but to thrive.
Yes, we have a number of issues confronting us, not the least of which are the additional losses reported in U.S. Central's 2008 audit, the impact of these losses on the other corporates, and in turn their member natural person credit unions. We also face a bumpy road of natural person credit union losses in some cases unrelated to the corporate losses. Several times over the past few years, I have referenced "Wei-Ji," the Chinese symbol that represents both "crisis" and "opportunity." I believe that this symbol continues to crystallize the crossroads of our industry. While the times are challenging, they are also ripe with new possibilities.
Today being frugal, thrifty, budget-conscious, a bargain-hunter and, yes, even cheap, is in fashion. The New York Times and the New Oxford American Dictionary have recognized new words created to describe consumers today like "frugalista" and "recessionista." Now, saving is trendy and comparison shopping is de rigeur. Lucky for us, that means people are looking for more value for their money and trying to be smarter about how they use it. Frankly, it is a confluence of elements that points to a greater appreciation of what our industry offers
Membership, share growth, credit cards, and innovative products and services hold the key to credit unions' continued success and prosperity in this difficult financial climate. The second quarter figures from NCUA indeed seem to prove that many credit unions are on the right path. Through June 30, the NCUA reported that assets increased 7.3%, loans grew 0.7%, investments increased 22.9%, shares increased 8% net worth grew 1.3% and membership increased 1.3%.
CUs experienced a noticeable uptick in consumer lending in July. While the Federal Reserve reported that total consumer credit fell by 10.4% to $2.47 trillion in July. The news was a bit more encouraging for credit unions. Credit unions had $281.1 billion in outstanding consumer credit in July, up from $236.2 billion in June. And while financial institutions overall saw an annualized decline of 8.7% in consumer credit, credit unions saw an increase of 9.7%.
This further supports the recent trend of consumers' increasingly seeking alternatives to banks. A recent USA Today article noted that banks are already pulling back on credit card lending-with the number of new cards down 38% compared to last year. In addition, the rise in fees and interest rates, as well as the cuts in credit limits, only serve to fan consumers' frustration with their banks and fuel their desire to seek alternatives.
The task before us now is to capitalize on consumers' desire for a more user-friendly, cost-effective financial alternative and actively promote ourselves. We need to educate and reach out to prospective members and strengthen our relationship with existing members. During this current economic climate, everyone is eager to get the best value...on everything. Fortunately for us, value is the cornerstone of what our industry offers members through lower fees and better services. Technology and innovation will help us spread the word efficiently.
With a little creativity and marketing savvy, credit unions can reach many new members and expand their web presence. Based on their knowledge of their prospective and existing members, they can explore new ways to offer your products and services to them. For some that may mean creating a YouTube video, for others it may be a special "back-to-school" promotion, and still others might offer financial education and review seminars for members who may be concerned about losing their jobs or minimizing debt. Ultimately, CUs can customize their outreach efforts to suit their audience.
Recently, the Reuters/University of Michigan preliminary consumer sentiment index rose to 70.2 in September, compared to 65.7 in August. It's the first increase since June. The university's current condition index was up 5.2 points, and its economic outlook also rose 4.2 points-so there is a glimmer of hope.
I recognize our marketplace is not perfect. Apart from corporate and natural person CU losses, we also have challenges from proposed legislation and regulation. But our growing esteem with members and nonmembers is a precious asset, especially at a time when overall consumer confidence is low. We must be careful not to squander it. There is no better time than the present to embrace the challenges that confront us, identify the key opportunities and seize upon them. Build upon the trust, reliability and confidence, as well as the solid business practices, that credit unions have long-since been recognized for and forge the road to recovery now.
Fred Becker is CEO of the National Association of Federal Credit Unions. He may be reached at email@example.com.