Before I present to potential credit union clients, I always do my homework. There are a number of things I research ahead of time, such as the credit union’s leadership team, the size of the credit union, and the geographic spread of their branch network. I look at their asset size, total loans, and total deposits. But the most valuable information for both me and the credit union are the details I learn from reviewing their product penetration.
Over the years I have researched a lot of credit unions. I have a few sources of information, including the call report submitted to the NCUA quarterly. From these sources of information, I can determine quite a bit about the credit union. I can tell where the focus of leadership lies, how engaged the members are in their credit union, and the sales culture that exists within the organization.
The information I glean as I do my research is important in directing sales conversations with my potential clients. I want these conversations to really touch on the needs the credit union has so they feel they are receiving valuable insight even as I offer my services as a solution. This way, whether we end up working together or not, the credit union comes away with actionable knowledge they can apply.
When researching a credit union, I am focused on finding areas of opportunity. I pinpoint specific ways in which the credit union can improve by providing competent sales training to their member-facing employees, team leads, and supervisors. I thought it might be beneficial to share some of the needs I often come across and find to be common needs for all credit unions. These may sound familiar and may be known needs at your credit union already. For you, this may serve simply as a reminder and an opportunity to refocus as necessary.
The Primary Financial Relationship
The greatest source of opportunity for any credit union is within their existing membership. Generally speaking, all sales efforts will be focused on existing members and prospective members coming to the credit union for the first time. When I am looking at information, I look to see how well the credit union is capturing their members existing business and developing those coveted primary financial relationships. I often find that the credit union is missing a lot of opportunity. Unfortunately, that isn’t uncommon.
A GOBankingRates.com article titled “50% of Americans Are Cheating – on Their Bank”, cites a survey which found that over 50% of Americans have more than one financial account for things like checking, savings, and loans. Of those, 31% of respondents listed convenience and flexibility as the reason they use multiple institutions, 24% reported having accounts at varied institutions in order to take advantage of the different products and services offered, and 20% said they were looking for lower fees.
These survey findings provide evidence of the opportunity available for most credit unions. Let’s look at the most common areas of opportunity.
Yes, every account has to have a primary savings account, but where are the member’s actual savings? In another report by GOBankingRates.com published in 2017, 57% of Americans have less than $1,000 in savings. While the focus on the article is on the concern with lower savings balances, the article also points out that individuals with over $5,000 in savings is rising with 6% of Americans having more than $5,000 and 25% of Americans with over $10,000 saved.
Interestingly enough, according to the NCUA’s U.S. Credit Union Profile report, the average credit union member had $10,421 on deposit at their credit union as of year-end 2017. This could mean that credit unions are doing better at attracting savers, or it could mean credit unions attract a larger percentage of members with high savings balances.
By taking a close look at your credit union member savings balances and percentages (excluding members under age 18) you can benchmark against the averages. Are you capturing the opportunity at your credit union, or is there an opportunity to attract more deposits through sales efforts in the contact center, branch lobby, and online?
Generally speaking, if your member has their savings balances with another institution, it is because they believe they are getting a better return elsewhere or have access to savings products which meet their needs better. In most situations, your credit union offers similar or superior products and capturing that business is simply a matter of education and a better sales process.
Credit cards and credit card balances offer one of the best opportunities for growth. According to the U.S. Census Bureau, over 70% of American households have at least one credit card. That’s roughly 88 million households and 183 million people. NerdWallet.com reports in their “2017 American Household Credit Card Debt Study” that the average American caries $2,850 in credit card balances.
Typically speaking, credit unions offer a superior credit card compared to other cards out there. They offer lower interest rates and better rewards programs. While this should be an easy sell, the NCUA reports that only 18.9% of credit union members have their credit union’s credit card. That’s 51% below the national average. Additionally, credit unions only hold an average of $532 in credit card balances per member.
Credit card debt does represent a higher risk to the membership and therefore you would generally not want to capture the credit card business from all of your members. However, that being said, there is significant opportunity out there not being captured to the detriment of your members.
According to CreditCards.com, the average credit card APR at 16.38% as of January 2018. Assuming a credit union can recapture that credit card debt at an average variable rate of 10.5%, they can save your member $400 in interest per $1,000 in credit card debt. For a member who has $10,000, that’s $4,000 in interest savings. What member wouldn’t be interested in that?
CNN Money reported in 2017 that nearly 43% of adults in the US have an auto loan. Although it is true that the credit union industry is capturing a significant portion of the auto lending market, one in five credit union members still has their auto loan with a bank or captive lender. And more likely than not, a higher percentage have their auto loans with another credit union.
A quick measurement of how your credit union is doing capturing your members’ auto business is to look at the average auto balance per member. According to the NerdWallet.com report cited above, the average American carries just under $3,800 in auto debt. The average credit union member has $3,000 in auto debt. If your credit union’s auto loan balance per member is lower than either of these numbers, there is room for improvement and significant opportunity for growth.
From a sales perspective, the best way to capture the opportunity is to teach employees the auto lending and auto recapture sales processes. This includes teaching them how to identify auto lending opportunities, how to engage the member in a sales discussion, how to qualify the opportunity, and finally, how to commit the member to take the next steps in the auto lending or recapture process.
We have only looked at 3 areas of opportunity in this article. Much more opportunity exists when considering checking account penetration, mortgage and home equity penetration, and ancillary products and services such as overdraft opt-in, debit card usage, and loan protection products.
Creating value by capturing your member’s full financial relationship is a goal all credit unions should have. The only way to reach this goal is through sales. Employees and leaders need sales training which emphasizes the importance of capturing each member’s unique, full financial relationship. Such training should be consistent across the entire organization and provide a consistent sales process. When sales training is consistent and complete, it is easier for sales leaders to train and coach and for employees stay accountable. If you’d like help with your credit union’s strategy, set up a time to chat today.