While a credit union isn’t a simple for-profit business, like a bank, you’re still responsible for providing your members with an operating profit. It’s what pays the bills, insulates the credit union against down cycles, and generates resources you can use to re-invest in your community or apply to capital expenditures.
You can pump up your bottom line through reduced costs or improved revenues, but either way, digital banking technology has a key role to play.
Cost-cutting is a riskier option for credit unions than for commercial banks. In the banking world, periodic “right-sizing” of branches and staff is simply a given, regardless of the impact on their surrounding communities. Credit unions, which typically stand or fall on their relationships with members, staff and the greater community, can’t — and shouldn’t — engage in that kind of ruthlessness.
Credit unions typically carry higher expenses than banks, and have to be more creative in how they trim costs. One option is to create incentives for staff of your CU to suggest operational efficiencies. Another is to scale back the size of new branches, which reduces your costs for square footage and staffing. You can also explore downsized locations for existing branches as leases come up for renewal. A secondary benefit of relocation is that it can help you follow population shifts in your community.
Technology can help. A credit union with physical branches will never match the 2 percent expense-to-assets ratio of a pure FinTech, but a strong digital platform can drive efficiency. The cost of member acquisition for credit unions typically ranges from $400 to $700, but digital marketing, with its wide reach and low cost, can help keep those numbers down. Many members, especially younger ones, may prefer to do most or all of their banking digitally. That reduces the need for staff and services at the branch level, and can facilitate the transition to smaller branches.
Doubling Down on Who You Are
The difference between a credit union and a bank may create higher costs for the CU, but it also creates an opportunity. Instead of increasing efficiencies by cost-cutting or mergers and acquisitions, leaning into the credit union’s members-first ethos can bring big dividends to the bottom line.
For example, look north of the border to Canada’s largest credit union, Vancouver’s VanCity. Since the arrival of current CEO Tamara Vrooman in 2007, VanCity has pivoted back to its roots as a community-based organization, revamping everything from its procurement and hiring practices to its approach to risk management. Bringing the impact-based portion of its loan portfolio — loans driven by their social value within the community — up to 50 percent of the total was one notable example of this focus (they’re halfway there).
This approach is counter-intuitive, but it’s working. VanCity’s assets have doubled in the intervening years, it’s posting record profits, and — most importantly — membership is growing, enthusiastic and getting younger.
The more of your services a given member uses, the more engaged — and profitable — they’ll be. That “stickiness,” or improved likelihood of retaining a member, is driven by a few factors. One is simple inertia: Moving a simple checking account is trivial, but moving bank accounts plus investments plus home and car insurance plus a mortgage plus a credit card or line of credit is a much bigger decision.
Emphasizing your level of community involvement provides another reason for members to join and stay with your credit union. Many will benefit directly from your investments within the community, and even those who don’t may opt to join or stay with your credit union from a sense of shared values or civic pride.
Personalization is another key driver of deeper, more profitable relationships. It can take several forms.
- Targeted acquisition: Non-generic outreach efforts aimed at specific demographics or types of client feel more directed, and can yield stronger results. Old-fashioned personal referrals work exceptionally well, too.
- A strong onboarding strategy: You need a formal, well-thought-out welcome program for new members to help them find their feet quickly with your services and digital banking platform. As always, a good first impression sets the tone for a comfortable, high-trust relationship. That can take the form of emails, a sit-down with a staffer, printed materials or online tutorials — independently or in combination.
- Financial education: Offer your members frequent opportunities to learn from your credit union and its staff. Not only is this a good driver of loyalty in itself; it isn’t rocket science to deduce that members learning about mortgages or investments are candidates for those products.
- Personalized marketing: A generic brochure listing your services doesn’t differentiate you from any other institution. Personalizing your marketing messages to each member’s circumstances will. For example, if the member’s home and auto insurance have renewed every June for the past few years, May would be a good time to suggest getting a quote from their friendly local credit union.
Leverage Banking Technology
If there’s a single tool that can empower your efforts more than any other, it’s digital banking technology. Increasingly, members and potential members — especially youthful “digital natives” — expect, and prefer, to do more of their banking online.
We’ve already touched on the ways digital marketing and digital banking can help lower costs. Digital engagement through your banking app, website and social media can also serve as channels to deliver your message of differentiation and community service, or — if you prefer — “reinforce your branding.”
Most crucially, a superior digital platform allows for an unmatched level of personalized service and financial education. With the analytic data you cull from each member’s daily activities, every service, product or piece of educational material you offer can be both timely and intensely focused. It’s not just good business; it shows that you understand and appreciate their individual needs.
The Lumin Digital Difference
Lumin Digital is precisely that kind of superior digital platform. It offers completely seamless integration and ease of use across all platforms and all of your credit union’s services, creating a comfortable, friction-free experience for everyone from youthful “digital natives” to tech-averse seniors. It’s a cloud-native product, so it’s fast and reliable.
More importantly, and unlike many other fintech products, Lumin grew directly from the credit union community, and draws on parent company PSCU’s decades of experience in supporting CU operations.
Contact us today to request a demo, and learn about the many ways Lumin Digital can help your credit union improve its bottom-line profitability.