Incubating Tomorrows Qualified Member

The pursuit of new members and borrowers is a never-ending process, and the consistent attraction of new members and loans are essential to a credit union’s survival. There are many growth strategies these days, ranging from complex indirect-dealer programs to simple member-referral programs. Hyper-competitive markets, falling loan-to-share ratios, and flat membership growth trends have credit unions scrambling, each looking to identify the most reliable source of tomorrow’s growth.

Becoming a Member-Incubator

Sometimes the answer is sitting right under our noses. We interact with members and potential new members, all the time who may not qualify for a traditional loan or product – at least today – but with a little help and development could become qualified tomorrow. My experience has taught me that “developed” members tend to remain most loyal to the credit union willing to make an investment in their development.

Incubation is defined as maintaining something at the most favorable temperature for its development. What if we became more attentive to those members (or potential new members) who, with a little development, care and attention could become our future member/borrowers/savers? Today there are credit unions doing just that: incubating and developing consumers into qualified members. My experience is that the “incubator” credit unions are experiencing superior membership and loan growth.

Development products and services to optimize incubation

There are many products and services available to credit unions today that are designed to incubate, or develop, tomorrow’s qualified members:

Personal one-on-one financial counseling and coaching: More than just a referral to a third-party financial counselor or an invitation to a group training, this individualized counseling provided by a trained and certified financial counselor can make a big difference. Most often, it is given by a credit union Teller, MSR or Loan Officer who has been trained to find teaching opportunities in real time as they occur at each member touch-point. CUNA has a very affordable curriculum, wherein employees can earn Financial Counseling Certification right at their home credit union ( To my knowledge, Hawaii First Federal Credit Union is the best example of leveraging this one-on-one financial counseling. For several years now, the credit union has staffed a Community Resource Center (a non-branch) near the credit union, where CUNA-certified financial counselors provide one-on-one development and then walk the new member over to the credit union to become a member. I recently had the opportunity to participate in the credit union’s strategic planning process and had the chance to visit their Community Resource Center. Members and potential members went out of their way to tell me just how much the credit union has helped improve their personal quality of life.

Small-balance loans: The continued rise of the payday lender demonstrates the high demand for small-balance loans. Credit unions have an amazing opportunity here to intercede by offering an alternate to payday loans. There are scores of best practices out there: credit unions who have developed products that include personal one-on-one counseling, products with a forced savings feature and prudent development plans to help the consumer break the payday loan cycle. These short-term loans are also used to improve credit scores by reporting timely and regular payments, as well as being used to pay off small balance charge-offs or collection accounts to improve members’ credit scores. Combined with training and the right features, these programs improve credit scores and behavior, and prepare members for traditional product offerings. Providing affordable access to credit is one of our original credit union mantras. Unfortunately, at some credit unions that means affordable access to credit for mostly prime borrowers. This line of thinking would not have worked for credit unions in the 1930s; in fact, it’s what we lobbied against at that time. A good example of taking a proactive approach to helping members break the payday loan cycle is Granco Federal Credit Union. President/CEO Roger Johnson takes a very proactive approach with members identified as payday loan users. His team actually calls the member and offers a work-around from the payday loan. These acts save members hundreds of dollars and create great loyalty.

Deposit accounts with very low balance requirements: We need to make it easier for people of modest means to save. It may sound crazy to some of us, but a $50 minimum savings balance is a hurdle to many people. One of the reasons the unbanked don’t open savings accounts is because they would need access to that required minimum balance from time to time. Before we judge, it’s wise to remember that approximately 60 percent of Americans don’t have funds on hand to cover unanticipated financial emergencies. Promoting thrift is another one of our original core mantras. Today, many of us are avoiding deposits like the plague, trying to manage lower capital ratios. If we play our cards right, today’s small-balance saver will be tomorrow’s big saver. Communicating Arts Credit Union, a successful community development credit union in Detroit, is continually innovating, with tools such as prized based savings to promote thrift:

Here I have focused on three basic tools credit unions can use to develop members, but this is just the beginning. You can learn more at the National Federation of Community Development Credit Unions:

Does member incubation work?

Fortunately, we have pioneers like those mentioned and scores of others that we can learn best practices from. Most of these are smaller and medium-sized credit unions that make member development a high strategic priority. So how do we measure success? I suggest that the best measurement is in membership and loan growth. Here are a few examples to consider:

The final test

If you haven’t done so already, I recommend you ask some of your long-term credit union members why they have stayed with the credit union so long. If you do, you are likely to here this response more than once: “The credit union was there to help me through some rough times.”

Rather than turning people away, imagine the potential long-term growth and financial impact from developing these good people into tomorrow’s borrowers and savers. Not only does it feel good, it’s getting far better results than direct head to head competition for the prime qualified borrowers. Finally, imagine the long-term impact to the individuals who, with our nurturing and development, migrate from high-cost transactors to traditional borrowers and consistent savers. Now that’s a mission and vision worth pursuing.