Do people really have a good reason to do business with you? Even if your credit union has good customer service, average product selection, decent prices and convenient access, why would anyone want to buy from you? In our hyper-competitive, global market, you can rest assured that there is ALWAYS someone out there who beats you in at least some of these aspects. What consistently makes you the best choice?
Increase value by solving a problem
What are some of the problems facing your members, potential members, or community? Is there anything you can do to solve them? Here are a few of the needs and opportunities for credit unions that I frequently see:
- Access to micro small-business development services. “Micro” is defined as small-business loans of less than $35,000 (and they don’t count as a MBL – how cool is that?) I visit a lot of communities around the country. There are always financial institutions in line and eager to serve well-established small business, but rarely one that will underwrite smaller loans and provide other development services, i.e. help with a business plan, etc. Alternatives Federal Credit Union is a best-practice example. Alternatives opened more than 30 years ago to meet the needs of small, emerging businesses that were not being serviced by the local financial institutions. Meeting this need has resulted in a strong and thriving credit union that is a clear product, service and community-service leader.
- Affordable access to consumer loans. Affordable access is not a problem for prime borrowers. Everyone wants them and is in line to match rate to woo them over. The real problem is the C, D and E borrowers who need reliable transportation to get to or keep a job. The primary competitor for these loans are the Buy Here, Pay Here car lots that typically charge 30-percent interest. Tuscaloosa Credit Union demonstrates the opportunity for credit unions willing to reach out and serve this group. Tuscaloosa’s Square One auto-loan product has a rate of 16 percent, compared to the average rate of 30 percent offered at the BHPH lots. The interest savings on a $10,000 loan at 48 months is $3,356. But the social and financial return is much more than the amount of interest saved on the loan. Affordable and reliable cars help consumers retain their jobs and build assets.
- Underserved communities that lack access to basic financial products and education. This problem is all too common. I frequently see credit unions that are treading water with growth and trying to rate-match with the bigger credit union(s) in town. But they are overlooking a group within the community that is completely underserved. Lower Valley Credit Union is a best-practice credit union that has embraced serving its local community. LVCU’s products and services are targeted and intentional in meeting the needs of its low-income, Hispanic community, portions of which are largely unbanked, marginalized, and migrant, and cannot meet the minimums or pay the fees imposed by mainstream banking institutions. LVCU’s typical member is essentially deemed not “bankable” by most financial institutions, and therefore LVCU integrates the needs of these members into its product offerings from the beginning by offering a logical path that will take them from transactions and convert them into savers and borrowers, with the ultimate goal of giving them access to asset-ownership.
Think these examples sound too risky? Check out their FPR’s. These credit unions have figured out how to solve significant problems, mitigate risk, and, in doing so, they are growing, thriving, and have become market leaders. Besides growth and profitability, the other measurement of success for these examples? Local and national leaders frequently seek out these credit unions for collaboration, partnerships and awards.
Solving problems isn’t anything new for credit unions
In 1934, consumers rallied around a very simple credit-union value proposition – affordable access to credit. Credit unions identified a specific problem and were formed to solve this problem. As a result, thousands of credit unions were chartered and eventually totaled more than 20,000 in 1969. And most importantly, the underserved consumers we served prospered and moved to the middle class.
Today, CUNA has rightly recognized the importance of a strong value proposition for credit unions to rally around: Unite for Good. The opportunities for credit unions to unite around common issues and to create good out of challenging situations facing consumers and communities are powerful.
A good value proposition isn’t good enough anymore
Successful credit unions that are consistently growing and thriving have identified specific problems and challenges they are solving for members and the communities they serve. Whether it’s service, product, access, or community service, best practices have GREAT value propositions that are easily perceived and felt.
If your current value proposition is a rate-match, status quo financial product offering, good service, or standard access, you may have a problem of your own that needs to be solved.