“It’s the economy, stupid.”
James Carville’s famous political dictum during the 1992 elections seems as relevant today as it did then . . . but not just for politicians. The economic environment has a direct effect on your credit union’s business (obviously). However, the ever-changing nature of consumer financial behavior makes tracking economic changes hard to grasp for already busy industry leaders.
Don’t worry—help is here!
Here are five fast facts about today’s economic environment and ideas for addressing these trends.
1. 22% of consumers avoid checking their finances.
Yikes! This is the financial equivalent of “if I don’t see it, it doesn’t exist.” Money ignites stress reactions for many people, and it feels safer to avoid the anxiety by ignoring the finances. But of course, the negative consequences of ignoring finances will exist no matter what. Members practicing this behavior are more likely to stumble into defaults or overdrafts. They are also less engaged with you on a regular basis, causing an attrition risk.
Ideas: Engagement is the answer. Does your mobile app prompt people to check accounts? Are there tools or gamified features? Does your member experience create positive memories to combat financial anxiety? As people withdraw, you must reach out.
2. 77% of Americans worry about their financial situation.
That’s an overwhelming number of people concerned about money. Even if someone is, in fact, financially stable . . . mindset matters. Perception becomes reality. If people perceive to be in financial trouble, they act like they’re in financial trouble. They cut costs, spend less and assess financial relationships.
Ideas: Comfort messaging is vital when fighting financial worries. Say, “we’ve got you.” And target the right pain points for the current time. Maybe vacations aren’t as popular right now . . . but used car sales will likely increase. Keep your messaging in touch with member concerns.
3. 69% of credit card users experienced a merchant surcharge at least once.
As consumers worry about money and cutting costs, they begin analyzing even small surcharges applied to bills. You see this most often at small restaurants . . . there’s an additional charge (anywhere from 1% to 3% of the transaction amount) for using credit cards. Tightening belts spur changing behaviors, so more members may start using cash or debit products to avoid credit card surcharges.
Ideas: Stellar rewards programs counteract surcharge dislike. Or maybe you lean into the shift to debit cards and create the best rewards checking program out there. Many credit unions still need deposits, so enhancing your checking accounts isn’t such a bad idea anyway.
4. 72% of corporations say operating costs are higher after tariff implementation.
For credit unions specializing in commercial lending, business wariness has a direct impact on ability (or willingness) to take out loans and expand. But this statistic still impacts consumer-focused credit unions too. Corporations pass rising expenses to consumers, further contributing to elevated costs and skyrocketing member worries.
Ideas: For those of you targeting businesses, emphasize that now is not the time for business leaders to shrink their own enterprises. The external environment is already doing that. Market how banking with you will help them achieve growth that outpaces expenses.
For consumer-focused folks, don’t forget about seasonal personal loans. Back-to-school loans help families when summer ends, especially as school supplies become more expensive. Rates on these special loans typically offer a better deal than credit cards.
5. 5.3 million student loan borrowers were in default as collections restarted in May.
The federal government finally began collecting on defaulted student loans again, putting many individuals no longer accustomed to these payments in financial straits. Are any of these folks your members? Do they have other loans they took out with you before collections restarted? Be aware of anyone who’s suddenly missing loan payments or experiencing paycheck garnishments.
Idea: Right now, rare opportunities exist to promote refinancing of borrowers’ student loans. You may be able to help someone out of a financial pickle while gaining income. And if the news is scaring new borrowers, market the benefits of a private student loan.
As you can see, there’s a lot to tackle! But now’s not the time to let fear or uncertainty paralyze your credit union. If you do nothing, your situation only gets worse.
No—now is the time to make a plan! Chart a course through these uncertain times by focusing on what you can control. Address these economic challenges as best you can . . . just make sure you plan to do something.
As Dean Karnazes says, “run if you can, walk if you have to, crawl if you must . . . just never give up.”
