Los Angeles Police Federal Credit Union’s Member Benefits Program Increases Member Participation – and Credit Union Revenue
LOS ANGELES, CA (July 8, 2013) — In response to continued challenges presented by the fledgling economic recovery, Los Angeles Police Federal Credit Union (LAPFCU) recently took the bold move of asking its members for more – and the response has been overwhelmingly favorable.
To combat the effects of the Great Recession, reduced member appetites for securing additional debt and the need for additional revenue streams, LAPFCU created Member BenefitsSM, a new program which rewards those members most invested in the success of their credit union, while asking those who are not engaged to help pay their fare share.
“Credit unions, like all financial institutions, are struggling for new ways to generate revenue,” explained G. Michael “Mike” Padgett, LAPFCU President and CEO. “We didn’t want to penalize members; however, we wanted to find additional ways to reward those who conducted most of their business with us, while addressing the ‘equal vs. equitable’ conundrum.”
The resulting program is a hybrid model, encompassing tenets of both relationship pricing and product bundling in a manner which rewards members for their use of credit union products and services. Concurrent with this, the Credit Union added $5 monthly maintenance fees to single-service share accounts with balances less than $250, and implemented checking fees to accounts that did not have basic related services such as direct deposit and e-Statements. Checking fees are waived when members have Member BenefitsSM.
Member BenefitsSM debuted on October 1, 2012, and asks that members qualify for the program by having one of three qualifying products:
- A first mortgage; or
- A checking account with e-statements and a monthly direct deposit of $250 or more; or a
- Credit card with Visa e-statements, general account e-statements and at least two transactions a month.
In return for meeting program requirements, members are rewarded with:
- No monthly checking account fees
- A $200 rebate on new first mortgages
- Up to $10 in monthly fee reimbursements for qualifying services
- A 0.20% dividend rate bonus on IRA/Share certificates
- Up to 0.50% interest rate reductions on select consumer loans
- A free box of checks annually.
“In developing the program, we wanted to include rewards that members would find attractive and would deepen their engagement with the Credit Union,” explained Manny Padilla Jr., Vice President of Marketing. “We poured over volumes of statistical data, conducted focus groups and surveyed members to find the right mix of product/service benefits and fees.”
“As part of our due diligence, we conducted a cost analysis of all of our products and services,” Padilla added. “We learned that 37% of our members supported the other 63%, so we knew we needed to make the playing field a bit more level. As part of our analysis, we also learned that 17% of our checking accounts were inactive and single-service accounts with less than $250 were costing us over $700,000 annually. It was reviews of items such as these that helped us determine how to structure the program.”
The program was in development for more than one year and over 20 different models were considered and tested. As there are several successful relationship pricing and product bundling models in use by financial institutions, the first impulse was to base the model upon those.
“We found that many of these programs only rewarded those with high balances, and that would not be equitable for our membership,” Padgett explained. “With some product bundling models, the requirements again were not realistic, so we developed our model from scratch based upon the best of both worlds.”
As a result of the comprehensive program development, LAPFCU has seen favorable results in the first six months of the program’s implementation. Highlights include:
- Fee income has increased from $35,000 to $207,000 on products/services tied to the program
- General e-Statement use has increased 32%
- Direct deposits have increased 10%
- Visa e-Statement use has increased 23%
- There has been a 25% increase in members who qualify for the program
- Member profitability has hovered around 40% which should increase over time
- The net financial impact from the program to date has been an additional $155,023 to the Credit Union’s bottom line.
In addition, Member BenefitsSM and its associated marketing have drawn attention from the credit union world at large. The program is not even a year old and has already won recognition from the Marketing Association of Credit Unions (MAC) Awards as well as a Credit Union Executives Society (CUES) Golden Mirror award.
“In sharing how the program has succeeded early on, we have to attribute it to our member- contact staff,” Padilla explained. “Our Marketing, Information Systems and Training teams did a great job of getting the program ready and launched, but it is really the Branch Operations and Lending staffs who have helped the members to see the many benefits of the program.
“We are very excited about the future of Member BenefitsSM,” Padilla added. “Of course, we’ll be monitoring and reviewing program elements to ensure Member BenefitsSM remains beneficial and continues to engage our members.”