Small Improvements in Digital Could Mean Big Wins in Loans For Credit Unions
Consider the fact that building a new credit union branch costs on average between $700,000 – $2 million, in addition to the $250,000 – $500,000+ required for maintaining the branch and staff each year. That’s a sizable investment to make. But as consumers adopt other channels, for both financial information and transactions, what are other ways a credit union can invest this large chunk of capital if consumers no longer have to come to a branch?
I have written and shared insight about how digital can be deadly for credit unions by simply implementing RDC (remote deposit capture). I proposed to one credit union who implemented RDC, their members behaviors would change as they would no longer feel the need to come into the branch. This has now been validated by research from Raddon showing in the chart below showing mobile depositors use the traditional lobby less than other online and mobile consumers by 20%.
Credit unions should invest where the people are and where the people will be in the future. Not where the people have been in the past. It is an ever present challenge I see with credit unions as we must evolve to being proactive and away from being reactive.
Simply take a look at your credit union’s website, online banking or mobile banking traffic and compare that to daily/weekly branch foot and drive-through traffic. Odds are your digital channels are generating more traffic than your physical branches combined.
This is not to say that the traditional branch is dead or will go away in the future. It is, however, requiring credit unions to reconsider how the branch will be used in the coming years. Recently, the retail branch concept has been a hot conversation as credit unions have remodeled their physical branches by ripping out teller stations, replacing them with pods and open floor plans in addition to other physical facade changes.
Instead of investing millions of dollars into continuing to build physical branch retail experiences, credit unions can began to build digital retail experiences and systems for the future. These digital retail experiences and systems would focus on targeting, nurturing and converting leads for loans and new accounts through the use of customized content based upon a member’s digital behavior pattern.
For example, look at your credit union’s online promos and email communications. Are you offering the same products and services to everyone or are you targeting an individual’s specific needs?
Imagine going to Amazon, Zappos or any other digital retailer and being served the same offers as every other consumer. Traditional digital retailers customize the offers per consumer based upon a variety of factors.
As a digital retailer, your credit union can offer members and consumers messaging based upon their digital behaviors (which pages have they visited) and their financial behaviors (where are they spending money).
Let’s be honest, for many credit unions the digital user experience is lacking when compared to other traditional and nontraditional financial digital experiences.
Many times, the digital user experience is a cluster of 3rd party solutions cobbled together as credit unions work off a strategic checklist of items, from online banking to PFM to RDC to loan applications. In short, the digital consumer journey is riddled with potholes and pitfalls.
For example, do you know what your credit union’s loan application or new member application conversion rate is? According to Andera’s Google Analytics study in 2011, on over 400,000 applications from 26 institutions, the conversion rate of an online application was 23.2%. In short, this means that less than 1 out of every 4 people who starts an application on your credit union website completes it.
Let’s assume that your credit union’s digital loan application conversion rate is currently 23% and on an average month, 100 people start the online application process. Furthermore, let’s assume that the average loan being applied for and funded is $20,000 and all are approved (although this may not be the case).
With a conversion rate of 23%, the credit union would release $436,000 in new loans for the month. However, by improving the digital user experience to generate leads and focusing on ways to simplify the solution, a credit union could release an additional $200,000 in loans with only a 10% increase in loan application conversions.
Investing in building and improving digital marketing and lead generation systems to boost conversion rates could quickly increase the bottom line of a credit union’s loan portfolio. A new shiny physical branch might look like a good investment, but a good lead generation system can definitely leave a positive effect on the overall business of a credit union.
