The Digital Evolution in Credit Unions: Real Member Benefits

Paul J. Giefing, Founder/CEO, UPLEX Globalby: Paul J. Giefing, Founder/CEO, UPLEX Global

In this article, we will bring to light a variety of examples in which digital technology can materially benefit your members in key areas of your operation:

  • Consumer / Retail Accounts
  • Lending
  • Portfolio / Risk Management

Consumer / Retail Accounts
This is considered by many to be the single most important component to any credit union’s (CU) overall health.  The ability to attract, obtain and maintain consumer / retail deposits in this competitive market is the leading driver of their core asset development: Mortgages, Auto and Personal Loans. Additionally, these organic accounts help to maintain the absolute lowest cost of funds, making their core products even more profitable. Let’s take a look at three specific examples where digital technology can play a large role in this area:

  • Marketing / Promotion:  A 2010 study at the University of California Irvine determined that, by 2009, nearly 70% of all U.S. households had a computer with internet access: http://crito.uci.edu/papers/2011/HouseholdComputerUse.pdf. This means that your CU can reach those consumers in any specific area via email and / or click-thru advertising to market your product or even collect valuable analytic data through online surveys.  Best of all, you can automate all of this, using a simple PC and software.
  • Customer Relationship Management:  Having a branch office where your management can sit down with clients or sponsor events makes good sense for community ties.  However, the majority of questions or service requests at the branch level can be handled with a friendly face and some basic technology.  Enter the Video Teller.  Customers can connect with these tellers live (via video conference) from their home or even their smart phone to ask specific questions, obtain assistance with opening new accounts or even provide feedback.  It is much more powerful than a simple phone call because there is a face behind the voice.
  • Consumer Account Alerts: One of the fastest growing areas of account services, people are taking advantage of smart phones and PCs to stay informed about the status and activity on their checking and savings accounts. This helps keep the client’s mind at ease and keeps your institution’s name in front of them on a daily basis….for pennies per day. Your institution is going to be the first one they think of when they need a financial service.

Lending
Once the deposits are coming in, the next most important thing is effectively putting them to work in the form of loans or earning assets.  Regardless of the state of the economy, there will always be people and businesses looking to borrow money and you need to be in the position to take advantage of every viable opportunity that comes your way.  It can be costly to attract, evaluate and fund the loan requests, but digital technology can cut these costs by as much as 60%. There are two prime examples that I want to address:

  • History has shown that any time a CU wants to increase loan volume they increase marketing and personnel…no big surprise.   We have already addressed digital marketing in our previous section, so I’d like to take a look at the role and cost of loan officers here. The average salary for a commercial loan officer (I) in the U.S. was $58,557 (http://www1.salary.com/Commercial-Loan-Officer-I-Salary.html), before benefits. Factor in everything and you are looking at an annual overhead north of $65,000.  This is not a number to take lightly, but what do you do?  How about utilizing digital applications, file transfer and video conferencing to make your lenders more efficient? Getting an answer on a loan request in 3 days instead of 10 and saving two afternoons by utilizing digital conferencing and file transfer could make your busy business owners very happy.
  • Loan Analytics software is gaining popularity as smaller institutions strive to expand into new markets without hiking their overhead.  These integrated programs consolidate your data and allow you to analyze and review both new loan requests as well as existing assets. While they cannot replace a human touch or intuition, they can serve as a very accurate weed-out in new markets where lender expertise is at a premium.  The up-front cost is substantial depending on the size of the bank, but the benefit (ROI) will carry on for years at a mere fraction of the cost of ballooning overhead.

Portfolio / Risk Management
With regulatory guidelines becoming more complicated and the fees levied for mistakes becoming punitive, this has become the single most complicated job at most CUs.  The subjectivity makes it nearly impossible to prepare for these reviews, but that doesn’t mean you cannot respond to them effectively. For example:

1.  Utilizing an automated secondary loan market can help your CU respond to an order in a fraction of the time and cost that it has traditionally taken. This includes areas such

  • Liquidity – selling loans to free up cash
  • Concentration – buying or selling loans to affect this ratio
  • Performance – selling non-performing assets at a discount

In each case, digital automation can save you hundreds of thousands of dollars in fines and brokerage fees while freeing up your people to focus on money making activities.

2. The risk management guidelines can change quarterly.  Data compilation and reporting services such as BankDataworks are making easier to stay tuned to these changes and adjust your policy ‘net’ accordingly.  Because this data is provided digitally, your CU can plug into your own analysis or the loan analytics software of your choice to make this information even more powerful.

Summary
Digital technology in banking is growing at a pace that no one could have predicted twenty years ago.  Still, there is hesitancy and general mistrust around the emerging products. I am hoping that in reading this article and the examples I’ve provided that you will see two main components of my message:
1.Digital technology takes existing assets and makes them more productive or efficient.
2.Digital technology allows your institution to be much bigger than it is today while actually reducing your overhead.
In every example, the result of these efficiencies will be reflected in your customer’s satisfaction with your people, products, processes and costs.

Paul is an entrepreneur and the Founder/CEO of UPLEX Global, the premier online loan exchange for financial institutions and investors. He has enjoyed being a part of the business lending world for nearly 20 years and makes his home in the Midwest. For more information on Paul or UPLEX Global, visit the website at: www.uplexglobal.com

AnyHour Solutions is a leading provider of comprehensive, professional, 24/7 call/contact center services for credit unions utilizing our Collaborative Contact Center business model.  These services can be used to supplement a credit union’s existing internal call center with overflow and after hours/weekend support, or we can facilitate a total outsourcing requirement.  Our collaborative business model and economies of scale result in significant cost savings to our clients.  AnyHour also provides online loan application functionality as well as a full suite of mortgage processing services for credit unions without an internal mortgage department. www.anyhoursolutions.com

Paul J. Giefing

Paul J. Giefing

Paul is an entrepreneur and the Founder/CEO of UPLEX Global, the premier online loan exchange for financial institutions and investors. He has enjoyed being a part of the business ... Web: www.uplexglobal.com Details