“You can’t get blood from a turnip.”

In lending, it’s often a case of “racing to the bottom” regarding rates and pricing. Competitors all try to have the best and lowest rates in town to maximize their loan dollars lent out to the best and most reputable borrowers. In deposits, we are seeing something very similar whereas all our financial competitors are racing to the top. Tossing out gaudy rates and trying to be the first, sometimes even before the Fed makes its next announcement. Sound familiar?

I encourage you to remember, you can’t get blood from a turnip. You can only get blood from livestock, not from produce. Financially speaking, shepherds with their flocks of pricey livestock would be more representative of today’s affluent members while farmers just trying to get by can be more representative of who credit union membership is mostly designed to serve. Credit unions for much of our history were designed to help the underbanked, the underserved, and those that the banks themselves didn’t want to do business with themselves. Let’s get back to that and design our success in deposits with that in mind, much like we do our loans.

In lending, it’s not advantageous to just serve the A+ credit paper. Sure, you know the payment will be made on time, every time. But at such low rates in the past few years, credit unions have wizened up that the thin and lower credit tiers (with charge-offs factored in) create not just more profit but more loyalty among their membership. Why can’t deposits work the same way?

In fact, 80% of American households have less than $50k in savings at all. With so many competitors competing for just 20% of households, who will have the most success winning the business of the affluent shepherds, and how much more of an opportunity would we have if we set our sights on the 80% who probably aren’t being targeted?

 

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