Boom, son.
Posted by Brent Dixon on October 23rd, 2008
Given the current economic climate, credit unions are receiving a lot of media love lately. Here are a few snapshots:
TIME Magazine – Bad Times for Banks Mean Boom Times for Credit Unions
Business is booming for Ed Speed, which is a little odd, considering he lends money for a living. But that’s the story of credit unions nowadays, including the one in southeastern Texas that Speed runs, where real estate lending has doubled over the past five weeks, and auto loans are on track to grow by 40% to 60% in October.
Members-only non-profit credit unions are having their turn in the sun as years of sticking to boring, old-fashioned banking practices — they typically hold the mortgages they make on their own books and only dabbled in subprime — put them in a position to grab market share while national banks, auto finance companies, credit card outfits and private student loan firms cut back on loans. “In good times, you’d say these guys are much too conservative,” says George Hofheimer, chief research officer of the credit-union-focused Filene Research Institute. “But in times like these, it’s just what the doctor ordered.”
Lifehacker – Why choose a credit union over a bank?
With major instability in banking and unprecedented failures and buy-outs, it may feel like the only safe place to put your money is under your pillow. While even through buy-outs like Washington Mutual’s, your money remains FDIC-insured, this is a good time to consider an alternative to for-profit private banks—like credit unions.
The Consumerist – Are Credit Unions Really Better Than Banks?
Here’s the simple reality: Banks have shareholders who want to see a profit on their investment. So banks do everything in their power to get as much money from their customers as is legally possible while still remaining competitive with other banks. Here’s a case-in-point: Citizens Bank paid the Phillies $92 for the naming rights to their new stadium. Where did that money come from? Customer fees.
Most people just accept it. After all, what choice do they have?
I’ll tell you: Credit unions. The owners of credit unions are the members themselves. So there are no fat-cat shareholders to answer to. As a result, credit union profits are returned to members in the form of fewer fees and better interest rates.
Blogher – Five Ways to Safeguard Your Money Now
Consider a credit union: OK, they’re about as sexy as an accountant in a bow tie [An aside from Brent: Ouch]. But they offer several benefits: They have non-profit status, so they can offer services at lower costs than many banks—from late fees to bounced check fees. That translates to lower interest rates on loans (including mortgages), and higher interest rates on savings accounts and CDs.
How can credit unions best react to and prepare themselves for the newfound attention / opportunity / responsibility? Let us know what you think in the comments.
Thanks for the links Brent. Recessionary periods are typically the time when smart competitors gain market share by engaging in smart tactics. With attributions to Bill Hampel at CUNA, John Quelch at Harvard Business and the many CUs out there, here are the ingredients I think will turn this gloomy environment into a sunny CU outcome:
Boom, son! indeed. Positive big mainstream press coverage like this is the national CU brand campaign everyone has been waiting for. Third-party endorsements by respected sources trump push advertising every time.
This is indeed positive press, but far from what is required to create sustainable brand awareness for credit unions’ inherent differences of their co-op model.
Not taking advantage of this positive press that helps to differentiate CUs from banks on a national level will just be another example of the industries inability to put aside differences and focus on positive commonality to establish consumer awareness of how credit unions are fundamentally different due to their co-op structure and lack of quarterly financial pressures.
Requiring each credit union to market its unique competitive advantages is important and necessary. Requiring each credit union to market how the organizational structure causes inherent differences due to how people are motivated is inefficient, ineffective and just plain stupid.
Take the pork chops out of our hands and stop bashing the wild dogs (i.e. banks). Focus on strategies to help our members get out of debt.
Great post! I’m anxious to see how the credit union industry deals with this incredible opportunity that lies before us. The effects of these past few weeks will have a major impact on the CU vs. Banks debate for years to come.
First, the banking industry can no longer complain about the tax-exempt status of credit unions, when it took $700 billion of taxpayer money to bail them out. It pretty much nullifies their argument of unfair tax status. In the future, when anyone from the banking industry tries to spill out that dribble, all we need to do is remind the public (and lawmakers) about the bailout.
Second, in the eyes of many young adult consumers under 35 years old, this is the final straw. From a young age, they heard and read about corporate scandals (Enron, etc.) and have developed a healthy distrust of large corporations. Now, this perceived level of mismanagement and greed is directly affecting their wallet and their parents’ retirement. This places credit unions in a fantastic position to tell their story. Any credit union trying to reach the young adult market needs to look at this reality as an important positioning strategy.
I want to connect with whomever is running TDCU’s PR! (What a win with the piece in Time magazine!) :)
More seriously… Let’s – Show/Remind our current members of the ways we can be here for them in these challenging times (products/services, fin. education)
Lend! Lend! Lend!
This is a perfect time for Credit Unions to be more aggressive with lending to longtime members with questionable credit.
If they are longtime members and you are their primary financial institution, they will be more likely to pay you before they pay anyone else. Balance their rocky credit against loyalty to the CU. You may fiind you can stretch for them a little more on that used auto.
Arm your Collections Dept with soft hands and short leashes. Push them to work with, not on, members.
Carey is right. If you really want to differentiate yourself from a bank – LEND.
All I hear on the major news outlets is how hard it is to get funded now. How the housing market is primed for buying but no one can buy because no one has A+ credit, 20% down and is willing to give up a major organ.
Your members may have been screwed by predatory lenders. Maybe they didn’t know you did mortgages too. Now is the time to knock on those doors.
People are also willing to pay an extra point or so just to get funded. Even with the extra point it could be lower than what they got a few years ago. It is a good time to be a stable credit union with money to lend.