How Credit Unions Can Compete with Member Business Lending

As I tell all my customers, I have been in the financial services space longer than I care to admit. After all these years of experience, I can say with confidence that the competition is the fiercest it has ever been. The consumer has so many choices of where they handle their financial business. Credit unions are competing against other credit unions, banks, and fintechs. The pandemic forced us to think differently and pivot from what our normal business operations looked like. Many businesses were either shut down or severely limited to how they served their customers and credit unions were no different.

So, add it all up and it seems like quite the mountain to climb, right? Well, it is, but not if you have a well thought out plan on how to compete now and into the future. Growing new relationships and building existing ones will still be the focus. But how to do it in the most efficient manner and still deliver that personal touch that your members have become accustom to? Let us explore some of those key elements to compete.

Before the pandemic hit, an American Bankers Association survey  found that 82% of people preferred digital over in-branch banking. The survey also found that digital transformation should be a top priority, and that the credit unions that do not embrace the technology of today may not be here tomorrow.

Where does your credit union stand on the digital transformation curve? Where do you start? Digital offerings for your members are at the top of the list. Having a robust digital offering that covers not only the day-to-day financial needs, but also to serve their lending needs (consumer and business) is a strong tool to retain and grow your membership.

Every decision the credit union makes on how to best serve their members will be critical. According to a recent article in The Financial Brand new branches or branch relocations will be even more important going forward, as branch networks tend to be smaller. The convenience of a branch near a member’s work or home increases convenience and is a key decision maker where people decide to handle their financial business.

Credit unions have always been about their members and their well-being. The key will be how to balance the personal service members have come to expect in an ever-changing remote environment.  In a recent CUInsight article, a robust omnichannel offering that supports digital, branches, call centers etc. is mentioned as a key element. How well you deliver that offering will be a huge determining factor of your credit unions growth and future success or failure.

When I got started working with credit unions there were over 25,000+ nationwide and today there are roughly 5300 left. So, the number of credit unions is not growing, but assets are still growing, meaning this area is ripe for growth and it’s time to compete.

Credit Unions are still in their infancy when it comes to small business and commercial lending, compared to their bank counterparts. A great opportunity exists to serve the needs of your small business members. Serving those needs is a great way to expand your relationship with your member and help the local economy grow and prosper.

Just like serving the needs of the retail member, convenience, speed, ease of use and getting a quick decision are all key attributes of a successful Member Business Lending program. Small business owners work crazy hours and want to handle their financial needs when it is convenient to them, not the credit union. Just like the consumer business, member business lending is highly competitive. Your small business members are being bombarded with offers on faster service, better rates, more convenient you get the picture.

The credit union mantra of people helping people gives you a great opportunity. If you can make the member business lending experience easy, convenient, and have a competitive offer for your member that can be the differentiator. People do business with people that they trust.

So, what are the key elements to a successful Member Business Lending program?

The answer is to deliver an experience where the small business member is empowered. You can do this by automating as much of the process as you are comfortable with. As you become more comfortable, you can continue to tweak and modify the program.

One of the major elements of making the member business lending process successful is to automate the decision. The successful lenders use scoring to handle high volumes of applications in the most efficient manner possible. Business credit score models like FICO SBBS and Experian Intelliscore are proven solutions. When you combine this with your policies, procedures, and risk tolerance you have a powerful way to handle more applications without additional staff. Every credit union is different and basing your practices on your unique experience and field of membership will determine where your starting point is on automated decisioning. 

The ability for your member to easily apply online, whether it be on a phone, tablet or desktop is critical. Remember this may be their first time applying with you and you do not get a second chance to make a first impression.

A portal to allow the member to easily upload documents and to communicate where they stand at any time during the application process. This improves communication and the member experience. If there is no communication from you, what is the member to assume?

These are just a few of the tools that will allow you to compete in today’s competitive marketplace. The ability to do all the other processes you do (depending upon loan size, etc..) do not go away so having strong tools for financial statement analysis, tax, and statement processing and to produce credit memorandum is very important.

With these tools you can deliver a superior member experience when it comes to member business lending. You will be providing a first-class experience that the top providers in the space offer. The difference will be the credit union difference of people helping people.

Happy Member Business Lending!

Author Bio

Rob Ames has worked in the financial services industry for more than 20 years with a focus on helping credit unions in operations, lending, and digital strategy.