In an era when many credit unions have moved away from the select employee group (SEG) model, BCU ($5.8B, Vernon Hills, IL) has done the opposite.
The Illinois-based cooperative has built the bulk of its business around scaling to meet the needs of some of America’s most formidable companies, including Target, GEICO, UnitedHealth Group, Cardinal Health, and HCA Healthcare. The credit union serves nearly 350,000 members, and its top six company relationships alone translate to 1.2 million employees eligible for membership.
“Relationships are our secret sauce,” says president and CEO Mike Valentine, who has led the cooperative for nearly 30 years. “Relationships we built with people we knew in the ’80s and ’90s who went off and ran other companies. They had been a member of our credit union, they liked what the credit union was, and said, ‘Can you do this for my company?’ It’s kind of a fairy tale story.”
To be sure, BCU has faced the same challenges as other credit unions: the post-pandemic shift to remote work, the mortgage bust, inflation, and interest rate volatility. But the credit union continues to add company partners, and its seven community branches have collectively grown to $1 billion in assets. A newly launched CUSO focused on financial wellbeing has brought in 1,300 new members so far this year.
“We have the trifecta of charters,” says Jill Sammons, senior vice president of marketing, wellbeing, and wealth advisory. “We have our company partners, we have our community charter, and we have our new associational charter.”
Sales-Driven Culture, Strategic M&As
Founded in 1981 as Baxter Credit Union, BCU began by building deposits and eventually making loans. In 1984, founding CEO Rex Johnson hired a young Valentine — then a branch manager at Household Finance in Waukegan — to manage loan collections and two salespeople.
“Rex’s vision was to create a great lending culture and be really good at lending and really good at sales,” Valentine says. “At that time, sales was not a good word, but it was selling that we were doing.”
After 10 years, Johnson left the credit union and took Valentine with him to form the consultancy Lending Solutions. Valentine passed up a chance to be CEO by leaving, but six months later, he was invited back to compete for the job against three other candidates. Valentine quips that he was selected probably “because it’s the devil you know.” When he took the helm in 1994, Baxter Credit Union had approximately $225 million in assets and one large company partner, Baxter International.
“Our big thing in the late ’90s was to say, ‘how do we get to $1 billion? What does that look like?’” the CEO says. “One of the first things we did was open an office in Crystal Lake, IL, and said, ‘let’s try to be in the community.’”
Also in the 1990s, Caremark International, the forerunner of pharmacy sales giant CVS Caremark, was spun off from Baxter International as a publicly traded company. Leveraging existing relationships, BCU began offering financial services to Caremark employees. In the 2000s, BCU added even more large SEGs from the medical field, including CardinalHealth and Boston Scientific.
The credit union achieved a major milestone in 2011, when Target Credit Union, a $30 million-asset credit union based in nearby Minneapolis, MN, extended a request for proposal (RFP) looking for a buyer with the scale to expand services to some 400,000 employees working at nearly 2,000 stores, distribution centers, and corporate offices spread across all 50 states.
Target Corporation was also committed to supporting the physical, mental, and financial wellbeing of its employees, and BCU’s well-established financial wellness program — already integrated into many other client wellness programs — was a major bonus. BCU won the bid to acquire Target Credit Union and helped it grow to $1 billion in assets during the next decade while operating as a division of BCU.
Acquiring a credit union in the retail sector marked the first time BCU stepped outside the health care field, but it opened opportunities for new relationships with insurance and financial services firms.
“That was a pivotal moment for BCU and our board,” Valentine says. “We always justified our expansion because we went with many companies that had a relationship with Baxter. We were in a whole new relationship with a company, but we won on the merits of who we are, what we are, and what we promised to do.”
Leveraging Well-Known Brands
BCU’s next big opportunity came in 2017 with UnitedHealth Group, one of the world’s largest health insurers, with more than 300,000 employees in the United States. Headquartered in Minneapolis, UnitedHealth Group’s leadership had already heard how their colleagues at Target were benefitting from the merger with BCU — particularly through financial wellbeing offerings — and they wanted to learn more. BCU pitched a plan to the insurer and ultimately won an RFP to be its employee credit union.
Then came the 2020 acquisition of $146 million-asset GEICO Federal Credit Union. Like Target, GEICO wanted to expand nationwide, and the two parties completed the deal during the height of the pandemic, even closing the transaction virtually.
Two years later, HCA Healthcare, which operates 184 hospitals in the United States and United Kingdom, also signed a contract with BCU to extend financial services to more than 200,000 employees. Not surprisingly, HCA’s longstanding relationship with Baxter International once again helped BCU get its foot in the door.
Importantly, BCU allows these credit unions to retain their original names on website, signage, correspondence, and all other external indicators, incorporating an endorsed brand strategy that includes “A division of BCU” beneath each logo. That started when Target insisted on keeping its name — contrary to the rebranding that is usually inevitable in the wake of an acquisition — and become a major point of differentiation for BCU in negotiations with future large accounts.
“There’s a lot of brand value, as you can imagine, that comes with the Target name,” Valentine says.
Scaling To Meet Demand
Offering services for and recruiting new members from a SEG can take years of discussion and relationship building, with Valentine typically involved at the CEO level while team members work with HR, pay and benefits, finance, and other departments to communicate the credit union’s financial and wellbeing value to employees.
“For instance, we rolled out UnitedHealth Group in 2017,” says Dave Blum, the executive vice president responsible for corporate relationships, business development, branches, digital banking, and marketing. “They did not have a credit union, so we started from ground zero. But we had conversations with them for two years before we rolled them out.”
The launch at UnitedHealth Group was so successful that 17,000 members joined in the first three months.
The market, social, and workplace changes that have taken place since the Great Recession also influence SEG relationships. For example, in a post-COVID world, large corporations are starting to provide comprehensive employee benefits that include ways to improve physical, mental, and financial wellbeing. Blum says BCU looks for partners who rally around those principles.
“That’s what success looks like — if they’re committed to financial wellbeing for their employees,” says Blum, a self-described “recovering banker” who joined BCU 10 years ago.
As the credit union’s SEG base diversified, so did the financial needs of employees across these companies, from front-line associates and warehouse workers to medical professionals and C-level executives. BCU has found that while paycheck sizes differ widely among those groups, the need for sound money-management support and valuable financial products does not.
BCU divides its services to members across three major categories — known internally as Corporate America, Middle America, and Working America — with each segment classified with average credit scores, household incomes, key product offerings, and more. BCU maintains a large portfolio of loans for auto, personal, home, students, and more, plus multiple credit card products ranging from a credit-builder card to cash and travel rewards cards.
“Before we do anything with company partners, we listen,” Blum says. “We try to understand what the need is. We’ve learned a lot over the past 40 years, and we’ve increased our offerings to make sure we have relevant products for every single segment of our company partners’ employees.”
CU QUICK FACTS
DATA AS OF 06.30.22
HQ: VERNON HILLS, IL
Last year, the credit union increased its support for members who lived paycheck to paycheck. That started by significantly reducing non-sufficient funds and overdraft protection fees and creating Life, Money. You., a CUSO focused on financial wellbeing. The latter effort builds upon a wellness program available to members for years and now available to non-members, as well, by visiting the CUSO’s website or downloading a separate mobile app.
BCU has trained and certified more than 130 financial counsellors across the organization, but in-person seminars and one-on-one counselling are hard to scale to a national level, Sammons says. The new CUSO is investing in technology with the ultimate goal of providing tools to leverage transactional intelligence to help users make better budgeting and spending decisions and ultimately change behaviors.
“That was the impetus for the CUSO — for us to keep a focus on this area and not let financial wellbeing get drowned out in the day-to-day minutia of the rest of the operations of the credit union,” Sammons says. “We wanted to give it its dedicated investment and resources.”
Changes Starting At The Top
Another ingredient in BCU’s “special sauce” for large deals is the credit union’s board of directors. In recent years, as BCU brought on large accounts, C-level executives from those companies have joined BCU’s 11-member board.
Today, only two Baxter International reps sit on the board: Christine Fleming, assistant treasurer, and former Baxter CIO Paul Martin, who serves as vice chairman. Other board members hail from SEG partners and the wider community.
Since 2017, the board has updated its governance policies, established term limits for members, and focused on increasing diversity. Four women now serve on the board, and members represent a range of disciplines, including IT, cybersecurity, HR, legal, risk, and accounting.
“Our board has done an amazing job reinventing itself over the past six years,” says Valentine, adding that a more diverse cohort there has helped BCU talk to new companies and evolve its culture with a greater focus on DEI.
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Navigating The Future
BCU set an ambitious goal of growing membership by 10% this year despite facing a variety of economic headwinds. The credit union operates 42 branches in company partner locations across the United States and in Puerto Rico. Those have historically been a major resource for enrolling new members, but the shift to remote work during the pandemic changed that.
“Pre-pandemic, when we had a branch location at a company partner site, we would probably get up to 50% penetration at that site,” Blum says. “If we didn’t have a branch, it dropped down to 10% or 15% penetration. With the hybrid workforce, there’s less traffic.”
To counter that trend, BCU is exploring ways to offer consultative services and increase financial wellbeing through cashless branches that can be run by a single employee and virtual relationship managers for the 65% of members who don’t work at a location with a branch. Meanwhile, BCU branch managers are reaching out to employees through webinars, direct mail, and employer-sponsored events.
“Our company partners are having the same challenges of how to get engagement at the company level,” Blum says. “We’re a trusted partner, so they are allowing us to use different channels post-pandemic.”
The credit union is using any communication channel its partners allow but also has been investing heavily in digital banking. Last year, the credit union updated its platform with a full line of services that rival those of Bank of America and Chase. Eighty-six percent of members use digital banking.
“We are embracing that digital experience that our members are looking for,” Blum says. “If they want to come into our branch, if they want to call us through the call center, or if they want to go to our app, we want to make sure every experience they have is what they expect at BCU.”
BCU tracks member experience with Net Promotor Score surveys of both members and employees. Member NPS scores have risen from 70.43 in 2011 to 79.16 in 2022, with individual branches scoring as high as an 85.
All 850 employees have gone through a 90-minute exercise to understand the member journey and how BCU can build member relationships, serve as a guide on that journey, and help members through life’s major milestones.
Earlier this year, BCU received the 2023 Gallup Exceptional Workplace Award, which recognizes the most engaged workplace cultures in the world based on a wide range of criteria. As part of its workplace efforts, BCU is focusing on diversity, equity, and inclusion through a DEI council, culture training, and a course for the entire enterprise on the power of leading inclusively.
“If you have happy employees and engaged employees, that equals happy members and engaged members,” says Lisa Baron, executive vice president and chief human resources officer. “We’ve put a lot of time and effort into developing our staff, making sure we have great benefits for them, and that they enjoy their work and their workplace.”
Valentine credits front-line employees — or financial first responders, as they’re known internally — for building relationships with members.
“It starts with employees and the right attitude,” he says. “We hire for attitude versus skill. You can teach skills, but it’s hard to teach the desire to help people, to serve.”
Like the rest of the financial services industry, BCU is navigating the current economy of high inflation and 22-year-record-high interest rates. The credit union’s mortgage business fell sharply when the Fed began raising interest rates in 2022. Delinquencies on credit cards and indirect loans are creeping up while share growth contracted by 1% in June 2023 as inflation ate away at member savings.
Despite those challenges, Valentine reminds cooperative leaders that, unlike the banks that failed earlier this year, credit unions aren’t governed by stock prices or investors. As a result, BCU can sustain losses and still serve members across middle America when the economy is down.
“We have strong capital, we feel we’re doing the right things, but we’re trying to position ourselves for the recovery,” Valentine says. “It’s been a really good, reflective time for us to say, ‘How are we doing? What are we doing? What have we said ‘no’ to? Are we investing in the right things?’ Two years ago, we could invest in a lot of different things. Now, we’ve got to be laser-focused, so we’ve got to be good at picking the bets.”
This is part of the “Anatomy Of A Credit Union” series, presented every quarter by Callahan & Associates. Read more about BCU or dive into a decade of archives. Contact Callahan to learn about gaining access today.