Nurturing A Successful SEG Business Partnership

Honda FCU has saved its single SEG millions of dollars while diversifying its own income stream and generating positive earnings.

Honda Federal Credit Union ($625.8M, Torrance, CA) is a closed-charter credit union with a single sponsor. Membership at Honda FCU is open to associates of more than 30 Honda companies and their immediate family members. CEO Jim Updike shared the credit union’s strategy for how it strives to be the financial institution of choice for The Honda Companies during a Callahan Leadership webinar. Through positive relationship building with employees and Honda and smartly priced products and services for the business, the credit union has expanded its revenue sources and saved its sponsor millions of dollars.

The Challenge

A number of years ago, Honda faced a challenge familiar to many credit unions: It realized net interest income alone was not going to sustain the credit union moving forward.

The credit union had a positive relationship with its single sponsor, The Honda Companies, but that relationship was limited to serving the financial product and service needs of employees. So the credit union decided to expand its SEG relationship and become a trusted financial advisor at the corporate level in addition to serving individual employee needs. With its future hinging on the success of the expanded relationship, the credit union new it needed to make helping Honda grow and prosper a primary strategic goal.

Watch It Now

View the webinar On-Demand and learn more best practices from John Updike and Honda FCU.

The Solution

Updike shared a few key actions that helped Honda expand its relationship beyond the traditional employee benefit. First, it included Honda senior executives in its planning efforts. The credit union invited senior executives from The Honda Companies to participate in its strategic planning session. This gave the executives a new perspective on the credit union and showed them that Honda FCU’s mission and goals aligned with the Honda Companies’ success. It also opened the door for new ideas to benefit both parties.

Honda FCU also worked to provide the products and services The Honda Companies needed. It had previously lacked a robust business services portfolio, so it focused on developing products that were profitable for the credit union and saved its sponsor money. Specifically, the credit union now offers Visa Business Credit Cards, Pre-Paid Debit Cards, and SBA loans for motorcycle dealerships.

Lastly, it communicated the availability of its financial savvy. Like a true advisor, Honda FCU employees makes themselves available to help and share their financial expertise with The Honda Companies on an ongoing basis.

The mutually beneficial relationship the credit union enjoys with its SEG did not develop overnight; rather, it required years of nurturing and positive interactions. Today, Updike and the credit union’s chief operating officer, Steve Brandon, are the two employees primarily responsible for continuing to nurture that positive business relationship with The Honda Companies.

We don’t go out and try to sell them, Updike said during the webinar. They come to us when they need a financial institution. They look to us first.

The Results

The credit union has saved the Honda Companies millions of dollars over the years. In fact, the company saved $2 million in the first year alone with the pre-paid debit card program.

This savings was primarily driven by reduced fees, Updike said. We looked at what they were paying to their previous debit card provider and were able to save them significantly.

But the results extend beyond the sponsor. The credit union has diversified its income stream and generated positive earnings even as it has continued to deliver valuable services. For example, the pre-paid debit program brought in $384,000 in new revenue to the credit union. And as of December 2012, Honda FCU had earned $930,000 in interchange income from the Visa Business Cards it provided.

One of its latest initiatives, SBA loans to motorcycle dealerships, will also help the credit union expand its services while creating value for The Honda Companies. The dealers, who sell multiple models, were having a hard time securing loans from other financial institutions. But because of the credit union’s relationship with Honda, it views those dealers favorably and is open to building a lending pipeline. A win-win for all involved.

Honda FCU’s SEG business partnership approach is not limited to single-sponsor credit unions. According to Updike, there are many opportunities for credit unions to develop similar partnerships with any, and all, SEG partners.

Credit unions with multiple SEGs or even community-based organizations with large employer groups can develop great partnerships as well, he says.

November 22, 2013

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