In many cases, credit unions have had to get creative when it comes to finding ways to properly compete with banks and other financial institutions that have considerably more resources. The most common solution is to offer financial products such as loans or high-interest savings accounts with rates that are extremely attractive to the member but represent limited opportunity to maintain the revenue the credit union itself requires to continue in operation.
So, how can credit unions compete on this not-always-level playing field? How can they attract new members and increase deposit volume without sacrificing their margins? How can they otherwise maintain or even increase their profitability?
Three methods immediately come to mind — ways credit unions can maintain their ethics, standards, and commitment to their communities while ensuring they remain a viable business entity.
1. Member Service And Engagement
Nothing new here. This has been the gold standard upon which credit unions have competed since their inception. Resolved commitment to these principles is core to what sets credit unions apart from banks and keeps generation after generation of the same families remaining loyal to them. Taking more time and putting more effort into understanding member needs leads to better member service as a whole and also can encourage the credit union to explore additional tailored services that create even more value for its members.
2. Competing With Services Rather Than Rates
Here’s where things begin to get a bit more interesting. So you’re attracting new members with lucrative rates on loans and accounts — but are they going to stay with you? Are they going to increase their deposits outside of that initial account that drew them to you in the first place? Are they going to explore the additional products you have to offer?
Getting creative with additional services could entice those members to move more of their assets over to your credit union — and keep them there for the long haul! One option would be a rewards program that channels an overall lower cost benefit that is more easily achieved. This would provide members with an alternative to points-based credit cards or other offerings that might otherwise cause them to look elsewhere for financial services.
3. Alternate Revenue Streams
Alternate revenue streams typically require alternate ways of thinking, without straying too far from the core business. Opportunities for interchange fees are dwindling, and the new wave of fintech companies that might be able to offer innovative solutions seem to be more focused on working with traditional banks. So, how else can credit unions make money while maintaining the strict ethics and morals that benefit our community as a whole?
Rather than interchange fees, could revenue sharing with partner organizations be a viable alternative? Finding the right partner is, of course, crucial to this endeavor, but they are indeed out there and many offer revenue sharing on easily implementable programs that could offer immense benefits to members. This, in turn, can lead to new and old members alike moving more assets to their credit union accounts.
These three methods are all connected to some degree and all offer more efficient and cost-effective ways to compete and grow without relying on costly advertising or unsustainable rates. Additionally, none of these methods are even remotely mutually exclusive, so a credit union can simultaneously implement any and all three. New initiatives will get your members talking to one another and to their friends, and that word-of-mouth advertising will lead to even more deposits in the future!
David Metz is the founder and CEO of Prizeout.
