Credit unions expand services
Credit unions have long played up their role as the little guys of the financial industry. With their narrowly defined clientele, limited list of products and often a single branch, they could focus on providing old-fashioned, personalized service to their members. But with the recent financial crisis, many credit unions saw an opportunity to compete more directly with banks and add some disaffected bank customers to their membership rosters.
Today’s credit union is serving up more of what consumers expect from a bank, including access to their accounts online, student loans and business loans. With economic constraints limiting their physical growth, credit unions also have embraced e-banking as one way to expand.
“The capital challenges that they’re having, given the state of the industry, are forcing them to slow brick-and-mortar growth and aggressively expand into those electronic channels,” says Chuck Fagan, chief sales officer for PSCU Financial Services, a credit union service organization based in St. Petersburg, Fla.
Here are five of the top areas in which credit unions are expanding their products and services.
Adding mobile banking
A small but growing number of credit unions are jumping on the mobile-banking bandwagon, even if most consumers are not quite ready to ride with them.
A June 2010 survey by the National Association of Federal Credit Unions in Arlington, Va., revealed that about 7.5 percent of its members currently offer mobile banking. According to the credit union consulting firm Callahan & Associates in Washington, D.C., 43 percent of credit unions said they planned to add a mobile-banking option in 2010, although some were holding back because of security concerns.
Consumers are even more cautious. In a September 2010 survey of U.S. and Canadian banking consumers by the research firm Empathica Inc., in Alpharetta, Ga., 51 percent of U.S. participants in the survey said they don’t think mobile banking is secure.
Fagan expects mobile banking to catch on eventually, just as online banking and bill paying have done. “It took awhile for bill pay to adopt, and now it’s got a pretty solid following,” Fagan says. “(And online) banking is mainstream.”
Credit unions share branches
Joining a credit union doesn’t have to mean driving across town in a race to get to its lone location before closing time. These days, you can get your banking done when you pick up your morning coffee and even make transactions at other credit unions closer to you.
Members of credit unions that belong to the CU Service Centers network can access their accounts at branches of any participating credit union by presenting the name of their home credit union, their account number and a government-issued photo ID to the teller. The network also includes more than 2,000 self-service kiosks located in 7-Eleven stores.
“Through our credit union locator site, CULookup.com, they can find not only the physical branches, but also the shared branches that include the locations at 7-Eleven,” says Patty Briotta, a NAFCU spokeswoman.
Get perks through rewards programs
To encourage members to use more of their products and services, some credit unions offer rewards programs featuring perks such as free traveler’s checks, free withdrawals from ATMs not owned by the credit union, and reduced car loan and mortgage loan rates.
PSCU introduced a member rewards program for its credit union clients less than two years ago, Fagan says. By accessing a website that’s linked to an online banking site, credit union members can explore a variety of options for earning targeted rewards such as a vacation trip or a digital camera. Members can also convert points into charitable donations.
Businesses have loan opportunities
In September, the Credit Union National Association released its Mid-Year 2010 Summary of Credit Union Operating Results, showing 29.5 percent of U.S. credit unions offered member business loans, up from 23.2 percent in 2006.
Credit unions would like to see even more growth in business lending, but they are confronting regulatory restrictions that limit the amount of business loans they make to 12.25 percent of their assets. Industry trade groups had hoped to raise the cap to 27.5 percent through an attachment to the small business stimulus package that recently became law, but the amendment failed.
“There may be other avenues that we can pursue into the next year,” says NAFCU spokesman Jay Morris. “We haven’t given up on it. We now have the support of our regulator, the National Credit Union Administration, and … the Treasury has signed on as well.”
Student loans are growing
Since it launched in May 2008, the Credit Union Student Choice service organization has grown from seven credit union partners offering student loans to 165, according to Mike Weber, the organization’s vice president of marketing. So far in the 2010-2011 academic year, participating credit unions have originated more than $210 million in loans, compared to a total of approximately $158 million for 2009-2010. Weber says the big jump in annual loan originations owes mainly to the spike in the number of affiliated credit unions.
After the U.S. government took over processing of all federally backed student loans, the industry had to change how it approached college loans. But Fagan says consumer adoption of credit union student loans has been strong.
“When banks started shutting down some of their lending practices, (student) loans were a natural fit for credit unions as they tried to get that next-generation consumer to join,” he says.