How Your Credit Union Can Drive Membership and Boost Loan Portfolio Diversity
By: Web Finance Direct
If boosting membership and loan growth is on your agenda for 2023 and beyond, it is important to factor in the right strategic planning for your credit union. Having a set plan in place for how to connect with the right loan applicants in your desired industries can go a long way. Credit union membership growth strategies help you better understand the market, set more clear goals, and even gain a competitive advantage by mitigating risks. So, what are some of the best practices for establishing a strategic plan for your credit union? In this blog, we’ll discuss the current financial landscape, ideas to boost your loan portfolio diversity, and the role indirect lending could play in driving your credit union’s membership forward.
The Current Market: Challenges to Consider Before Planning
When strategically planning, credit unions must first consider the increasing number of challenges in today’s fast-paced financial markets. To start, loan fraud. As fraudsters across the globe become more sophisticated in their methods with the help of advanced technology, it’s important to ask if your credit union is properly prepared to defend against them. Do you have strict guidelines in place to screen applicants who apply for loans? Is your credit union embracing new technologies that can safeguard against potential cases of loan fraud?
In addition to indirect lending, which we’ll dive into later in the blog, there are three great ways to set your credit union up for success when strategically planning how to combat fraud.
- First, it is important to expand your screening of applicants. If you operate under the mindset that fraud simply won’t find its way into your credit union, you could be struck at the worst possible time.
- Make sure you take advantage of the many new technologies on the market when possible. AI, biometrics, and more give lenders a leg up against fraudsters.
- Finally, it’s crucial to enhance your collaboration with law enforcement in the event your credit union becomes the victim of a fraud attack.
Web Finance Direct ensures you’re working with the right dealerships . We carefully vet every dealership we partner with alongside each applicant to make sure they are credible which factors into your credit union’s strategic planning. To do this, we pull detailed industry reports—also known as CLEAR investigative reports—to “grade” each dealership on whether or not they are financially stable. This process helps to raise red flags in the event of shady practices or financial inconsistencies. For applicants, we’ll work closely with your credit union to help you connect with potential members who meet your criteria. To learn more, visit our lender page!
Strategies for Credit Union Membership Growth
Now that we’ve discussed the current landscape, including how to better prevent the risk of fraud, let’s talk about a number of strategic plans for credit unions to drive membership growth over time.
Partner with Local Businesses
Not only does partnering with local businesses help contribute to the health of the local economy, it also presents credit unions with a unique way to offer exclusive benefits to their members. This can help keep your new and existing members engaged and lead to better overall member retention.
Utilize Social Media to Connect with Members
In 2023, social media’s power only continues to grow, especially among younger credit union and bank members. According to Forbes, 78% of Americans now prefer online banking to in-person, representing a radical shift in the way we manage our finances and loans. When strategically planning for your credit union to find new members and diversify your loan portfolio, you may want to consider how you’re connecting with your members in the digital space.
Implement a Referral Program
Who doesn’t love a good incentive once in a while? Referral programs are potent strategies for credit union membership growth. A well-implemented referral program incentivizes members to promote your credit union, leading to organic growth. Furthermore, referred members are typically more loyal, as they often join with a positive impression and are more likely to utilize additional services, enhancing overall member engagement and satisfaction. By offering referral bonuses such as gift cards, you can show new and existing members that you appreciate their continued business.
Expand Your Marketing Efforts
When was the last time you stumbled across a well-produced advertisement? Did it pique your interest? Maybe it even caused you to take action. For credit unions, ads on social media, the internet, TV, or even around town can lead to higher membership. By expanding your name recognition, your credit union can better implement your strategic planning to find the right members.
Leverage the Power of Indirect Lending
With the right indirect lending partner, your credit union can unlock a wide range of opportunities across many industries—from auto to recreational vehicles to marine and even powersports. So, why is indirect lending so powerful for boosting membership? One reason is that the process is typically faster than direct lending. Because indirect lending partners like Web Finance Direct facilitate the partnership between the dealers and lenders, indirect lending can often lead to a seamless approval process.
Indirect auto lending, for example, is significantly outpacing direct auto lending in 2023. And as some banks, which have historically held a large share of the indirect lending market, start to pull out of indirect lending, credit unions have a unique opportunity to capitalize on the market share that is being given up by the banks.
At Web Finance Direct, we’ve connected credit unions to qualified dealerships and applicants since 2008. If you’re looking to establish indirect lending as part of your credit union’s strategic plan, our team will work tirelessly to make sure you do it in a frictionless way.
Loan Growth: Why It’s Important for Your Credit Union’s Strategic Planning
Loan growth plays a vital role in a credit union’s success, contributing both to its financial stability and its ability to serve its members effectively. At a fundamental level, credit unions generate revenue primarily from the interest on the loans they issue. Increasing the volume and diversity of loans translates to more interest income, improving the credit union’s overall financial health.
With a healthy loan portfolio, credit unions can reinvest profits back into their operations to provide better rates, lower fees, and expanded services, enhancing member satisfaction and loyalty. So, how can credit unions stay on top of their loan growth and health in a slower economic cycle like we find ourselves in today?
Adopt an Indirect Lending Strategy
Indirect lending, by nature, can help your credit union diversify your loan portfolio. Indirect lending enables you to reach borrowers who might not have considered your credit union as a lending source. This can broaden your overall member base and introduce a greater variety of borrowers into your loan portfolio. On top of this, the right indirect lending partner can help mitigate risk when utilized as part of your credit union’s strategic planning.
Diversify the Types of Loans Your Credit Unions Writes
A more diverse loan portfolio can reduce risk. If your credit union relies heavily on one type of loan or one demographic of borrowers, it could be more vulnerable to specific economic shifts. By diversifying your loan portfolio, you can ensure that your credit union becomes more financially stable.
Offer Competitive Interest Rates
Interest rates can be a major selling point for potential members. In fact, better interest rates are one of the reasons why so many across the country are members of a credit union. When financing a large purchase, such as a new car or boat, applicants want to make sure they’re not being taken advantage of by higher interest rates that are hard to pay off over time. Within your credit union’s strategic plan, make sure competitive interest rates represent a big part of it.
Ensure Responsible Lending
While loan growth is crucial to any credit union’s ultimate success, it should be balanced with risk management and sustainability considerations. A more consistent and manageable rate of growth can help ensure a credit union’s long-term health and stability. Irresponsible lending can lead to a lot of long-term issues, including more stringent regulatory oversight, enforcement, or a subsequent downturn in portfolio value.
The Importance of Sustainable Credit Union Growth
When creating your credit union’s strategic plan, it’s typically not best to simply prioritize the short-term. So, how can credit unions make sure they’re focusing their efforts to achieve long-term loan growth and sustainability?
Focus on Member Retention
It’s one thing to find a new member. It’s another thing to keep them engaged. By focusing on membership retention, your credit union can ensure that your short-term growth does not go to waste. By offering high-quality customer service, you can go the extra mile to make sure your new and existing members feel welcomed.
In addition to customer service, your credit union’s strategic planning could also include software to help with membership retention. From CRM platforms to modernized apps, you can create an experience that keeps your members excited to come back. As we continue into 2023, the power of digital technology in the credit union and banking industries will most likely only continue to grow.
Don’t Forget About Marketing
Is marketing part of your credit union’s current strategic plan? If not, it definitely should be. Brand recognition can be the difference between your credit union attracting new members or stalling and potentially losing membership over time.
Target More Industries
Although the auto industry understandably dominates a lot of the indirect lending space, expanding your credit union’s reach to other industries like marine, RV, and powersports can have a profound impact on your loan portfolio’s diversity. Although these loans can sometimes be more complicated, especially those for boats, many of the applicants you’ll find in these industries may have better credit scores than those looking for used cars at a dealership.
How do you find new credit union members?
The best way to find new members is to put a robust credit union strategic plan in place. By doing so, you can establish the right goals for targeting new members and retaining them.
How do I promote my credit union?
There are a lot of ways to promote your credit union, especially through marketing campaigns. TV ads can be a great way to find new members, but in today’s digital age, social media often reigns supreme. Platforms like LinkedIn and Facebook can give your credit union a wide range of ways to connect with and reach potential members.
How do you grow a small credit union?
To grow a small credit union, it’s important to have a strategic plan in place. While you may not be able to aggressively diversify your loan portfolio in the short term, focus your efforts on quality marketing, customer service, and even referral programs if possible.
What makes a successful credit union?
A successful credit union will not only have a diversified loan portfolio with qualified members, it will also offer competitive interest rates, referral bonuses for existing members, and much more.
What should credit unions focus on in 2023?
Apart from digital software, credit unions should prioritize indirect lending in 2023 to capitalize on market shares being given up by large banks.
What are the biggest challenges facing credit unions?
Fraud is one of the biggest challenges facing credit unions. Strategically planning to overcome the risks of fraud is crucial for ensuring the safety of your credit union and its members.
To learn more about our low-risk approach to indirect lending and how it could transform your credit union’s strategic plan, contact our team of experts.