This is Why Credit Unions are Becoming 'Financial Portals'
posted by Eric Schurr on Thursday, September 21, 2017
The following is an excerpt from the Credit Union Times article “Broadening Income While Serving Members.”
Eric Schurr's job is to try to think ahead for credit unions.
These days, he's thinking credit unions will need to become helpful to their members beyond just making loans, managing their checking accounts and cashing checks.
Members’ ties to their financial institutions, including credit unions, are weakening as more transactions are done remotely and more options exist to find loans and manage money from online providers with no physical connection to the community.
Schurr, who is TMG Financial Services’ chief strategy officer, sees this trend vividly in the rise of e-commerce. Schurr cited a study released in February by Slice Intelligence that showed 11% of consumers’ things-buying budget was spent online last year, and that number is expected to grow to 17% by 2022. That trend has been accelerated by the savvy of Amazon, which drew 43% of all online retail sales last year, up from 33% in 2015 and 25% in 2012.
Those numbers exclude spending for commodities like gasoline and services like restaurants. But Amazon has armed a new generation of consumers with new expectations.
Looking closer at the portal model
The rise of Quicken Loans’ Rocket Mortgage and Carvana's car buying service shows the spread of that trend into financial sectors. Like any trend, the rise of e-commerce presents both threats and opportunities.
“Forward-thinking credit unions are turning themselves from a financial institution that offers solely their products and services to a financial services portal that allows their members access to products and services that are best suited for them but not necessarily their own credit union's product or service,” Schurr said.
For example, Navy Federal Credit Union of Vienna, Va. offers insurance on its website. “When you look at their auto insurance, it's not theirs, it's GEICO's,” Schurr said.
Becoming more integral to financial lives of members has the added benefit of allowing credit unions to rely less on net interest income and fees charged to members, and more on other operating income.
Rethinking the ‘financially distressed’
Schurr said many credit unions have the opportunity to provide unique help to families living one paycheck from disaster.
He cited a report released last year by the Federal Reserve that showed 31% of U.S. adults, or about 76 million people, are either “struggling” or “just getting by.” It found that 46% of adults didn't have the cash to cover a $400 emergency expense, like an illness or car breakdown, and instead would have to borrow money or sell something.
“Financially distressed is not necessarily someone who is scraping the bottom of the barrel,” he said. “A household with $75,000 annual income might be two people with three part-time jobs.”
As result, many people lack disability insurance, life insurance, health insurance or retirement savings plans.
“That's why it's important for credit unions to think holistically,” he said. “If your mission is to serve your field of membership and not compete against your peers, then you really need to understand your products and services.”
Building on the strongest asset: trust
Schurr said credit unions can build on the trust they’ve established with members to offer a broader array of services, but they also have to be sure they align with their members’ interests.
For example, many credit union executives who have expanded indirect car lending programs said they create a substantial stream of income by selling GAP insurance and extended warranties for members who want those products. But they also say their prices for those benefits are sharply lower than those offered by others.
“Our goal is not to maximize profits,” Schurr said. “Credit unions have to take it upon themselves to do some due diligence to present products that are a good value. Who else has that position of trust?”
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