For University Credit Unions, It's All in the Family

WEST PALM BEACH, Fla. – Like members of a family, university credit unions share a lot in common – but they each have their own personalities and challenges. “State universities are struggling with getting funding for higher education,” says Bill Sterner, CEO of the University of Colorado Credit Union in Boulder. “That obviously has some impact on us. People don’t get salary increases, and that slows down deposit growth.” How has UCCU responded to the challenge? “Some university credit unions have single sponsors. We have 160 SEGs, a lot of small businesses in this area. So we have diversified our base a little bit. That has helped us.” For example, the credit union recently added to its field of membership employees at a new hospital complex. That’s a potential 1,200 new members. But Sterner points out Colorado was late to get hit by the recession and is slowly slogging its way out. Until new jobs open up and hiring takes place, state revenues remain pinched. On a positive note, Sterner continues, although students are paying higher tuition, enrollment hasn’t dropped. So students, staff and faculty continue to be important to UCCU. “We need all three,” he says. “We need the young people, because they’re our future. We have over 17,000 students in our credit union. We also need the faculty and staff because they provide the savings and deposits.” Sterner agrees with other university credit unions who see technology as the key to keeping those students after they graduate. New jobs may take them anywhere in the country, but their accounts can remain as close as the nearest computer and ATM. He also echoes others who note today’s students are very comfortable with technology. In fact, UCCU has created an electronic account to keep students away from costly branch transactions. About 80% of student members have signed up. Idaho State University Credit Union in Pocatello is one of those single-sponsor credit unions Sterner mentions. So it’s not surprising CEO Lonnie Nelson also cites students as their future. But Nelson sees technology as a challenge as well as an asset. “One difficult task is keeping pace with technology and being able to offer our members some of the services they would like, such as bill pay and the ability to do more with home banking,” he says. “I think they (the university community) perhaps demand it a little more than the average member would. For the most part they are at home with technology.” Another issue, he continues, is human resources. That runs the gamut from finding people to training them and enabling them to handle the technology members expect. “For instance, we’re at the size now we’re beginning to look at something like a call center. That’s a perfect blend of what I’m talking about. You’ve got the human resources factor as well as the technology factor,” Nelson says. ISUCU membership includes students as well as faculty and staff. Who rules? “We try to cater to both,” Nelson answers. “We think students are an important part of our future. Even though when they’re in school their accounts aren’t what you’d call profitable, we know some day they’re going to be out of school and will need loans, are going to get married and raise a family, and we want to be part of that. “We need to get them in, show them what a credit union is all about and turn them into a lifelong member.” Duke University Federal Credit Union, Durham, N.C., doesn’t include students in its field of members. However, most of Duke’s 6,000 graduate students – and they form an impressive half of the university’s enrollment – have on-campus jobs and are thus eligible. Employees at Duke’s extensive medical complex, which employs 21,000 people, also supply significant credit union membership. In fact, 3,000 nurses form the biggest single segment of the credit union’s 16,000 members. “The challenges we have would be probably be similar to those facing any other credit union of our asset size,” DUFCU CEO Lee Fogle says. “That’s obviously a membership that has high expectations for service levels. At same time we have to make our limited resources go as far as possible.” To deliver what members want, DUFCU spends a lot of time surveying them and fine-tuning products and services. For example, a package of services has been developed specifically for the 3,000 nurses at Duke. “We’re so closely aligned with the university that employees of the credit union are actually employees of the university,” Fogle points out. “We’re considered very much a part of the university, the way you thought about credit unions maybe 30 years ago. For example, the university is looking at us as the financial education provider for their employees. We have to spend a lot of time fostering relationships at the university and the health system.” Katherine Hutchinson at UMASS/Five College Federal Credit Union in Hadley, Mass., is another university CU CEO who singles out relationships with the sponsor as vital. “Our number one challenge is positioning our credit union as a value-added benefit to administration,” she says. “I think members already see you as an added value. You have to have that relationship with the administration to sell the credit union to new groups coming in. “The credit union could do a better job of positioning itself. We do rely somewhat on members to spread the good word rather than maybe getting out and selling ourselves a little bit. There are so many other financial entities including community banks vying for that business.” Originally students weren’t included in the credit union’s field of membership. Hutchinson says the credit union may go after them more aggressively. University credit unions often in effect subsidize student accounts expecting to transform those students into more significant accounts after they graduate. But how do you track the retention rate?, she wonders. Competition from other financial institutions is also an issue at Penn State Federal Credit Union in State College. CEO Constance Wheeler sees more advertising from credit unions with community charters as well as from banks. “The demographics are attractive. This area seems to be growing and vibrant,” Wheeler says, a contrast to what Sterner observes in Colorado. To respond, PSFCU has refreshed its brand with a new look and image backed by more extensive marketing. Wheeler has also talked to some of the credit union’s board members who are on the Penn State faculty to learn what impact rising tuition is having on students. “They felt there may be some impact and federal student aid is shrinking. But Penn State is working on increasing student aid from the university such as trustee scholarship funds,” she explains. “We didn’t add undergraduate students until the mid to late 1990s. We were involved in the Penn State ID card and we had quite a bit of undergraduate membership during that time. The current Penn State card is contracted with PNC Bank and they are marketing extremely heavily to faculty, staff and students.” Overall, Wheeler sees university credit unions facing common issues. She gets a chance to swap notes with her peers during forums for university credit unions at the Education Credit Union Council annual meeting. She also participates in meetings of credit unions from the Big Ten universities. The sessions rotate from campus to campus each year. “Even though there are differences, there are a lot of similarities,” she says. The University of Michigan Credit Union is part of that Big Ten group. CEO Jim Mattson agrees with Wheeler that increased competition pretty much leads his list of issues. “In Ann Arbor we have had a couple new community banks formed in the last few years,” Mattson says. “Some of the major players who were not here before have added branches.” On a positive note, “We are fortunate to have students in our field of membership. Students provide us with a fresh group of credit union members each year. While we’ve seen the number of those who join the credit union decline since we started doing that in 1995, we are still happy to have that new blood to help the credit union grow. We’re capturing about 20 percent of the students each year.” As at Penn State, the ID card has proven critical. Most students open accounts at TCF Bank, which has the contract for the single card students use to access the library, their dorm and their bank account. Mattson suggests issues affecting university credit unions vary not only from campus to campus, but from year to year. “Sometimes it’s recruiting volunteers. Sometimes it’s health care costs,” he notes. -