Keeping It Local: Growing Business Streams in Your Community

One of my favorite parts of Saint Petersburg, Fla., apart from it being my home base, is that I usually visit at least one local business every day: my choices in grocery store, coffee shop, dinner spot and theaters are all born-and-bred in St.Pete. There's even a formal organization called "Keep St. Petersburg Local," that actively supports small businesses. Even when I am on the road, I like to try out local businesses whenever possible. I'm not alone. More and more consumers are interested in supporting local businesses. According to Gallup, 70% of consumers have confidence in small businesses, compared to 20% confidence in big businesses.

The Small Business Administration's Office of Advocacy defines a small business as one that has fewer than 500 employees. Using that definition, small businesses comprise 99.7% of all companies in the United States. If we whittle down the list to businesses with less than twenty employees, there are 5.2 million in the United States today. Offering products and services from books to office furniture, from coffee to boutique clothing, small businesses employ millions of Americans and breathe life into the local economy.

Despite the fact that they are important threads in the fabric of local economies, small businesses face challenges including access to credit. They need liquidity, but unfortunately for our industry, they're not inherently choosing credit unions. In fact, only 1.9% of small businesses say they visit a credit union for their lending needs.

Filene began a collaboration with Larky in 2014, a web and mobile loyalty platform that enables credit unions to delight members with frequent point-of-sale discounts at local and national merchants. During the pilot, members saved an average of $1,000 per year. An unexpected benefit of Larky was that it established and grew relationships between credit unions and small business. Because Larky provides local merchants with free advertising, it offers a window to establish and grow engagement with small businesses and to increase interchange income.

As Larky has continued to work with dozens of credit unions across North America, CEO Gregg Hammerman has noticed an increasing trend among credit unions interested in working with local small businesses. Based on his interactions, credit unions are not simply looking for a loan or a deposit relationship. Instead they are looking at the long game, at ways in which to reinforce their presence and connection to the local community through small local businesses. Larky does not charge the businesses to promote offers through their platform, and neither does the credit union. The message that results is only a very positive "we want to help your business succeed."

What are other creative ways credit unions can drive business relationships in the local community?

Talk to other credit unions who are doing this. There are about 1800 credit unions that offer Member Business Loans today. Engage with your friends and work associates and ask for their tips and tricks. For example, St. Helens Community CU engaged with local businesses in a different way. They recorded micro videos highlighting small business and feature them on their social media channels. It raised awareness of local businesses, and reinforced the credit union's support of the community. In the Filene report "Room to Grow: Credit Union Business Lending" (Walker, 2015) the author provides this conclusion: "Small business has been a major source of increased employment and the source of much innovation in the United States for several decades. Thus, credit unions should find it imperative to enhance their business lending services and offerings."
Consider a mobile engagement platform like Larky. With more than 40 credit union clients in the U.S., Larky has the engine and deep experience in our space. Two pilot participants in particular, United Teletech Financial Federal Credit Union in New Jersey and Christian Financial in Michigan, have continued to use Larky with particular success among small businesses. The pilot studies Filene conducted examined the very real tension credit unions face in needing to increase non-interest income without alienating members or compromising their credit union difference. Testing showed that loyalty programs with local business could be a strong strategy for growing engagement, brand awareness, and non-interest income that provides value to members, is cost-effective, uses a member-preferred channel, engages the next generation, and grows community and business relationships.
Embrace Principle 6. As a financial cooperative, credit unions should be keeping the 7 Cooperative Principles on their radar and looking to walk the talk of their cooperative nature whenever possible. The Filene report "Cooperation among Cooperatives: Quantifying the Business Case for Credit Unions and Other Cooperatives" (Dopico, Rogers, 2015) explained that "beyond the quantifiable interest-rate benefits that cooperatives could obtain from shifting deposits, investments, and loans to credit unions, cooperatives would benefit from obtaining financial services from a broader range of participants in financial markets. Examples of cross sector cooperative collaboration are many, and include cross-promoting membership, locating credit union branches and ATMs in non-financial cooperatives, and cross-marketing initiatives such as co-branded credit cards." On the purely quantitative side, the report concluded that if cooperatives shifted a large fraction of their deposits (50% or $37.5 billion) from commercial banks to credit unions, they could earn an additional $2.2 billion in interest over 10 years. Those shifts could help both credit unions and cooperatives, significantly.
Join a small business collective. Keep Saint Petersburg Local is part of the American Independent Business Alliance. More than 85 local communities across America leverage the work of AIBA today. Check them out and search for local businesses near you at https://www.amiba.net/.

Engaging with local businesses offers a whole range of benefits, and it offers the magic win-win-win combination: for your members, for local businesses and the economy, and for you. Let me know how you are keeping it local at @erinc_filene or [email protected].