Take Care of Your Members’ Financial Chores

If I were to ask you about a vivid childhood memory, would financial services be the centerpiece of that thought? For me, I often think back to a Sunday evening ritual that occurred in my family. After my family sat down to eat dinner and the plates were washed and put away, we would clear the kitchen table. The house became quiet and my parents sat down under dim lights with stacks of papers, pens and the checkbook. It was time to pay the bills and balance the checkbook. Depending on where in the month each Sunday fell, there would be more work, deliberation and stress than usual based on when payday arrived, if they had cashed their paychecks, and if an emergency room bill came because I made some pretty dumb decisions jumping a barbed-wire fence (sorry mom and dad).

In an upcoming Filene report, “The Credit Union of the 21st Century,” Filene’s managing director of research, Taylor Nelms, and co-author, Stephen Rea, describe “financial chores” as cashing checks, paying bills or transferring money. Like my chores of mowing the lawn, taking out the trash and cleaning the house, I know my parents didn’t enjoy this weekly routine. Nelms and Rea stated, “By automating such financial chores and building in added value for members, credit unions can place some of the more onerous – repetitive or confusing – banking tasks out of sight and out of mind, freeing members up to concentrate on other activities.”

Credit unions have been tuning into this insight for many years now. They have come a long way from that Sunday kitchen table routine to providing members with convenience services such as bill pay, remote deposits and online account balances. For many consumers, these features are expected and now serve as an ongoing expense for credit unions. However, there remains an abundance of opportunity for credit unions to generate new noninterest sources of income by helping members spend their money and time in ways that enrich their lives beyond finances.

One of my favorite examples to demonstrate this noninterest income opportunity comes from our Australian credit union friends. Queensland Country Credit Union and its program SmartBudget helps members take care of multiple financial chores. Members are able to manage and pay multiple types of recurring bills. In addition, SmartBudget assists with fluctuations in those expenses through a “Rainy Day” balance and smooths out payments for those bills over a 12-month period. If bills are higher or lower than expected in a given period, funds will be withdrawn or added to the Rainy Day balance. What value would you place on this package of features that reduces the time and stress needed to pay bills, budget and manage unexpected costs? Queensland Country charges members $5 (Australian) per month for this service. While this may not appear like a large source of income, each new SmartBudget user contributes to the credit union’s bottom line as the program is highly scalable. By deepening their member engagement with this tool, they’ve found that a SmartBudget user has three times the lending with the credit union than a non-user.

What’s so intelligent about SmartBudget is its ability to help members take back control of their valuable time, but also, buy peace of mind that unexpected fluctuations in their expenses will be managed through the program. Credit unions can be at the forefront of reducing stress for their members in other ways such as introducing insurance concepts. This idea is not new and credit unions have been partnering with insurance companies to offer life, home and auto insurance for years and generate noninterest income through these partnerships.

But what about other services that help members buy time and peace of mind? Just yesterday I received a co-branded offer from my credit union for ForeverCar, a mechanical repair coverage service. It has some catchy tag lines that demonstrate its de-stressing value proposition: “Never worry about a car breakdown again” or “Go from BOOM to ZOOM.” ForeverCar helps consumers stress less about what they will do if their car breaks down and if they will be able to afford it, and refocuses attention to using their vehicle to live their life.

Speaking of vehicles, in a recent research report from Filene, “Consumer Insights on Autonomous Vehicles as an Impending Market Disruption,” innovative lending solutions like subscription-based car services allow credit unions to experiment with new models of financing. Credit unions and CUSOs are already seeing their auto lending portfolios begin to squeeze. Volvo’s Care subscription program includes vehicle maintenance and insurance in a flat monthly rate with the opportunity to upgrade once a year. It’s only a matter of time before financial institutions begin earning revenue with similar programs and partnerships.

Beyond daily financial chores, what about saving time and creating peace of mind for major life events like planning for college? Filene’s i3 program innovation Debt Dragon helps families understand the financial implications and alternatives about their higher education investment options with clear action items, next steps and checklists. Couldn’t credit unions help individuals consider options, alternatives and implications for other major life decisions such as starting a family or caring for elderly parents through advisory models comparable to credit union wealth management services?

Credit unions have served members well with savings and loan products. But the landscape has already changed, and consumers are increasingly looking for partners to help with all of life’s “chores.” Whether it be budgeting, bill-paying, advisory services, or countless other options that give members the ability to make the best use of their time and money, credit unions have the ability to be the centerpiece of their members’ financial (and overall) well-being while sustaining their enterprise through new sources of income.

Looking back to my childhood, I also think about how my family could have spent those Sunday evenings if our financial chores had been taken care of for us. I’d bet that my parents would have eagerly paid for services we take for granted today and spent more time as a family playing games, chatting or eating ice cream around our kitchen table, rather than worrying about a never-ending stack of bills.

Adam Lee is Incubation Director for the Filene Research Institute. He can be reached at 608-661-3747 or adaml@filene.org.