‘Big Smart’ Ideas to Drive Growth

I’m inspired by a story our new Filene Chief Experience Officer, Christie Kimbell, told about her four-year-old nephew wanting to grow up to be “Big Smart.”

Let’s be “Big Smart” on a topic facing all our organizations – growth.

We want and need our organizations to grow. Growth brings more value to members, more opportunities to employees and more impact to the communities we serve. It can translate to everything from generating revenue to ROA to membership to innovation. But what really delivers growth?

At Filene we tackle big issues through easy-to-digest, research-based innovation, so let’s look at growth from two simple perspectives: The “Tried and True” and “Fresh Thinking.”

Tried and True Strategies

Launch long-term growth with a unique value proposition: To dominate your market segment, you need to first define what your organization will be the very best at – and then execute a value proposition to get you there. There are three options at the core of a strong value proposition: Are you a leader in operational efficiency (i.e., best total cost solution), product innovation (i.e., best products) or customer intimacy (i.e., best member solution)? Consider where you want your organization to shine – and how that focus guides your growth strategy and business plans.

Stimulate revenue growth through noninterest income: There are the tried and true NII solutions of interchange fees, credit insurance and debt protection. But it takes innovation, member focus and product design competency to deliver more than just marginal revenue growth. Our research shows untapped revenue levers in enhanced debit card rewards programs, services that support members’ shopping and buying decisions, and personal financial management services beyond simple tools. Doubling down on your innovation can help stimulate your NII and deliver new sources of revenue for years to come.

Trigger inorganic growth through smart mergers: Mergers of equal-sized credit unions are now everyday news. And there’s good reason. These institutional marriages deliver greater value to members and increased efficiencies to operations. But what about acquiring smaller banks and thrifts? (Radical thinking, I know.) They can increase economies of scope and scale – and be profitable within a relatively short period of time. It’s an intriguing concept. Your members receive access to new loan products. You’re also bringing the credit union solution to often underserved communities. With recent low interest rates and the Federal Reserve policy blueprint, it’s now easier for credit unions to make these acquisitions – and regulators have been receptive.

Fresh Thinking Strategies

Juice membership growth through new segments: If your field of membership isn’t broad enough, you can petition to change it and serve new groups. But what if your field of membership is so expansive, you don’t know where to start? You begin with demographics. Identify a local, definable market niche and get to understand their specific financial needs. Think beyond millennials. Think Polish & Slavic Credit Union, Latino Community Credit Union or Central Canada Credit Union, which targeted their communities’ First Nations population (Canadians’ term for their country’s Native Americans). Then there’s Vancity Credit Union, which successfully reached out to serve the lesbian/gay/bisexual/transgender/queer (LGBTQ) community. In the U.S., this segment is estimated at about 10 million people – and it’s largely untapped by financial institutions. A majority of the LGBTQ population in one survey have strong or moderate concerns about being denied a home mortgage because of their sexual orientation – and not for financial reasons. And there’s much, much more: Consider immigrant populations, students, veterans and retirees. Whichever segment you target, this is a long-term play. Commit the resources needed to deliver long-term, sustainable growth.

Spark product revenue through innovation: Credit unions rock at progressive financial solutions and serving the financially vulnerable. With that combo in mind, how can you reach new markets, grow your balance sheet and do good at the same time? Consider the current state of our country. One in five households – more than 24 million families – is underbanked and lacks access to affordable financial services. Drilling down deeper we find that 53% of African Americans, 43% of Hispanics and 44% of Native Americans are underbanked. The business opportunity is there. There are people who need our help. What about the products? Through Filene’s Incubator program, we have developed and piloted several. Some show strong promise: A loan with a built-in savings component, Individual Taxpayer Identification Number lending and community microfinance small business lending to entrepreneurs. Consider how you can do good for your community and your credit union’s future.

And now for the “Big Smart” idea: Create long-term growth by rethinking your model. Credit unions were founded on common bonds tied to employer groups, associations and local communities. But the world is changing. Rapidly. Today credit unions are more like platforms that constitute their own communities, with members tied together in ways beyond occupational, associational or geographical relationships. As our recent report, “The Credit Union of the 21st Century,” shows, the U.S. workforce is shifting from the traditional career employment to the “hustle and gig” economy – temporary work with nonpermanent contracts. A January 2018 NPR/Marist survey found that one in five workers in the U.S. is a contract employee. Serving “1099” workers’ financial needs represents a significant opportunity to grow your membership, and update and advance your credit union’s original mission. But what about your members’ financial needs in this fast-changing environment? The growing importance of payments also represents a growth opportunity. As our report details, payments offer a bedrock point of entry for members into financial services. It also presents opportunities for your credit union to reach a broader membership – mimicking how fintechs have customized payments solutions for particular populations like small merchants, young people and temporary workers. And all that data can then be leveraged to tailor other services to your members’ needs. By rethinking your credit union’s power as a connector and harnessing new financial technologies, you can realize new self-defined communities to take your credit union well into the future.

But this is just an appetizer. A taste of what’s available. If you’re interested in a heaping helping of research-backed innovation to generate growth, think forward and change lives, check out the following Filene Research Institute resources at filene.org:

• “The Credit Union of the 21st Century”
• “Developing and Executing a Clear Value Proposition: Six Credit Union Case Studies”
• “Factors Contributing to CU Asset Growth, 1979-2016”
• “Addressing the Revenue Growth Challenge”
• “Characteristics of Credit Union Mergers: 1984-2008”
• “Credit Unions’ Acquisitions of Banks and Thrifts”
• “Credit Union Market Niches: Social and Demographic Opportunities”
• “Understanding the LGBT Opportunity in Financial Services”
• “Reaching Minority Households Incubator”

Mark Meyer is CEO for the Filene Research Institute. He can be reached at 608-661-3740 or markm@filene.org.