3 Innovations to Power Your Growth in 2020

Across America, big, bright credit union minds are prepping for that annual challenge: How to build growth into strategic plans. It should be easy. Your dedicated board members have ideas from the latest conference. Your brilliant executives read an article in the Harvard Business Review. Your trusted vendors have new product solutions.

After facilitating a plethora of strategic planning sessions for growing, innovation-minded credit unions, I know it’s not always so straightforward. Let me share three action-ready growth-generators based on Filene’s cutting-edge research:

1. Invest in cutting-edge market research. (This recommendation should score some thank-yous from chief marketing officers …) Kern Schools Federal Credit Union, a more than $1 billion institution, shared a case study on its proven results and hard lessons learned in the Filene study, “Using Analytics to Meet Member Needs.”

After the Great Recession and tough local market conditions, this credit union took a hit in its numbers and its reputation. But its bold leaders responded with action. They stepped back and reviewed their member experience KPIs. When they didn’t like what they saw, they started asking the right questions through market research. What they found forged their understanding of their actual total target market, reshaped their brand and value proposition, clarified market segments and true member needs, refined training and technology investments, and identified new product opportunities.

The proof of their success shines in their numbers:

• Capital moved from 4.4% to 10.3%;
• Membership increased 52.7%;
• An additional $130 million in consumer and mortgage loans were added;
• New checking accounts jumped by 91.9%; and
• Net interchange income increased by 93%.

Market research can help you identify real business growth opportunities – and get out ahead of problems in time to do something about them!

2. Dive into niches. Niche doesn’t have to mean small. Unlock new growth inside and outside your membership by identifying pockets of individuals with particular financial needs. As we outlined in Filene’s “The Credit Union of the 21st Century” report, the “hustle and gig” economy offers a niche with big, bright opportunity:

• From 2005 to 2015, 94% of net employment growth was through freelance, contract, on-call or temp agency jobs.
• In 2017, 57 million U.S. workforce members freelanced in some way.
• Studies predict by 2027, the majority of U.S. workers will freelance.

And what do these workers face?

• Unpredictable income;
• No employee benefits; and
• No unemployment insurance.

Vancity, a multi-billion-dollar shop in Vancouver, British Columbia, saw and seized this opportunity. As outlined in Filene’s report, “Meeting the Needs of Independent Workers at Vancity Credit Union,” this credit union’s innovators recognized that a large portion of their membership were independent workers. These members had unique economic struggles and needed a more holistic approach to financial services.

Vancity laid out its strategy with these focus areas:

• Go to market quickly to test and learn what resonates with independent workers.
• Deliver solutions to generate revenue streams that seize the financial opportunity in the growing independent worker market.
• Continually develop insights on the needs of independent workers through research, partnerships and member feedback.

From this framework, Vancity developed two pilots to tackle the biggest challenges facing independent workers: Income instability and lack of health benefits. It partnered with a fintech and a health insurance firm, respectively to deliver an artificial intelligence-adjudicated small business loan for independent workers, plus a health plan specifically designed for independent workers.

The lesson learned: View the independent worker as a growing opportunity you support through a suite of products and service rather than a single product. This can lead to new business growth and deeper, more sustained relationships with members.

3. Think outside the lending box to change lives. There’s a huge segment of your community that’s widely untapped, underserved and looking for basic financial services. Just like your core members, they need a loan to buy a home, get a car or start a small business.

Financial services leader Visa sees financial inclusion as good for communities and good for business. It partnered with Filene and the Ford Foundation on Filene’s “Reaching Minority Households Incubator.” Through this work, Filene incubated five lending products tested by 40 credit unions over 18 months. The numbers tell the story:

• 18,559 borrowers;
• $84.8 million in loans;
• 3.81% ROA versus a system average of 0.75%; and
• 67% of the loans went to people who became new members.

The nearly 30 million non-citizens in the U.S. provide a huge opportunity from a financial standpoint. They’re permanent residents, foreign-born students, refugees or new immigrants, and often turn to predatory lenders for financial services. Of those ages 25 to 34, 60% are employed year-round, full-time and 75% are in the labor force either full or part-time. They have solid employment but lack one thing – a Social Security number.

The solution: Individual Taxpayer Identification Number lending.

Ready to tap this untapped loan market? Consider the following lessons learned by ITIN lending innovators:

• Go all in: Of the credit unions in the Filene pilot, nearly 100% said they’d refer ITIN lending to other credit unions. This is a growth decision. However, with today’s political climate, make sure you have solid alignment across your organization from board to leaders to staff to lock in your long-term success.
• Use word of mouth: Of the borrowers in the pilot, nearly 100% reported they’d recommend ITIN lending to their friends and family – and nearly 100% said they’d use ITIN lending again. (These are the “Promoters” we all dream of!) Just like any segment of the U.S. population, noncitizens turn to friends, family and colleagues for recommendations. Although credit unions have used other channels successfully, most have found word of mouth as the most successful.
• Partner, partner, partner: Tap your community connections to build added credibility and visibility for your new program. Work with community partners that already have strong ties to the noncitizen community – from churches to nonprofit agencies to immigrant-owned businesses like auto dealers.

This summer, Filene, Visa and respected players such as Coopera, Inclusiv and PolicyWorks held a series of workshops across the country helping credit unions generate new growth through ITIN lending. Leaders from billion-dollar credit unions have invested time to join us. Want to grow your credit union and make an impact in your community? ITIN lending may be your solution.

As economic winds change, operating costs increase and spreads continue to tighten, we’re all looking at new options for growth. The strategic planning session is our chance to step back and consider not just how we grow, but how we transform our organizations. How we can think forward and change the lives of those we serve.

Wishing you a successful strategic planning session, a positive balance sheet and a powerful impact in your community.

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