Prioritizing Member Financial Health During a Recession
Now more than ever, it is important for CUs to prioritize guiding their members toward healthy financial tools and habits.
A recession in 2023 is becoming increasingly likely, with economists now placing a 70% probability that the United States will fall into a recessionary period in the next few months, according to Bloomberg.
While there is never a good time for an economic downturn, many consumers are already dealing with multiple cash flow difficulties: COVID-19 incentives have run out, the cost of goods has increased and interest rates are skyrocketing. Now more than ever, it is important for credit unions to prioritize guiding their members toward healthy financial tools and habits. Here are three approaches that credit unions should consider in 2023 to help boost their members’ financial well-being:
1. Strengthen relationships with members through financial education.
According to a study done by Capital One, 77% of Americans feel anxious about their financial situation, creating an opportunity for their financial institutions to provide support when it is most needed, offer educational resources to reduce this stress and truly become trusted advisors in the long-term. For example, credit unions can create free financial education resources, such as webinars, guides and workshops, to help their members better understand financial concepts and make informed decisions about savings and investments during economic hard times. Those credit unions that focus on providing members with the tools and resources to improve their financial health will have a member retention advantage over those that do not in the coming year.
2. Leveraging data to generate pre-approved loan offers.
It will become more common for credit unions to use new technologies to automate the process of lending money, allowing for a more customized offer based on the borrower’s data. Modern automated lending platforms use data and algorithms to analyze a borrower’s creditworthiness and display the list of loans they are pre-approved for. These platforms can operate entirely online, allowing borrowers to accept pre-approved loan offers and receive funds in a matter of minutes. Having a variety of offers that consumers are eligible for can greatly benefit them by helping to remove the uncertainty many feel when applying for loans, only to be rejected later down the line. Furthermore, by eliminating the credit application process in favor of an ongoing automated credit approval, the credit union can provide the nearly instant shop-borrow-buy experience that consumers crave.
3. Creating customized loan offers and services.
Building off the pre-approved loan offers mentioned above, the increase in automated financial tools allows the lender to provide more customizable services for each of their members’ needs specifically, competing with the “out-of-box” solutions that previously only fintechs could supply. Borrowers are likely to feel a greater level of customer satisfaction when their institution has taken their needs into account by offering a service well-suited to their financial situation. This can be accomplished by offering a variety of products and services, providing excellent customer service and responding to customer feedback. Additionally, customized loan offers can also help lenders reduce the risk of default, as borrowers are more likely to be able to afford their loans when the terms are tailored to their financial situation. For instance, not everyone’s auto loan needs can fit into an out-of-the-box loan. Lenders can consider things like the member’s credit score, debt-to-income ratio, down payment funds and other factors necessary for creating a unique loan that is appropriate for that member.
Looking ahead to the next year, credit unions should place a special focus on empowering members to take control of their financial lives and make informed decisions that lead to long-term financial stability and security. It is important for credit unions to be flexible and work with members to find solutions that meet their needs and help them weather the choppy waters ahead. Pairing modern technology adoption with the existing data already available to credit unions will allow these institutions to deliver the digital experiences that leapfrog their competition and solidify relationships that last.
Tony Salamone President CuneXus Perpetual Offers Santa Rosa, Calif.