With 65% of members reporting trust as the reason they chose a credit union, credit unions will be counted on to help them during challenging times. 

Potential members have no shortage of choices when considering their financial options. However, a primary reason why so many choose credit unions is linked to trust. According to a recent survey, 65%of members said they chose credit unions over other options because they trusted credit unions.

With trust at the center of member relationships, it’s important that credit unions explore ways to deepen that trust further. Three potential avenues for strengthening these trusting relationships include leveraging data to offer new options in order to stay relevant, spotting signs of member financial distress earlier, and building strategic partnerships to offset potential risks.

Asking what risks you should be taking in order to grow

Every time you fund an auto loan, mortgage, personal loan, or other lending product, you’re taking a potential risk. Credit unions are constantly weighing risks against member needs, fiduciary responsibility, and credit union growth. So, while it’s counterintuitive, Jeff Rendel, Principal of credit union consulting firm Rising Above Enterprises, suggests that in addition to asking, “How do we reduce risks?” credit unions should ask, “How do we take more risks?”

“An example is a credit union member who hasn’t built any credit yet,” says Rendel. “A member with no credit might not be a favorable risk, but newer technologies allow us to tap into alternative data that provides a larger picture. That data might include a member’s employment history, utility bill payment history, rent payments, and more to get a nontraditional view of their creditworthiness.”

Tapping into alternative methods to view data allows you to serve more members who need help and provide them with value, while also providing your credit union with opportunities to increase profitability and serve a larger membership.

Identifying members who need help sooner

At the same time, data often tells a story when a member needs assistance. For example, payments might come a little later each month. The member might start using more of their credit, or savings balances or credit scores might slowly dip. If you spot these signs early, your credit union can step in and proactively offer help. “One of the dynamics that’s important with regard to technology,” says Rendel, “is the ability to look at trends within your members’ payment histories, their credit scores, and items of that nature to better predict if they might be experiencing some sort of financial difficulty so that you are able to step in at the right point.”

Technologies such as those powered by artificial intelligence can often evaluate member databases to spot behaviors that might indicate trouble. For example, AI may show that payments continue to arrive slower and credit utilization rates are climbing higher. Or an AI-based insurance tracking program may show that a borrower has dropped their auto insurance, which is often an early sign of a stretched budget.

Once you have access to this information, you may communicate with at-risk members to convey that your credit union understands the challenges they might be facing and is here to help. This is both a relationship and trust strengthener as well as a strategic opportunity to present messaging that discusses possible programs or options that may offer a member assistance if they find themselves in a difficult position.

In addition, you can also use broader economic data to prevent risks associated with market conditions, such as high vehicle values, by anticipating them early on. If a member has taken out a substantial loan and their vehicle’s value dips sharply in the future, the member — and your credit union — might be at risk.

“The cost of vehicles has risen steadily over the past few years,” says Rendel. “I recently passed a billboard advertising a vehicle on sale for $108,000. Of course, this is an extreme example, but we all know a vehicle loses value when it drives off the lot, and if the market corrects itself in the future, that vehicle’s value could take a sizable drop.”

Products such as guaranteed asset protection (GAP) become increasingly important resources to mitigate these types of risks. Encouraging a member to purchase GAP in today’s economic environment can help minimize their risk as well as yours if the vehicle is stolen or involved in a total loss accident.

Working with partners to mitigate risk

Risk is inherent in what credit unions manage, but you can significantly dial back that exposure with strategic partnerships. For example, many credit unions are already leveraging partnerships with fintechs that employ tools to spot fraud and compliance issues faster, to help safeguard members and the credit union from unnecessary risk.

Partnering with a collateral protection insurance (CPI) provider is another way to help reduce potential risk in your credit union’s auto loan portfolio — for example, in situations where vehicle values drop too quickly, or members increase insurance deductibles or drop their insurance altogether unbeknownst to their credit union. Unfortunately, these scenarios are increasingly common, with one study finding that one in eight drivers is currently uninsured, and in some states, that percentage is as high as 29%.

Keeping members safe and secure

Part of achieving growth and financial success in today’s economic environment means constantly evaluating the risks you’re taking, how these risks affect members and your credit union, and how you can continue to build the trust that is pivotal in deepening and expanding member relationships. By taking advantage of emerging technologies, leveraging member and economic data, and entering into quality strategic partnerships, you can maintain the trust of your members, who are counting on your credit union to remain a safe and sound organization that looks out for their financial well-being. At the same time, you can also take the risks necessary in order to continue to grow and remain relevant as the economy evolves.