Many financial challenges for credit unions are still to come.
Only a few short months ago, credit unions, like the rest of the national economy, were enjoying periods of phenomenal growth. Then pandemic struck, and the economy mostly stopped on a dime. For the time being, credit unions are essentially circling the runway of a once-bustling economy waiting for the storm to pass so we can land and assess the damage. While this happens, jobless numbers climb, and many businesses still have their doors closed – some of them for good. There is a lot of fear and uncertainty out there.
Through it all, credit unions have stepped up to help. Like many businesses in other industries, we understand that now is the time to support our communities through volunteerism, donations, and taking proactive steps to help members navigate and manage their finances despite the vast uncertainty. Most credit unions are currently offering generous relief programs to help their members weather this storm. We believe in the adage, “People helping people.” And we aren’t finished.
Challenges to Come
The thing that’s keeping most credit union CEOs up at night is worry over what the future holds. The problem lies in the unknown:
- When will a vaccine arrive?
- Will there be another shut down just as some members are returning to work?
- What’s going to happen when things like mortgage forbearances come to an end?
- What loan modification options will be available to consumers and lenders when this comes to an end?
- What happens if another shutdown, longer than the first, becomes necessary?
- How many people will remain unemployed or out of business once the immediate crisis ends?
- Will that create a new crisis on its own?
If your credit union’s lending portfolio is not substantial in mortgages, you may think you can breathe a big sigh of relief. However, with millions of Americans in forbearance, the greatest unknown is what will happen after that initial 90-day window passes. How will that affect members who may not have their mortgage with you, but do have other loans and accounts with you? Will we be facing a new crisis once those forbearances end?
This is similar to what happened in the aftermath of the 2007-2009 housing market crash. Institutions that once only had to manage a handful of auto repossessions in a year were suddenly faced with more than that monthly. Credit unions that were heavy with auto lending felt the sting long after the housing crisis passed as people sacrificed their cars to save their homes.
As a credit union CEO or marketing manager, you essentially have two primary options available to you for taking action.
- Sit back and wait it out.See what happens and then react.
- Be proactive.Get out in front of everything now, before the fallout of this crisis starts landing in your lap.
Number two is by far the better of the two options.
In Florida, we view this as a hurricane that’s brewing. We take precautions – board up our windows, fill bags with sand, secure our belongings, and plan an escape route. We act before the storm hits, and believe that’s what you should do, too.
What can you do?
Keep the lines of communication open. Your members need to hear from you now and often, know you’re on their side, and feel like you have a plan for them.
Shift marketing focus to education and solutions, rather than sales promotions and products. Make sure your members completely understand the financial relief programs available to them and train your employees to answer questions on these programs correctly.
Preparing for a Long Recovery
Like most storms, this too shall pass. The question is this: “What will the financial landscape look like once it does?” Just as hurricanes and other storms forever change the landscape of the lands they touch, this financial storm may change many lives. If you use this storm as an opportunity to reimagine the services you offer and how you deliver them, you may find your credit union positioned to help ensure many of these changes are for the better.
If you’re in the midst of a digital transformation, now is the time to accelerate your efforts. Remote services must become core components of the way you operate your credit union and become integral parts of your growth strategy. You want members to be able to conduct business with your credit union on their terms – anytime, day or night, including things like:
- Increasing online & mobile banking usage among all age groups
- Completing loans entirely online via secure applications, encrypted email, and digital signatures
- Simplifying transactional activities, such as deposits, withdrawals, transfers, and payments
By doing this, you’re preparing for a future that reduces the need for face-to-face transactions and positions your credit union to compete effectively with much larger banking institutions.
Many credit unions are looking for ways to reduce expenses to offset or prevent charge-offs and to cover other pandemic related and recovery costs. If you must cut costs across the board, don’t stop marketing. Instead, shift your focus on more cost-effective mediums, such as email, social media, blog posts, and continuous updates on your website. Communication with members is critical right now. From current credit union operation updates to financial relief options, your members need to hear from you more today than ever before.
While there is so much that we don’t know about what the future holds, there are things your credit union can do, today, to help you prepare for that future. The better prepared you are now, the better positioned your credit union will be to ride out the storm in the next 90-180 days or longer.
Don’t wait for Uncle Sam to come up with solutions that may do more harm than good. Get out ahead of things and see what you can do today to minimize the damage to your members and your credit union later.
Strong & Stable
At STRATIX, we dive into your credit union’s financial performance to determine what you should promote and why. Marketing plays a key role in mitigating interest rate risk, diversifying share & loan portfolios, overcoming liquidity issues, and more.
As we venture into unknown waters, maintaining a strong and stable financial institution is more important than ever. The more secure your credit union, the greater the benefits you can provide to your members – including the many financial relief options necessary today. Interested? Let’s Chat.