Will Minnesota’s Credit Union Growth Plan Apply Elsewhere? | Journal of Credit Unions
A new statewide partnership to help increase the share of Minnesota’s credit union portfolio could serve as a model for other states.
The Minnesota Credit Union Network has partnered with ClickSwitch to make the company’s Switch Kit service available to all member institutions to automate the process of converting direct deposits and direct consumer payments into one. credit union.
Minnesota is believed to be the first league of state credit unions to launch such a campaign. The growth of members of credit unions has slowed in recent years and with increasing deposits and declining income, many institutions are looking for new ways to enrich their rosters and increase their income.
“Credit unions are expected to increase their deposits by 20% this year and that is creating some interesting issues for them with what’s going on with loan application,” said Kris Jacobsen, the league’s business development manager.
“For us, it’s a no-brainer: you have all these people with deposits coming in and there’s always this need to attract, maintain and build strong relationships,” he added. “What better time than now to review the credit union’s indirect membership – so they can review all memberships that don’t have direct deposit and start a campaign to tell the co-op’s story. credit and capture some of those people?
Switch kits gained popularity early in the last decade, when credit unions began to see an increase in membership in the wake of the Great Recession and lingering resentment against the big banks. But the process varied from institution to institution and was often on paper. The ClickSwitch process is automated and allows new members to work with credit union staff to quickly convert automatic credits and debits to their accounts. The company works with around 500 credit unions across the country.
While new memberships themselves are not necessarily profitable, becoming a consumer’s primary financial institution may better position a credit union for future loan and non-interest income opportunities.
“When you think of the measure of [primary financial institution status], it’s really direct deposit-based, ”said Tom Snyder, regional vice president of sales for ClickSwitch. “If you get direct deposit, you’re about 50% of your way to grabbing the rest of that relationship. If you have direct deposit when you open the account… that new member will sign up for additional products much faster, ”which helps generate more interchange revenue.
Jacobsen said some CUs will likely focus on using the service to increase relationships with members who have indirect auto loans through credit unions. In many institutions, indirect customers may have little or no interaction with the credit union beyond the car buying process. In some cases, they are even unaware that they joined a credit union in order to obtain their car loan. A tool to help bring these members into the fold and make them more active with the credit union could help increase profitability.
North Shore Federal Credit Union, an institution with $ 201 million in assets located in Silver Bay, Minnesota, has been a ClickSwitch client since the start of this year. CEO Cassie Ernest said the credit union has been able to become the primary financial institution for about 75% of new members since the product’s launch.
Although he uses ClickSwitch for members who join through indirect loans, she has observed that in many cases these members are the most difficult to convert.
“We have integrated the required training [for member service representatives] and recorded this training from day one, so they were all required to participate, ”she explained. “We provided them with the language and the script and how to explain this process to our members. … [P]the art of that is why we are successful. But if you only use it for indirect purposes and not necessarily for those who come forward with the intention of opening an account, your success rates would obviously be lower than what you would potentially be able to do.
While discussions about switch kits may have slowed down in recent years, some industry watchers say interest in them has not.
“What could the credit union want a consumer to do more than choose them as their primary financial institution? There’s virtually nothing, ”said Sam Brownell, founder and CEO of consulting firm CUCollaborate. He suggested that automating the process, similar to Amazon’s “buy now” button, could work in favor of many credit unions.
Dennis Dollar, consultant for credit unions and former president of the National Credit Union Administration, suggested that as consumers’ financial lives become more complex, the value of switch kits increases.
“It helps a credit union convert its members’ business to make more use of the accounts and services of another financial institution,” he said via email. “If a member only has one department at another institution, you normally don’t need a switch kit. However, if the member has multiple services, loans, and deposit accounts, it is much more difficult to get them to switch to the credit union and provide all of these services. This is the limb that the Switch Kit is designed to target.