MADISON, Wis. — There are plenty of credit unions out there that want to test out new and innovative products, but many of them are already stretched so thin that they're unable to do that.

One year after the launch of the Affordable Financial Services Incubator at the Filene Research Institute, is finding there's a lot of interest in innovation, but it's difficult for credit unions to give the time necessary to making that innovation happen, said Cynthia Campbell, director of innovation labs at Filene.

"One of the biggest lessons from recruiting was that credit unions definitely want to test out new products and want to know how to serve the underserved better," said Campbell. "The other side to that is that credit unions are really stretched to capacity. There were many credit unions who said they would have loved to join the fun of testing a new product but literally they had no room anywhere — not extra people, not extra budget money, nothing. They were really stretched to the limit. It was kind of disheartening to find that there's no space left for innovation sometimes."

The incubator is funded by a $700,000 grant from the Ford Foundation and saw 45 credit unions of all sizes from across the country test out five different products aimed at helping unbanked and underbanked consumers.

"The aim was to test these products at all sorts of different locations geographically and asset-wise to see if it's a truly scalable project," said Campbell. Each of the five projects was tested by a billion-dollar credit union and a mix of small and medium sized CUs, as well as a mix of SEG-based and community-chartered credit unions. When it came to having to decline participation, however, the range of locations and asset sizes was equally broad.

"It seemed like for the smaller credit unions it really did come down to resources," she noted. "For the bigger ones, maybe they're just not nimble enough to add a new thing into the process. … It seems like the bigger the credit union, the longer the planning process for adding a new product could be. They said a lot of times that it wasn't the right time."

To be clear, Filene didn't struggle to find participants — the grant only required each product to be tested by five CUs, but Campbell nearly doubled that.

"We decided to take in more just because the way research goes sometimes, credit unions want to do something, they'll commit to it, reality hits and then they'll drop out," she said. "It's always great to pad that requirement a bit, but it also speaks to the demand."

After Phase One

For those CUs that did participate, the first phase involved beta testing the various products, which ranged from helping consumers save to focusing on non-prime auto lending. Phase two is set to begin soon, with selected credit unions analyzing profitability, scalability and consumer impact, along with feasibility testing, legal and regulatory ramifications and more.

Of the 45 participating CUs, 80% are currently reporting product data, and Campbell said that those who are not yet reporting data are largely employer-based credit unions.

"I think we're going into that problem of capacity again, where they agreed to do it and thought they could do it, but life happened," she said. "Who knows — their CEO changed, maybe they're going through a core conversion — I think we'll have a couple shake out."

Of those who are reporting, many have already found the various products to be successful. The non-prime auto lending product is being tested by 13 CUs that currently have more than 1,600 loans on their books for that product totaling $22.5 million, she said.

"That, right now, has the largest consumer uptake and probably the largest consumer impact, because when you look at people getting reliable transportation, that increases their access to jobs, healthcare, etc.," she said. "Having a reliable car can be a game-changer for a low-income family."

'The Best Impact'

The Ford Foundation Grant had an 18-month timeline, which means it will wrap up during the first half of 2015. Data collection will likely continue through July or August, with research reports and other deliverables to follow. At that time, the various products will also be packaged with full-blown tool kits and other turn-key elements "so they can be grab-and-go for credit unions across the country to use," she said.

"We could have some products ready for wide acceptance across the credit union world, but what it really means is many more members are being helped and many more underserved members are coming into the credit union fold," she said. "The best impact would be changing life for consumers."

Campbell is also meeting with the Consumer financial Protection Bureau to discuss the project.

"They're interested in looking out for the consumer, and these look out for consumers that have gotten the shaft a lot in financial services," she said. "They're interested in hearing about what we're doing. They're interested in small-dollar loans, since they see a lot about predatory loans."

In spite of the number of credit unions that wanted to participate but were unable, Campbell said there was still a positive message to be gleaned: CUs, no matter their size, still want to innovate.

"I just love that they're thirsty," said Campbell. "But it is a little discouraging to know that there are credit unions out there that want to innovate but just can't because of resources and know-how."

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