SAN DIEGO-Web acquisition of borrowers requires new skill sets for credit unions, including learning how to maximize search engine optimization and strategically placed web ads to drive interest in loan promotions.

That was the message from Terence Roche, principal and co-founder of Scottsdale, Ariz.-based Cornerstone Advisors. Roche told attendees of the recent Harland Connections conference here one Web lending best practice is to ensure all click-throughs on ads go directly to focused landing pages for simple navigation and fast fulfillment.

"Some financial institutions are finding lending a struggle, while others say they are doing fine," Roche observed. "But on a national basis both banks and credit unions are seeing their loan-to-deposit or loan-to-share ratios down significantly from six years ago."


A Big Loss On 1 Side of Balance Sheet

In 2006 CUs were more than 80% loaned out, while banks topped 90%, Roche said. Today, banks at 70% and CUs are at 68%. "That represents a 20% loss on the asset side of the balance sheet," he stated. "The net effect of the loss of loans is $1.5 billion."

As most CU managers know, in recent years deposits have been flowing in during a low-rate environment. Roche said the good news is most FIs are seeing more loan demand so far this year compared to last year.

Roche shared research that found from December 2009 to March 2012, banks/CUs combined for 2% loan growth. In that same period, Ally Bank has had 94% loan growth-to $66 trillion from $34 trillion. "There is some really good loan growth out there, and Ally Bank has managed to carve out a really nice niche," Roche assessed.

Roche urged FI management to ask itself: if the CU/bank were funded from investors to start a brand new company focused on originating loans, what would the marketing strategy and delivery model look like? More importantly: would it operate the way the CU/bank does now? "If not, why not change?" Roche asked.

There are 10 ways to focus on building loan volume, he continued. The first three apply to new borrowers: 1. Web acquisition; 2. product/channel expansion; 3. sales force innovation.

The next three are applicable to existing borrowers: 4. Web cross-sell; 5. goals and incentives; 6. training and knowledge.

For both new and existing borrowers, he recommended concentrating on: 7. loan product selection and application; 8. changes to loan underwriting procedures and approvals, and, if necessary, renewals and modifications; 9. loan fulfillment; and, after loans are booked, 10. loan analytics.

"The 10 steps end up in a loop, because loan analytics can circle back up and apply to the others," he explained.

In most cases, FIs don't have plans to close their existing branches as they have already made the investment and are in the communities. Therefore, Roche said, they need to maximize the value branches deliver to the organization.

Most branches do not have a sales culture problem, he said, they have a training and incentive problem. "Financial institutions need to dramatically reinvent their consumer credit operations to allow for streamlined delivery, risk-based underwriting with adjusted pricing, sophisticated analytics for origination and portfolio management activities, and intelligence-based marketing capabilities to increase borrowing among existing members/customers and active engagement of new members/customers," he said.

Currently, 16% to 17% of loans come in online, excluding mortgages. The numbers are higher for web applications, which Roche said is an indicator consumers still view the branch as a place to do business.

Roche urged FIs to think more aggressively about sales. He said both CUs and banks are beginning to see the benefit of outbound calling as a loan origination vehicle.


It's Time To Get Aggressive

"With rates at or near historical lows, financial institutions should be aggressive," he emphasized. "When onboarding a new checking account they need to cross-sell loans or at least credit cards. Develop friendly competition between branches, including visible scorecards and contests, to build energy."

Technology can help beyond Web acquisition, he said, because speed of fulfillment and personal contact reduce the number of approved but unfunded loans.

"E-doc delivery has become mainstream. It is cheaper, faster and makes borrowers happy," he said.

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