If credit unions want to boost membership and grow loans, they’ll need to do a better job at cutting costs and leveraging data.

That’s the word from two Experian executives who spoke at the recent California and Nevada Credit Unions Leagues’ conference.

According to Sue Schroeder, Experian’s senior director of marketing and insight, the majority of community banks in California and Nevada are in the asset-size range of $100 million to $1 billion. Approximately 70 percent of loans made by credit unions in the two states are auto loans and mortgages; Community banks, meanwhile, have a different mix, with a higher concentration in commercial real estate.

“California and Nevada credit unions deploy fewer deposits into loans than community banks,” she said. “California and Nevada credit unions operate at higher expense ratios than community banks. By reducing costs and improving ROAA, credit unions can create more revenue for investment to grow, including technology.”

Melton Knight and Sue Schroeder of Experian
Melton Knight, Experian’s senior business consultant, and Sue Schroeder, Experian’s senior director of marketing and insight

According to research cited by Schroeder, credit union membership growth in the Golden and Silver States was closely correlated to asset size – the larger the CU, the larger percentage membership growth.

“There are opportunities for credit unions in diversifying their loan portfolios by going beyond indirect auto lending, locating higher-yielding loans, and capturing micro and business loans,” she counseled.

Melton Knight, Experian’s senior business consultant, said when it comes to leveraging data for growth, credit unions need to understand the opportunities available to them.

“To get to the right answers, you have to ask the right questions,” he said. “These include: What is our share with members? Where can we grow?”

Knight recommended CUs drive their strategic efforts with expanded credit data.

“You have a view of on-book member loans by type, but that is only part of the story. The big question is what loans members have off-book. In many cases, your members have auto loans or mortgages with another financial institution. If you know this, that gives insight as to what you can go after.”

Credit unions need to first identify the interest rate their members are paying on those other auto loans, Knight continued. He said CUs need better tools to target consumers more likely to open an account with the credit union.

“Experian has created relationship clusters to identify these candidates,” he said. “Relationship clusters also can be used on cross-selling efforts with existing members. We can specifically identify likely users of auto loans, credit cards, mortgages, HELOCs and student loans. Cluster targeting can increase new account opening by 200 percent.”

According to Knight, micro-segmenting further identifies different types of opportunities, and allows the CU to tailor offers. In some cases, they can use data research to send a pre-approval letter to people with an offer to lower their interest rate on their auto loan or personal loan.

For credit cards, a member might carry their CU’s Visa or MasterCard, but all of their spending is on other credit cards. Knight said different offers will be made in different circumstances. For example, if someone does lots of transactions on their credit union credit card but does not carry a balance, the CU should not send a balance transfer offer to that member. Instead, it should send balance transfer offers to people who carry a balance on cards with other providers.

“The point is to put the right offer in your members’ hands at the right time,” he said. “These data-driven campaigns target the right members, which reduces marketing expenses while increasing open rates. They also identify previously underserved members.”

Schroeder suggested credit unions look into getting a low-income designation from NCUA, as this gives CUs access to secondary capital for investments, and lifts the 12.25 percent cap on member business lending.

“The fastest-growing credit unions in the country are launching new products and services, including products for thin file/no file consumers,” she said. “The credit union movement was built on good, and this is good. If you stick only with prime consumers, you will battle with B of A and Wells.”

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