Lending Strategies That Generate a Quick Return (Part 2 of 2)

Your credit union has set its 2018 budget, but it has some limited extra funds to invest in the short-term. Where should it invest right now to get the most bang for the ROI?

In part one of our two-part article series, we discussed how optimizing existing systems can be a smart lending strategy that generates a quick return for your credit union.  Now, let’s look at a second key approach that can produce a quick ROI for your credit union. Incremental spending to produce incremental revenue – also known as self-funding initiatives – is always a smart business strategy.

Leveraging third-party providers can be an effective means of gaining expertise and scale without increasing sunk costs. Services available include marketing, call center support, underwriting with limited authority, and processing. Some credit unions are hesitant to outsource loan origination services for fear of losing control of the member experience. However, there are several providers that have expertise and scale that credit unions lack, and they are very much in tune with the credit union philosophy of member service. For example, by ensuring that you are always available when a member is shopping for a loan will increase loan volume and build brand loyalty. I have been in shops where we incrementally booked $5 million more per month in auto loans by extending our reach through third party providers, and I have seen credit unions fund much more when leveraging multiple providers. It is important to ensure that you only do business with reputable providers, and keep a close eye on performance metrics, but it can easily be a self-funding program.

Much has been written about how credit unions have a ton of valuable data at their disposal, but struggle to extract it and make it actionable.

Hiring a full-time data scientist may be beyond a credit union’s budget, so instead consider outsourcing this activity to a service that charges per initiative. For example, getting your arms around where payoffs are coming from can help to reduce payoffs, or at least recapture the members in short-order. For example, payee information on auto loan payoffs is often housed in a section of the core system that is separate from loan originations, and some credit unions don’t think to extract and quantify where those payoff checks have been going, which is usually to another lender. Once you identify and quantify that run off, you can make a business case for allocating resources to defend against it. This may involve contracting out data extract and analysis, subscribing to services that provide alerts when a member is shopping, or outsourcing outbound member calls; but again, the member and loan retention will offset the cost of employing these solutions.

We’ve found that credit unions are using CU Direct’s Intuvo marketing and sales engines to sync their core and loan origination systems that drive these data mining initiatives. The key to leveraging data is not only locating the right data, but also applying it in a way that integrates proper data analysis, automated marketing, engaging content and CRM follow up.

The goal is to successfully increase loan volume and member satisfaction, while also improving efficiency by decreasing call volume and branch visits. That’s key when it comes to self-funding initiatives and quick ROI.