As consumers shift to mobile channels, credit unions need to rethink their lending approaches, says John Best, chief technology officer for $2.5 billion asset Wescom Credit Union in Pasadena, Calif.
The Apple Store is a window on the future of how successful retailers will serve connected consumers, Best says. A buyer can walk into the store, pick a product off the shelf, scan the price, buy it, and walk out the door without talking to anyone.
“This turns the retail and buying experience on its head,” he says. “Credit unions may say they want the relationship and they want to speak face-to-face with the member. But the new consumer does the research before they show up at the store or branch.”
Members of “Generation Connected” or Gen C—18- to 34 year-olds who are defined by their connectivity—don’t necessarily want to come to the branch or deal with people. If they do, it’s on their terms, Best says.
“They will show up in a store or your branch if they don’t understand something,” he says. “They may come into a store if it is a product they want to touch, play with, or see. And then they may still buy it online. If you insist on them coming to the branch, you may drive their business to another financial institution.”
The buying event should be viewed as a whole, and credit unions need to get involved at the beginning. It isn’t enough to automate the lending process, although this will help.
For the long-term, credit unions will have to deal with disintermediation evidenced by auto dealers’ aggressive involvement in lending.
“We still lose opportunities because lending needs do not start with the credit union,” Best says. “Members usually decide they want to buy a car before they consider their credit needs.”
Opportunities are going to providers who are quick and innovative. For example, Windows 8 was introduced a few weeks ago and Bank of America already came out with an application.
“Bank of America is indoctrinating kids to use this app,” Best says. “It has the money to develop this quickly.”
Internet age changes car-buying process
There are four main steps to the car-buying process in the Internet age, according to Best. The consumer:
2. Visits the dealer but is more focused on the car deal.
3. Focuses on getting the loan approved but doesn’t care who provides it.4. Gets the loan and closes the deal but may not have received the best financing.
Traditional loan providers offer services in the middle of the transaction while third parties are inserting themselves at the beginning. For example:
►AutoTrader provides calculators, financing information, and dealer referrals for financing. Notably, it doesn’t send referrals for financial institutions.►Volkswagen has an Internet car-buying service that claims to have “financing as fast as our cars.” It provides information on leasing, financing, dealerships, and estimating payment amounts.
“Car dealers can fulfill every need in the buying process,” says Best. “Is there any need to consider the credit union when buying a VW?”
Building a mobile loan application does nothing to insert credit unions into the early stages of car buying. “We need to think outside of our traditional ways of making loans to identify opportunities sooner,” he says.
Best cites his recent purchase of a 2013 Ford Explorer. He visited a dealership and asked if it had the Limited 302A model. The salesman didn’t know and had to ask others.
“I was reluctant to do business with him since he was unaware of this model,” he says. “I had already assimilated the research and I did the sale myself.”
Consider the implication if a veteran goes to your branch and wants a mortgage with Veterans Administration options. Would your staff have the answers?
Savvy lenders have staff who are prepared with answers—and might even seek out the veteran before he or she came in for a loan.
“Consumers have a lot of options not related to geographical boundaries, and credit unions may not be able to serve them because of field of membership limitations,” Best says. “That could give credit unions a bad name. The digital market isn’t necessarily fair to all providers.”
Best addressed the CUNA Lending Council’s annual conference in Miami Beach.
Next up: Check back Monday when Best outlines the importance of real-time data and multiple channels for lending success.
As millennials emerge in the workplace, CU leaders modify their management approach and expectations.