We spend an inordinate amount of time, marketing, sales dollars, and imagination to originate new loans.
Our collective creativity has created a loan origination process that includes quick loan decisions, the use of electronic signatures, omni-channel delivery, point of sale (POS) financing, triggers, and teams of credit union professionals who know how to make the member loan origination experience a “wow.”
Yet we find that our net loan growth is only a fraction of our new originations.
The challenge is that we have not perfected a means to retain the loans once they are a part of our portfolio.
We tend to look at the products won in the market war in a vertical manner. The loan is closed, and we do not react to its presence unless a payment is delinquent.
Our destination is loan “pay-off” without any incident, and within that focus is the inherent problem.
Over time, we have lost the perspective that retaining a loan until its maturity is our primary goal, and that time allows us to deepen our relationship with the member. This is especially important to a credit union where members are our currency for success, and that losing a loan in a lot of cases means losing that member.
If we change our view of loans from being a sound investment of deposit dollars to being the basis of a member relationship, we can begin the journey to loan retention.
Let’s start with what is readily available to each credit union: Staff identification and reaction to an event.
Every day, our members provide us clear clues about what they are considering. A call to the loan center for a pay-off figure is the most obvious queue that the member is considering some action that may result in the loan leaving the credit union.
The use of member search tools within the credit union website gives us insight into what the members may be planning.
A member in a new car in the drive-through lane, without a loan showing on the member profile, may be a recapture opportunity.
Have we built cultures that recognize a queue from the member and know how to react to it? Unfortunately, for the most part, our retention and recapture rates on loans indicate we have not.
We buy “triggers” from the bureaus to identify possible member opportunities for new loans. Do we do the same for loans our members are applying for elsewhere, or actions such as an auto dealer pulling a credit report for a member shopping for a new vehicle?
The answer again is probably no.
What do we do to make the member feel a part of the credit union community rather than a borrower?
“If your customers are made to feel as if they are outsiders, they will eventually find a competitor who makes them feel better about doing business with them,” says Shep Hyken, author of “The Cult of the Customer and The Amazement Revolution.”
Credit unions by design should be the best at making members, regardless of tenure, feel like they belong to something special. There is an intimacy by having an ongoing dialogue about what the member needs or is considering, rather than reacting to a specific request.
There have been major strides in data analytics that allow us to not only see what members are doing today, but forecast what they will do in the future.
Credit union service organizations and the credit bureaus have developed sophisticated analytics with easy-to-use solutions to help credit unions develop and strengthen relationships. Technologies are available to credit unions that make what the member needs or wants a few clicks away rather than enduring a long process.
Loan retention should be a primary goal, and loan recapture a high priority—all now with proven technology solutions that put the member in control and the credit union in high regard.
SoFi, Kabbage, Lending Club, Rocket Mortgage, and other successful fintech companies are rolling out new and innovative ways to capture loans from credit unions. They’re also creating communities by using big data analytics to determine what consumers want before they know it themselves.
They have adopted the Steve Jobs philosophy to “get closer than ever to your customers; so close that you tell them what they need well before they realize it themselves.”
It is in the DNA of the credit union movement to create a sense of community, where each member is better off for being a part of it.
It is time to ditch the traditional way of doing lending and reimagine what is possible—and find a way off the hamster wheel.