Between the recent pandemic, increasing inflation, and the situation in Ukraine, these are trying financial times. But these are also fantastic opportunities for Credit Unions to step in and step up to be a financial first responder. Just as a first responder is a person with specialized training who is among the first to arrive and provide assistance and at the scene of an emergency, a credit union financial first responder is the first on the scene of a missed payment, job loss, illness and other circumstances where the member needs help and doesn't know where to turn. With inflation increasing and gas prices, many members may feel a financial pinch.
Here are a few steps that your credit union can take to leverage the financial first responder position and embrace it.
1. Identify those in need.
Leverage your data as it will help you identify those who may be living on the precipice of a financial disaster AS WELL as those who may be heading in a similar direction.
2. Continue to nurture and foster programs that will allow for improved financial positions.
Whether it is via product like a debt consolidation loan, offering a deferred payment (a skip a payment), or improving financial literacy, a credit union needs to continue cultivating and nurturing these programs to help improve these members' lives.
3. Leveraging successes.
The members that have been helped can, in turn, help other members as they are an inspiration for change.
4. Creating a virtuous cycle of events.
Formalizing the identification, nurturing, and leveraging of members into a formal recurring cycle of events will create a framework of continuous favorable results.
These may be actions that your credit union already undertakes. If so, that is fantastic! Start measuring how many lives you are impacting and how. Harvard Professor Rohini Pande and Duke University Professor Erica Field, work on deferred payments and micro-lending indicate a positive economic impact when a borrower is given a chance to defer a payment. Professors Pande and Field found that offering borrowers a grace period of just two months doubled the rate the new businesses were created. The cash flow created by the deferred payment allowed the borrower to take bigger risks, resulting in more significant rewards. After three years, business profits were 41% higher, and household incomes increased by 19.5%.
Does this mean that credit union members who skip an auto loan payment will have a similar economic impact? The research has yet to be done. However, an argument can be made that allowing the member to have the freedom to have additional cash has two positive impacts on local economies. The first is it keeps the member from defaulting on other loan obligations and keeps them in a positive cash flow state. Secondly, it makes the member more loyal to the credit union and increases the likelihood that the member will not default on the auto loan in the future.
How will your credit union be a financial first responder?
Where can I fill my data knowledge gaps?
With a stop at the
Data Education Center.
We believe that data transformation doesn't have to feel overwhelming or expensive to be impactful. After helping over 600 credit union leaders launch their data journeys, we have identified several consistent knowledge gaps. We have worked hard to fill these gaps with a variety of educational artifacts:
NEW! Read the Data Education White Paper (found at the bottom of the page)
Looking for more insights on data and how you can leverage it to transform your members' lives?
Check out Big Data/Big Climb. Written for credit unions by a credit union expert, this book has been hailed as a "must-have". The book cuts through techno-jargon and translates data transformation concepts into a playbook filled with real-world examples, assessment guides, and other tools needed to reduce member friction, analyze actual competition, and identify disruption to improve the lives of its members and gain competitive advantage.