Credit Unions poised to capitalise on €2 Billion lending opportunity

140513_JB1_115Credit Unions are ideally positioned to capitalise on a €2 billion lending opportunity for 18-34 year olds across the country, according to experts at the CUNA Mutual ‘Credit Unions – Your strategy for growth’ conference in Dublin today

Mr Paul Walsh, CEO at CUNA Mutual, said that Credit Unions were seen by young people as more understanding than banks, easier to deal with and a great place for loans.

“According to recent Behaviour & Attitudes research, 47% of 18-34 year olds would consider the Credit Union for their loans, which they mainly need to buy a car, education or holidays. Credit Unions can attract these ‘borrowing type’ customers and can safeguard the benefits offered to existing, yet older members. However they need to control costs and invest in new ways of working,” he said.

With young people a prime target for Credit Unions, the independent survey found that the majority of young people (91%) regard online banking and mobile banking as a prerequisite for joining Credit Unions.

Four in ten young people aged between 18 and 34 years of age are members of a Credit Union and half of this age group would consider a loan averaging €6,300. These loans would be used for a car, a holiday or education.

Mr Luke Reaper, Deputy Managing Director Behaviour and Attitudes said that great potential exists for the movement amongst 18-34s. “They are open to Credit Unions and have emotional empathy towards the brand. Essentially this is about building a convincing brand story based on authenticity in this new world.”

Mr. John FitzGerald, Chief Risk Officer with CUNA Mutual said that the Movement’s current members were savers rather than borrowers and by attracting young members between 18 and 34 years of age, research shows that they would borrow at twice the rate of older members.

“To free up the investment which is needed to attract these younger members, insurance costs, the second largest cost in the Credit Union, had to be managed as these costs increased by 16%, in real terms, over the past 3 years”.

‘It is time to use every tool available to tailor insurance benefits to support the needs of existing members, yet free up much needed capital to invest in better access and loans for younger members.”

John said that by increasing membership and lending more, Credit Unions would generate revenue to modernise their operations and reduce costs. “For every €10 million loaned, your Credit Union will generate €500,000 per annum, whereas money lying idle in savings accounts will generate very little interest,” he said.

Mr Bernie Winne, President and CEO of Boston Firefighters Credit Union, Boston MA said that the Credit Union industry, which began as a volunteer driven movement, had become more complex and required different expertise, as it was difficult to compete for business with the “old” model.

“There are solutions, but not if people refuse to act. For example you can stay small, stay limited, stay in your niche and offer basic services that provide low growth and low returns. You can merge, which is usually into a larger Credit Union with loss of control and identity. Alternatively you can get creative. Go and find what your members need and provide it. Be unique to your membership group”.

“Our preference in Boston is for collaboration where you share the work and the expenses for administration, marketing and IT. This allows your credit union to maintain local control. Opting to merge with a bigger credit union will take away your control,” he said.

There are 1.3 million people aged 18-34 in Ireland and this group has unique loan needs. While there is less spare cash in Ireland, with discretionary income below 2001 levels, this demographic group has more disposable income as they have less financial pressures.

Young people question the digital delivery of Credit Unions. Online and digital is here to stay and there is a need to stimulate the character of the Credit Union brand online and offline. The survey highlighted the need for the credit union movement to provide multiple routes to retail with effective links between the high street and online in both directions.

The conference was hosted by CUNA Mutual Europe, which is part of CUNA Mutual Group, the worldwide leading provider of financial services to mutuals, including Building Societies and Credit Unions.