October 22, 2012
Editor’s Note: This is Web-only bonus from “Catching Loans” in the November issue of CU Management.
Technology, in and of itself, can be one of the best tools for marketing loans. Edward Guerin, VP/credit union development at Costa Mesa, Calif.-based software provider MeridianLink, says it’s especially effective in casting a wide net to nonmembers and bringing them into the fold.
Using tools like those provided by MeridianLink, a credit union can offer prospective members instant online approval on a credit card—all the applicant has to do is fill in a few pieces of information. Once that’s done, the system uses the same information, plus a few additional questions, to create the applicant’s credit union membership and fund his or her savings or checking account. This ease of use can make all the difference in a challenging market, especially as more and more people begin to prefer interacting with financial institutions online.
But that’s not even the best part, Guerin says. Once applicants are approved for membership, the online portal automatically pulls up all their existing debt obligations on a single screen and shows at what rates the credit union could refinance them.
“What we’re doing is basically pairing the data on the membership application with the credit detail, and the credit union is making an offer to the member that goes something like this,” he says. “‘So we see here you’ve got a car loan with WFS Financial. The current balance of that car loan is $20,000. Your current payment is $474. You’re pre-approved to refinance this loan with us, your new credit union, at a better rate of 4 percent, driving your payment down to $401.94. The net result is, we’re going to save you $72 a month by bringing that car loan from somebody else over to your new credit union.’ And the person can go ahead and execute the offer by clicking an apply button.”
The new member is given an opportunity to refinance his or her credit cards, mortgage—you name it. At a time when consumers are fearful about getting into debt, the credit union is bringing people face to face with their existing debt and offering to help. The analysis tools included with MeridianLink’s technology show this is a very useful strategy.
“The system provides a plethora of reports that they can obtain at any time they want,” he says. “They can say, ‘We have 100 new membership applications that came in online. Out of these 100 new membership applications, we see five new funded car loans, we see two home equity loans, we see five credit cards, and so on.’ We break it down into profitability reports. We break it down into delivery channels.”
Using technology to streamline the process and make it instant-gratification is Marketing 101, says Guerin. When an offer is made to a consumer at the point of sale, right on the spot, marketing statistics show a 30-32 percent increase in success ratios. So the more loans a CU can sell on the spot, right as the new member is joining, the better it will do.
The main marketing task, then, becomes driving the potential member to the site where he or she can apply for a card and join the CU. But even that is easier than it used to be, since the whole process can be Web-based. Member service reps can just take iPads with them whenever they do a new member drive at an employer group or community event. Using an iPad, employees in the field can show members or potential members online marketing messages and, even better, help them sign up and/or apply for a loan on the spot.
Another source for loan application technology is Mequon, Wis.-based Mortgagebot, LLC, which uses an online technological strategy to help financial institutions originate mortgages, and has recently created an application for originating other kinds of consumer loans, too. Both work on the same premise: that streamlining the process makes taking out loans more appealing to consumers.
"I think the biggest thing that we do to help a credit union sell more loans is we give them the ability to have some scale in their channel operations,” says Matt Cotter, SVP/sales and marketing at Mortgagebot. “If a customer goes to the website and the mortgage piece is easy to find, easy to navigate, and it’s easy to work through the application in a really quick and frictionless way.”
Cotter says right now, mortgages aren’t the part of the consumer lending puzzle that credit unions are having trouble with. New sales might be scarce, but refinances have been plentiful. But CUs will need to put strategies in place to help them re-adjust when the picture changes.
“Fundamentally, you can’t keep short-term interest rates at zero forever,” says Cotter. “So at some point, it will start to come back. At that point, the total mortgage pie will shrink, because people will slow down on their refinances. The purchase market will pick up because the economy is going to pick back up. But it’s not going to pick up fast enough to take over for the loss of the refi business. So the overall pie will shrink.
“The question for credit unions at that point is, how do they compete much more effectively than they’re doing today to ensure their piece of pie doesn’t get smaller along with the rest of the pie? Effectively, what they’re going to have to do is take market share from other people, simply to maintain the business that they’ve got.”
Cotter’s advice is for CUs to double down on loan-origination technology investments now, while refinances are active and they’ll be able to get a fast return on their investment. If a credit union doesn’t have online mortgage software, he says, it should acquire it; if it has mortgage software, it ought to consider expanding into software for other kinds of consumer lending.
Credit unions like to say their best marketing comes from word of mouth, he points out. But in today’s world, a lot of word of mouth happens online, which is where technology solutions can help.
“Think about [what it looks like] if you’re trying to use social media and you don’t have a mortgage application on your website,” he says. “The reality is, you are creating a brand message. You are sending a message to the market, whether you have something online and are operating like a modern financial institution, or whether you don’t. And if you don’t, you’re sending a very different message.”
Jamie Swedberg is a freelance writer based in Athens, Ga.