I remember there was a time when a popular term was used within financial services circles: three-six-three. For financial service professionals three-six-three was the internal jargon for a successful institution.
The formula and meaning of this term was very simple to understand. The first three is what an institution would pay on deposits. The six is what the institution would charge in interest on the loan. The last three represented the tee time at the golf course.
The days of three-six-three are over. In place of three-six-three is now likely one-two-nine. One percent what you pay on deposits, two percent what you charge on loans, and nine p.m. is the time in the evening when you go home if your institution is still in business.
When I think of the credit industry and the changes since St. Mary’s Bank started in 1908, I recall a time when the mission seemed simple and clear. I once had a credit union board member tell me the heart of the credit union mission, the soul of the credit unions, was they were the institutions designed to help serve members. Credit unions were here to help, in terms of a loan for a car, home or even a new washer.
The financial landscape has changed over the last 100 years. The past five years seem to have brought more than 50 years’ worth of changes. With the increases in short-sighted governmental regulations, such as changes restricting overdraft fees and interchange income limitations, as well as historically low interest rates and arguably hyper-conservative lending practices, many credit unions are struggling to find the next sources of revenue.
Many institutions are charging for formerly free checking accounts and some are charging more for withdrawing and raising fees where they can. For many small credit unions now, the goal is to just keep the lights on and open the next day.
As a recent former credit union professional, I saw first-hand the scrambling and in my time off since, I have asked myself if all the effort was for saving a model which may no longer be viable.
Mind you, I am not suggesting that lending is going the way of the dinosaur. But I question the perception of continuing to apply a retail business model, particularly a sales-based retail business model, on something in which people consider, their financial well-being, as sacred as their physical health.
If you do not like the shirt you bought two weeks ago, you take it back. If you do not like the car you purchased two weeks ago with a 60-month loan, good luck returning that and getting all your money back.
I believe that financial institutions need to look beyond the basics of retail selling and apply a business model similar to healthcare. The question likely now is, “How and why would credit unions be anything like healthcare?”
I go back to the concerns people have over their physical health. A person, who eats right and lives a healthy lifestyle, trying to make the right choices, should be healthy, bearing unforeseeable circumstances.
A person who eats more than 3,500 calories a day and works out only 30 minutes a year may be in a different physical situation. In both cases, it is normally the annual check-up which helps determine the healthy status of an individual.
It is often the doctor who prescribes medication and a nurse which helps the patient identify their ailments and symptoms. How different is this from a member service representative or teller reviewing a member’s account with them or a new accounts representative offering the member the right customizable financial solution to meet the member’s needs.
For peace-of-mind health, I pay for it. I pay for my scheduled doctor visits and I pay when I need to get medication to help me with my sinuses. My doctor is my primary care provider – she provides me peace-of-mind and I trust her with my health.
I have heard credit unions say they want to be a members’ primary financial institution, but some try hard to oversell the product-of-the-day without taking the time to really get to know their members and their members’ needs.
There are plenty of new ways for credit unions to make money applying a financial healthcare model. The big question is, can the credit union industry see how similar they and the healthcare industries are to develop the new revenue streams to make them more successful?
Justin Weiler worked in credit union branch management and marketing for nine years and now is completing his MBA.