Where does a credit union look for long-term growth today? Theanswer lies in noninterest income.

Historically, many credit unions have relied on lending as aprimary source of income, which has built strong memberrelationships. There is a tremendous untapped opportunity toleverage those existing member relationships to offer solutionsthat members are purchasing elsewhere. Growing your percentage ofnoninterest income also diversifies sources of revenue.

Most important, expanding noninterest income programs can alsomeet member needs, creating a win-win for members and the creditunion.

Noninterest income opportunities can be classified into fivecategories.

Opportunities from existing credit unionsolutions. Some examples include guaranteed autoprotection, mechanical breakdown protection, debt protection,credit insurance and creditor placed insurance.

Solutions members are purchasing elsewhere. Forexample, a credit union can offer foreign currency for members whoare traveling, AD&D insurance, identity theft protection,insurance solutions, financial planning and wealth managementservices, IRAs and health savings accounts, and merchant cardservices for business members.

Wringing income from improved operations. Manycredit unions have charged off debt sitting on their balance sheetsthat can be sold to generate cash from a liability. Others areusing sophisticated predictive analytics to generate better resultsfrom marketing to retention.

Adding value to convert existing free services to feeservices. The interchange amendment touched off the debateabout free vs. fee checking accounts. There are opportunities toadd solutions to a basic share draft account and charge a fee toprovide better overall value to members–and in the process generaterevenue for the credit union.

New offerings to generate buzz and provide differentvalue drivers. Income-generating solutions can get staleif you achieve a certain level of market presence and then growthstops–or worse, members turn to other providers. Credit cards are agreat example. Market or wallet penetration is the first part ofthe challenge, and getting members to use their cards is anotherpart. It is difficult for any one card to meet all needs, andoffering an alternative card with different value drivers (likerewards) can often generate growth.

Embarking on a noninterest income diversification program mustbe strategic. Credit unions must understand how a proposed solutionwill fit into their long-term plans and what they need to ensuresuccess for the future growth and health of their creditunions.

For example, look at Desert Schools Federal Credit Union. Priorto 2008, Desert Schools' main revenue source was interest incomegenerated by its traditional lending products. The credit union hada fully operational CUSO specializing in nonlending products. TheCUSO was originally created to offer a range of investmentproducts, but Desert Schools saw a lot of untapped potential.

The CUSO added a 401(k) rollover product and adopted aneducational component to its marketing. Demand for these productssoared. Average 401(k) rollovers went from $35,000 per transactionto $80,000.

Naturally, part of the strategic process is identifying whichoptions are the best fit for your credit union.

Finally, marketing and sales are essential. It is vital for youto promote the value of noninterest income solutions to yourmembers through a variety of channels–direct mail and email, Web,face-to-face, statement inserts and newsletter articles. 

David Frankil ispresident of NAFCU Services Corp.