Credit union professionals predict direct loan growth, marketingautomation, Instagram, Snapchat and topic-based marketing areexpected to be some of the top prevailing strategies and trendsthroughout 2018 credit unions will use to attract new membersand grow loans.

From participating in dozens of strategic planning sessions in2017, Scott Butterfield, principle of Your Credit Union Partner inSumner, Wash., said his firm heard a recurring theme from hiscredit union clients: Focus less on indirect member and loan growthand more on direct member and loan growth strategies.

“We heard many leaders of large credit unions say they intend topull back, but not stop, indirect lending during the coming year,”Butterfield said. “Common reasons for the shift in strategy includeavoiding high and increasing indirect loan-to-collateral values,challenges of cross-selling other products and services to indirectmembers, and strong competition for indirect loan purchases,including a growing number of out-of-market paper buyers.”

Strategies that can help credit unions focus on member andborrower growth include leveraging prescreen tools to qualify andsegment potential member/borrower lists based on the credit union'sunique criteria and then zeroing in on those who are most likely torespond to offers.

After a credit union has a good understanding of thecharacteristics that make up the most profitable members,Butterfield recommends working with a credit provider to leveragethat data to identify new prospective members and borrowers withinthe field of membership. However, Butterfield added this is not aone-and-done strategy. Instead, success can be accomplished fromadjusting, testing and monitoring criteria to find the bestapproaches.

He pointed out that Experian has recently developed“relationship clusters” that can assist credit unions withidentifying potential members/borrowers who have a greaterpropensity to select a credit union over a bank.

“The cluster filter can be applied over most credit unionproducts and it increases the likelihood of targeting consumersopen to credit union product offerings,” he said. “Initial resultsare remarkable with a triple-digit increase in consumer responserates on these clusters.”

Nidhi Verma, vice president of consulting for InnovativeSolutions Group at TransUnion in Chicago, said there are marketgrowth opportunities for credit unions in auto loans, credit cards,first-time homebuyers and HELOCs.

Though credit unions have been aggressively growing theirshare of the auto finance market, they tend to be more riskconservative than their peers. Verma pointed out that regionalbanks originated 30% of auto loan balances to below prime consumerscompared to just 25% of originations for credit unions.

“Credit unions can diversify their portfolio risk by attractingsavvy consumers via prescreen offers or optimize pricing tolower-risk consumers to capture untapped segments,” she said.

What's more, while there has been much industry angst thatmillennials are less interested in owning a car, it appears thatanxiety has been misplaced. It turns out, millennials (21- to34-year-olds) took out new auto loans at a 21% higher rate than GenX borrowers did when they were in their 20s and 30s, according to a2017 TransUnion study. Additionally, research by Auto Trader andKelly Blue Book found that more than 90% of Generation Z (12- to18-year-olds) plan to own a vehicle. Anotheroption for credit unions in 2018 is to consider expanding theirvehicle loan portfolio by offering members a leasing program.

“While mixed reports have the new car sales market with littleto flat growth, the desire to lease continues in popularity asaggressive incentives can be readily found,” Frank Rinaudo, SVP ofGrooveCar Inc. and CU Xpress Lease in Hauppauge, N.Y., said.

Leasing represents more than 30% of new car sales nationwide,but in more urban centers, that number increases to more than 70%,according to Rinaudo.

“Credit unions should include leasing to provide all thefinancial options to satisfy the member,” he said. “The point is,strive to be competitive 100% of the time.”

Marketing credit cards is another opportunity for credit unionsto grow revenue.

According to TransUnion, 43% of members do not carry a creditcard with their credit union, and the risk distribution among these19 million members is mostly concentrated in the prime and aboverisk tiers.

“The credit union member who carries a credit union card uses itmore than the average bank card,” Verma explained. “Using thisinsight, credit unions can focus on enhanced product valueproposition, specifically for [members] in the higher credittiers.”

TransUnion's data also revealed that credit unions lagged inmortgage originations with first-time homebuyers. In 2016, forexample, 24% of credit union originations were to first-timehomebuyers compared to 35% of non-credit union lenders.

Additionally, during the first week of 2018, mortgageapplications rose 8.3%, according to the Mortgage BankersAssociation report.

In marketing to first-time homebuyers, credit unions canleverage propensity scores to target this important consumersegment nearly eight months before they enter the mortgage market,according to Verma.

HELOCs also hold a potential marketing opportunity for creditunions because more than two-thirds of homeowners, whose creditscores skew strongly to the top tier, could be eligible for aHELOC.

“With access to property data and propensity scores, creditunions can identify a segment of consumers who are likely to open aHELOC,” Verma said.

The rising interest in marketing automation is expected tocontinue in 2018, which can help credit unions attract consumerswhen they are ready or close-to-ready to buy a financial product orservice.

“This technology is a crucial part of the digital growth engine,which we define as digital advertising that drives traffic to awebsite that sells,” James Robert Lay, CEO of the Digital GrowthInstitute in Houston, said. “In turn, the website that sellsgenerates leads that are nurtured by the marketing automationplatform through the consumer journey. And finally, salesenablement technology empowers credit unions to close more leadsfor loans and new accounts.”

While a thorough due diligence process willhelp credit unions decide which marketing automation technology mayfit their needs, it is also crucially important to first develop astrategic plan so that credit unions understand how they willexecute and evaluate ROIs from their marketing automation program.Without that plan, credit unions will never realize the fullbenefits of marketing automation, Lay said.On the social mediafront, credit unions are expected to expand their use of Instagramand Snapchat because that is where many young prospects are hangingout.

“I expect Instagram to continue to grow in popularity on thepaid and organic side. It gives credit unions a chance to useimages and videos to capture the attention of a user,” MarneFranklin, digital director for Your Marketing Co. in Greenville,S.C., said. “A compelling visual is able to make an emotionalconnection that amplifies the power of the message. By utilizingpaid Instagram messaging, credit unions can include a link directlyto their website within the post, an option not available onorganic posts.”

Although Snapchat is enjoyed by millions of young people, it maybe somewhat trickier for credit unions to capture the attention ofthis audience, which is primarily under the age of 25.

“The campaigns that have been successful, which admittedlyaren't many at this point, have found a way to integrate the creditunion message into users' everyday lives via custom geofilters,”she said.

Leveraging topical-based marketing may be an effective way tocapture the attention of young prospective members through online and mobile banking channels, BrianBellhorn, a Detroit,-Mich.-based director of marketing and businessdevelopment at Fiserv, said.

“What I mean by content-based marketing is also topical-basedmarketing,” Bellhorn explained. “I think what we are seeing isquite a proliferation of wrapping the marketing content aroundsomething that is happening in the industry that appeals toconsumers. One of the biggest trends we've seen in the past yearthat's really boomed in 2017, and I expect to continue into 2018,is the news around credit scores.”

Fiserv research showed that about 64% of U.S. consumersunderstand that it's very important to know what their credit scoreis in order to qualify for a loan product. While consumers used tocheck their credit score once a year through free credit reportsites, it's much different today with younger consumers who tend tocheck their credit scores more often.

Research showed Gen Xers and millennials are most likely to bemore proactive and view their credit score for functional reasonssuch as improving their score.

“We actually built out a tool that will help credit unions serveup the credit scores through their online banking channels andthrough their mobile channels,” Bellhorn explained. “What it reallyhas built for marketers is not just a chance to serve members.That's obviously why credit unions are in business, but more thanthat, it's an excellent marketing opportunity to offer a loan, byexample, or a credit card to that member, who's already somewhatpre-qualified.”