SAN ANTONIO — Increasing spread pressure, changing demographics and competition at every corner are making the lending environment more challenging than ever.
That's why credit unions must identify a lending strategy then allocate adequate resources to help it succeed, attendees of CUNA's Lending Council were told during the group's recent annual conference.
"The challenges credit unions are going to face will continue to get more complicated," said Bill Klewin, director of Loanliner products at CUNA Mutual Group. "Once a credit union decides what it can be the best at it must allocate the resources necessary to achieve success. Allocation of resources is a clear statement of what your strategy is going to be."
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Klewin cited two primary reasons the lending arena will become more complex: changing demographics and what he called looming "black swans."
"Mostly importantly, credit unions need to put a sharper focus on the younger generation when devising a lending strategy," Klewin said. "Credit union execs and middle management are generally people who grew up serving baby boomers. More attention needs to be paid to Generation Y in the lending event than baby boomers, who are becoming less and less important to your lending business."
Klewin said the 80 million members of Gen Y, who are those born between 1977 and 1997, "are where the money is."
"They are financially sophisticated, market savvy, and financial success is an important characteristic of how they view themselves," Klewin said. "It just makes sense to focus on where you can make the most loans."
The potential "black swans," Klewin said credit unions need to identify, are those changing events that could threaten or kill a business. "Think of the local agency insurance rep and what someone like GEICO can do to that traditional way of selling insurance. There are business-threatening occurrences that you have to keep an eye on."
Competition is coming from everywhere from boutiques to international conglomerates, Klewin said. But those threats can be turned into opportunities.
"A credit union can take a boutique approach by specializing in a certain aspect of lending. Even though you want to be full service, you may determine you can be the best at auto lending or business lending in your marketplace. Then, you must allocate in order to succeed."
Klewin said credit unions shouldn't just end up in a lending business because that's where they've previously had success.
"Determine what you want you can be the best at, then allocate the time, attention and marketing toward that end. Your chances for success are slim if you don't put your money where your mouth is."
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