By John Flynn, CEO, Open Lending
Credit union consumer loan growth crawled along throughout their existence until 2012. We experienced some stronger growth between the mid-90s and 2000s. Then, of course the economic crisis hit, and credit unions leveled out, even dipped a little but nothing like other lenders.
But in 2012, credit unions’ lending – fueled primarily by auto lending – skyrocketed! As many were bemoaning the invasion of the fintechs and other alternative lenders, credit union auto loans were growing loans like never before in their century-long history. Credit unions have earned a place of trust in the hearts and minds of consumers, and credit unions is where they turn after others failed.
But as consumers are evolving, so must credit unions because at some point in the not-too-distant future, fintechs will worm their way into our business at a rapid clip. We can’t be left behind.
Credit unions are the best option out there for consumers, but we can certainly continue improving. What can we learn from fintechs? What makes them appealing?
They’re quick, simple and easy to use. Fintech lenders are in everyone’s purse or pocket every day on a device consumers check 52 times a day – their smartphones! But by learning from fintechs, working with fintechs and using their strategies, credit unions can absolutely be right there with them.
One of the things fintechs have done is make themselves part of the consumption experience; they’re always with consumers when they are making purchases. Credit unions can do the same through indirect lending agreements, whether through a partner like Allegro Lending Suites, CU Direct, Meridian Link, TCI, CRIF Select, GrooveCar, Temenos, defi Solutions or others, or making individual agreements with local lenders. Remember a car buyer wants to buy a car, not get a loan. So, when they’re in looking for their next ride, your credit union can be right there with them!
Using loan originations systems such as these can expand your reach and marketing, make your institution more convenient for members and create new opportunities. Leaders Credit Union increased loans by 114% in the 600-639 credit score range, and the total amount financed increased 181%. Look-to-book doubled!
Overall, Leaders has generated a 2.79% return on its auto lending program through Allegro and Open Lending’s partnership by using data to reach deeper into lower credit score borrowers while offering them a better deal and then selling them on the credit union’s overall value proposition! Leaders Credit Union EVP Spencer Pratt explained, “We have a strong onboarding team that we have specifically for that purpose. We’re probably close to 30% on additional products overall in indirect lending. This particular group, we were really, really successful, to the point we almost had to back up some of the offerings we were giving to this group.”
Pratt continued, adding those with lower credit scores don’t have a lot of other options, especially ones as good as credit unions, so they’re highly receptive to additional offers. It’s a win-win that can grow your credit union exponentially, especially with Open Lending’s Lenders Protection default insurance backing you up.