There is a phase in every company’s lifecycle dedicated to becoming more efficient. When we think of efficiency, the first thing that pops in our head is technology, but that is only one aspect. Efficiency also includes evaluating the staff’s skill set, re-engineering procedures, eliminating unprofitable products, and possibly consolidating staff in one location.
Financial institutions are no different from other companies, whether they are small one-person shops or multi-national corporations. Banks starting in small towns knew their customers at a personal level. The town banker knew their customers’ families, who they worked for, how reliable they were, and how much integrity they had. These were the qualities that a local banker used to determine the creditworthiness of their customer base.
As financial institutions became efficient, bankers started using less expensive and less time-consuming methods, such as credit scores and automated underwriting, to analyze loan applications. Consequently, many banks and even some credit unions knew their customers and members less than in the past. This has resulted in the public being suspicious about how loan applications are approved or denied. The lack of transparency by banks adds fuel to the fire.
Our Credit Union still underwrites loans the old-fashioned way: We look at the member from a personal perspective by focusing on that individual’s history with us. The credit report showing other debt history is good information but lacks the human element necessary to really dig below the surface that reveals a person’s integrity and reliability.
According to USA Today, “Millennials are shying away from credit cards like no other age group, a recent study finds, that could cost them when they go to buy a car or even when they apply for a job.”
A survey conducted by Bankrate.com revealed more than six in ten people ages 18 to 29 don’t have a credit card. Another survey conducted by the FINRA Investor Education Foundation’s National Financial Capability Study found that one-fourth of millennials who do have credit cards engage in more costly credit card behavior, such as carrying a balance, paying only the minimum required payment, being charged late and over-limit fees, and taking out cash advances. These are more good reasons for financial institutions to stay personally connected with their customer base.
Our 34 loyal members who started the Credit Union 66 years ago have grown to over 27,000 members. Our reason for being has always been, and will continue to be, getting to know each member on a personal level, no matter how large we grow, and giving all our members the financial services and education needed to enhance their lives.
David M. Green