Innovative Products that Generate Revenue

Jim Jerving
February 18, 2008 | COMMENTS

Innovation travels a narrow footpath in the financial services industry. The products and services offered by banks and credit unions are strikingly similar—most consumers can't tell the difference. Innovation, though, can be a means of standing out and attracting new members.

High-yielding, online savings accounts were just available to bank customers until the fall of 2005. RateEdge.com became the first American credit union account to offer this savings account, which could only be opened online. It has the potential to attract young and computer savvy members. There are a number of development issues to consider—compliance, cannibalization of deposit accounts, as well as field of membership.

Affinity cards have the ability to strengthen the brand of the credit union and the sponsoring organization while provide income to both. Local Government Employee's Federal Credit Union partnered with the North Carolina Firemen's Association to offer an affinity card. The latter organization has a strong bond with its members and uses the income it receives to offer training programs.

FORUM Credit Union developed one of the first rewards programs based on a debit card. Since it is based on the debit card, the credit union earns more on the interchange income than it would on credit card fees. And the member has an incentive to use his or her debit card in lieu of a credit card.

Every college student remembers, with a small measure of dread, the beginning of the school year and waiting in endless lines in crowded rooms. University of Southern California Credit Union (USCCU) proposed and the university agreed to take over the bursar function. The credit union now manages the bursar function and all students come into contact with the organization many times during their college career. Students can conduct business over the Internet by way of electronic transactions. During registration week, USCCU takes over the gym and makes it a branch with 10 teller stations and the same number of new account stations.

The image of payday lenders has been evolving during the past few years. Once seen as the face of evil, they are now acknowledged as serving a need in the market that most banks and credit unions have failed to meet—small loans on a short-term basis. A small but growing number of credit unions are offering payday loan alternatives that offer a better rate and financial education.

Payday lenders have grown to more than 22,000 outlets because they are convenient, efficient, and free of judgment. It makes no sense arguing the ethics of payday lending—they are here to stay. Credit unions can learn from the payday-lending business model and adapt it to their operations and earn income for their lending portfolio. A credit union payday loan alternative can strive to be free of abuses and can help members gain control of their finances.

This executive summary is from a CUNA OpSS Council white paper by Jim Jerving entitled “Innovative Products that Generate Revenue” Read the complete paper in the " White Papers" section of the CUNA CFO Council website.