If you look at current economic downturn data and projections for too long, you’ll get depressed quickly.
McKinsey & Company is projecting it will take most business sectors more than five years to get back to their 2019 GDP levels. Bancography recently said “Banks and credit unions should understand and accept the disruption will not be temporary. There is no ‘light switch’ that will instantly restart the economy at the point where we entered the crisis.” And on a recent call with large credit unions Steve Rick, chief economist for CUNA Mutual, noted that a double-dip recession is a distinct possibility.
So what approach should your credit union or community bank take as we close out 2020 and prepare for an uncertain 2021? Rather than panicking or pausing, you must be proactive.
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There are actually hidden opportunities for your credit union or community bank during the current economic situation.
Here are five ways to seize advantages during an economic downturn:
Launch new products
During the last major economic downturn, Apple’s revenue fell 33%. So what did they do? They increased spending on research and development by 13%. That resulted in multiple new products such as iTunes music, the iPod mini and iPod photo. While your credit union or community bank may not launch a new tech toy, it can invest in creating new financial products and services consumers need. For example, Bank of America just launched a new digital financial planning tool. Now is the perfect time to completely review all your products and services through a creative lens.
Implement the CU Growth Accelerator
If you want guaranteed growth, then check out our trademarked CU Growth Accelerator. This is a program that provides immediate growth results and gets you ahead of the game. Our proven five step process guides you through the key actions that will deliver an increase in ROA, assets and member growth. Traditional growth numbers from previous years will cease to exist in the midst of economic downturn. You must take a proactive approach with your growth strategy and CU Growth Accelerator does just that.
Close underperforming branches
Nothing can drag your financials down more than facilities that are not producing. But sometimes boards and others in your credit union or bank get tied to those buildings. Sometimes the mindset is, “more branches means more growth.” Sometimes there is a positive psychology to seeing your logo and name on a building. But the pandemic has changed consumers’ banking habits: less branch visits and more digital activity. If you’ve been hesitant to close a branch or two, the pandemic presents the perfect opportunity to do so.
Seek merger partners
As sad as it is, some credit unions and small banks are going to throw in the towel. Maybe not this year or in 2021. But by 2022 we will more than likely see more consolidation in our industry. You must ask yourself, what can we do now to facilitate that activity? Whether it is proactively meeting with potential partners, hiring a consulting firm to assist you with the process or putting out feelers within your own network you must lay the foundation for mergers now. Mergers won’t just happen by osmosis and won’t just happen because you want them to happen.
Recessions are high pressure exercises in change management. You must be flexible and ready to adjust. During a recent strategic planning session with one of our clients we asked, “What hassles can you remove from doing business with you?” It was an eye-opening experience because they realized that through the years they had put multiple hurdles in place when it came to opening accounts and getting loans. Now is a great time to review every single process you have in place and ask why is it there and how can we better improve our consumer experience?
When the economy slows, the temptation is to slow with it. But inaction is the riskiest response to uncertainties of an economic downturn. Now is actually the perfect time to seize strategic advantages.