I belong to a number of different credit union-oriented discussion groups where members pose questions about operational challenges and receive suggestions for resolution from other list members. In general I think the suggestions are pretty good, but sometimes the discussion becomes too focused on providing specific answers to the specific question asked. As a result, the person asking the question is deprived of new ways to think about the issue that concerns them.
Case in point. About two weeks ago I received a list posting containing the following questions about early closure fees:
We have had members repeatedly close and re-open their accounts; this is primarily so they can use us as a check cashing facility. Do you charge an early closure fee? What would you consider early closure (3 months, 6 months)? How much of a fee?
Discussion participants replied to this question with great answers, each addressing the questions above with a high degree of specificity. Some went a step further with offers of sharing fee and account closure policies. Nothing wrong with that at all, and I am sure the poster very much appreciated having a range of suggestions for how to deter early account closure, but when I read the question I thought of a very different thought that had nothing to do with early closure fees. That thought? New product opportunity.
Because of the simplicity of this real-word example and the context in which it is shared, I imagine the product opportunity is quite apparent but I will point it out anyway: a check-cashing solution for credit union members.
Though I am not informed of the specifics of the situation, not knowing this credit union other than by reputation, it seems to me that they have a fair number of members opening and closing accounts in order to take advantage of no-fee check cashing. I say this because if it wasn’t perceived by the credit union as a real volume problem I doubt they would have taken the issue to a discussion group for suggestions on how to manage it. In any case, the question in my opinion is not how to eliminate this behavior, but how to capitalize on this behavior with a targeted solution that benefits the member, allowing members to cash checks at rates and fees far less than what they will be required to pay to check-cashing companies.
Know that I am not suggesting here that every credit union get into the check cashing business – that isn’t the argument. The argument is that sometimes member behavior, behavior that may be perceived as negative, may actually be a definitive member request for new services that a credit union should offer.
In this statement I think back to credit union arguments against risk-based lending. Opponents of the practice of risk-pricing member credit would argue that it was unfair to charge members different rates – but they would then turn around and deny loan requests made by members with higher-risk credit. Such members, not to be deterred in their quests for loans, simply went down the street to the corner finance company and got the loan they wanted/needed but at rates far higher than what any credit union would have charged with a proper risk-based pricing program in place. The point in this case is that member behavior suggested a need for broadening lending strategy and policy, but the common response (at the time) was to say no to such “unconventional” loan requests.
I do recognize that some member behavior must be deterred – no doubt about that – but the first response in seeing early signs of a change in member behavior shouldn’t automatically be to deter it but to understand it.