Consumer Loan Applications: Members Still Prefer "Bricks" to "Clicks"

By Chad Thiele
Senior Research Analyst
Credit Union National Association

Credit unions can’t take lending for granted these days, if they ever could, according to CUNA’s 2005/2006 Credit Union Environmental Scan (E-Scan). Convenience and competition are everywhere. Not only from the traditional players (i.e., banks, savings & loans, other credit unions, etc.), but also from insurance companies, retailers, and payday lenders.

In an effort to set themselves apart from the competition, many credit unions are offering innovative loan products combined with creative marketing campaigns.

One of the best ways a credit union can gain market share is to provide fast, quality service. If customer satisfaction is an indicator of service quality, credit unions are doing a good job. For 21 years in a row, credit unions have ranked higher than banks in "customer satisfaction", according to the 2005 American Banker/Gallop Consumer Survey.

But given the current economic conditions, credit unions can’t rest on their laurels. Gone are the days when interest rates were at all-time lows and loans were fairly easy to come by. Now, credit unions have to work harder to acquire their members’ loans. Multiple channels, easy approvals, and quick loan decisions are keys to a credit union’s success, according to CUNA’s 2005/2006 E-Scan.

As technology advances, many members are expecting loan application and approval processes to be automated.

In an effort to meet the demand, many large credit unions have stepped up to the plate and are offering their members online loan applications and approvals via their Web sites. These loan applications are accepted and reviewed/approved online by a system that renders a decision to the applicant(s) via the credit union’s Web site or the member’s e-mail address.

Nevertheless, the data also shows that many credit unions have been slow to adopt this important emerging technology. In 2002, only about 5% of credit unions offered automated online loan application and approval systems, with an additional 20% saying they planned to offer this technology to their members by year-end 2003. Current statistics show this did not happen.

In fact, when we look at the credit union movement as a whole, we find that only about 9% of credit unions have automated online loan application and approval systems in place in 2005, up only slightly from the 5% reported in 2002, according to CUNA’s 2005/2006 Consumer Lending Survey.

Even when a credit union does offer automated online loan application and approvals to members, many will still choose to apply in person.

In fact, 67% of credit unions with automated online loan application and approval systems in place say "in person" is one of the two most frequent methods used by their members when they apply for consumer loans. In comparison, only 32% of these credit unions listed their Web site among the top two methods. However, this is much higher than the population of all credit unions, where only 8% listed Web sites among the top two methods used when members apply for consumer loans.

In addition to information on credit union application and approval channels and trends, CUNA’s 2005/2006 Consumer Lending Survey provides credit unions with valuable information on the economic conditions credit unions are facing, credit unions’ insight on consumer lending challenges and the competition, indirect auto lending, risk-based lending, subprime lending, marketing budgets and how the dollars are spent, and much more. For more information on this and other reports offered by CUNA’s Center for Research & Advice, please visit http://advice.cuna.org and click on "Reports".

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