How BCU is Growing Consumer Lending in Uncertain Times
BCU, a $5.5B credit union outside of Chicago, noticed a growing consumer need for personal loans for debt consolidation and home improvement projects. Combined with a significant dropoff in branch traffic during the pandemic, the credit union knew they needed to offer a digital personal loan solution.
Especially amidst an uncertain economic environment, BCU needed a fintech partner that could help them grow loans and members within their desired loan volume and risk appetite.
Vetting the right partner
As BCU began its fintech partner search, one of the most important factors was finding a partner that could help grow loans and members within its Company Partners on a national scale, a strategy that allowed BCU to lend beyond its branch network. As a Company Partner-focused institution, BCU partners with Fortune 100 companies to provide financial benefits to their employees.
The BCU team learned about the success of other large credit unions like Patelco and Abound Credit Union on the Upstart Referral Network, a program where qualified personal loan applicants who met the credit union’s specific credit policies received tailored offers. Through the Upstart Referral Network, prospective members would be transitioned into a BCU-branded experience, complete with digital application, closing and fast funding.
Best of all, Upstart could help BCU expand membership based on its specific field of membership requirement by lending to its designated Company Partner groups. Brydun and his team members knew the solution would allow them to quickly scale personal loans and expand membership with minimal upfront costs.
“A big piece was finding ways on a nationwide scale to find Company Partner-eligible members and bringing them in through an unsecured personal loan product.”
— David Brydun
SVP and Chief Lending Officer
Full flexibility and control during turbulent times
After reviewing the solution and business case, BCU gained their executive team’s approval to move forward with Upstart. Once the partnership was kicked off, Upstart assigned BCU a dedicated account manager and customer success manager, who would work with the BCU team to achieve their desired KPIs for the program.
Given the evolving economic environment, one of the key advantages of the Upstart partnership was the flexibility to set risk and profitability targets. The BCU team had full capability to configure the program for their desired returns, which they reevaluated and discussed with their Upstart account manager frequently.
As the macroeconomic conditions shifted in 2022, BCU became focused less on excess deposits and more on having a safe, profitable lending program with low loss rates. “The biggest takeaway with rising interest rates and liquidity issues has been the Upstart team educating our teams at BCU of the capabilities and dials we can adjust to hit our various goals around volume and net return,” Brydun said.
Post-pandemic, BCU has been able to step in and fulfill members’ needs for personal loans with a seamless, all-digital experience. “The demand for personal loans is back after the pandemic,” said Brydun. “Our members have a need for these products, whether it be debt consolidation or small projects like home renovations.”
“The biggest takeaway with rising interest rates and liquidity issues has been the Upstart team educating our teams at BCU of the capabilities and dials we can adjust to hit our various goals around volume and net return.”
— David Brydun
SVP and Chief Lending Officer
“The demand for personal loans is back after the pandemic. Our members have a need for these products, whether it be debt consolidation or small projects like home renovations."
— David Brydun
SVP and Chief Lending Officer
Growing loans and members via Company Partner groups
Another key win for the BCU team was the ability to acquire new loans and members nationally within their designated Company Partner groups. By acquiring creditworthy members, over 10 percent of BCU’s membership is now from Company Partner groups.
“Upstart allowed us to find Company Partner-eligible members on a nationwide scale as branch traffic declined during the pandemic,” explained Brydun. Two months into the program, BCU has acquired over 1,100 new member relationships.
What’s next for BCU?
Looking to the future, BCU is looking to build out its financial well-being service offerings to best serve its members’ needs.
With the success of the Upstart partnership, BCU is planning for continued growth via fintech partnerships to meet these needs. “Upstart is helping us find members with great products and a great digital experience. It’s definitely a complimentary piece to our overall Company Partner growth strategy,” explained Brydun.
“Upstart is helping us find members with great products and a great digital experience. It’s definitely a complimentary piece to our overall Company Partner growth strategy."
— David Brydun
SVP and Chief Lending Officer
Conclusion
With rising interest rates, high inflation, and uncertainties about economic recession on the horizon, credit unions need to be doubling down on innovations, like digital transformation and applying AI and machine learning to the lending process. Though some institutions are in the midst of business model changes and cost-cutting, credit unions need to be strategic about which areas of investment will deliver the greatest long-term value.
By leveraging an AI lending platform, credit unions are empowered to make their own decisions and adjustments about risk tolerance and reward in the current environment. Though these providers give credit unions the information about the general market, average return yields, and more, it is ultimately up to the individual credit union to make its own decision based on its business goals and risk tolerance at any point in time.
A lending approach that combines a seamless borrower experience with machine-learning models that factor in macro-driven adjustments will enable credit unions to best serve their members and stay profitable during turbulent times.