Credit unions today face many challenges to generating new loans, from regulations, community banks, and new startups and peer to peer lending. At the same time, this new competitive market provides opportunities for those who are willing to act. External growth, including partnerships, investments in CUSOs, and strategic acquisitions, provide a unique way to rapidly take advantage of these opportunities.
I recently addressed this topic at the Strategic Lending Conference hosted by CU Conferences on July 16. I explained how credit unions can use a simple, but powerful tool called the Opportunity Matrix to understand where your credit union stands today and how to position it strategically for future growth.
The opportunity matrix is a two-by-two grid that forms four quadrants:
- Consolidation: selling more of the same products/services to the same market
- Distribution: selling the same products/services to new markets:
- Breadth: selling new products/services to your existing market
- Diversification: selling new products/services to new markets
Let’s take a closer look at distribution using an example from the news. Quorum Federal Credit Union has formed a strategic partnership with LoanHero in order to expand in the healthcare market.
The partnership will enable Quorum FCU, based in Purchase, New York, to expand their lending in healthcare by providing loans to healthcare providers and patients through LoanHero’s automated platform, which expedites the lending process for those seeking loans for medical procedures. At the same time, the fintech company will gain access to Quorum FCU’s over 70,000 members throughout the US.
The strategic partnership is a smart choice for Quorum FCU who is now able to tap into the booming healthcare market. This industry will only continue to grow as people live longer and require more medical care. We also have a huge demographic shift with aging baby boomers who are rapidly increasing the number of Americans over the age of 65.
If you’re thinking about growing your credit unions, consider using the opportunity matrix to identify the best path forward. Once you’ve determined where you want to go, then begin thinking about how you will pursue this goal. You might choose to develop a partnership like Quorum or to invest in a CUSO or to acquire another entity. The good news is you have lots of options and using external growth can be the key to your success for years to come.
*This post was written by John Dearing, Managing Director at Capstone