DriveUp Savings

The earliest adoptor of DriveUp Savings, Members United Federal Credit Union, represents the innovation as it is featured in the January 2009 issue of Credit Union Management Magazine, from CUES:

. . . some of the most innovative approaches to auto lending in a down market are cropping up at small CUs. $7 million Members United Federal Credit Union of La Porte, Ind., for example, is piloting a program called “Drive-up Savings” that allows members to link a car loan to a savings account and offers them the same rate on the savings account that they are paying on a car loan.

“This is a wonderful product,” Probasco enthuses. “It breeds savings.” For members who are struggling financially, it builds up a savings balance they can’t touch until they trade in the car, finish paying off the loan or need to make authorized repairs to the car. They’re likely to build up money they can eventually reinvest or use as they see fit. And having the savings account can help them raise their credit score and make future borrowing less expensive, she explains.

From CUNA.org ~ Indiana ignite initiative ready for CU adoption:

INDIANAPOLIS (12/2/08)–Indiana Credit Union League’s ignite initiative is making progress, and innovations begun at the start of the year by the ignite working group are ready to be implemented in credit unions, says the league.

Several Indiana credit unions have committed to offering the innovations, and working-group members are seeking additional credit unions to adopt them, the league said.

“To stay in touch with all that is happening with ignite, we have established a website, www.ignitecu.org,” said Doug True, league director and leadership team member, and senior vice president technovation at FORUM CU and president of FORUM Solutions.

The site serves as an information center for ignite projects and as a social networking site. The credit union community nationwide can join the network to keep up with the developments, True said.

One credit union that has adopted an ignite innovation is Lafayette-based Purdue Employees FCU, whose CEO Bob Falk, is a member of the ignite leadership team. Purdue is implementing DriveUp Savings, which allows borrowers to open a matching-rate savings account at the same time they close on their auto loan.

“This product has merit not just for our members, but for credit union members everywhere who need a little extra incentive to save money,” Falk said.

. . . In the DriveUp Savings product, members open a savings account, such as a certificate, at the same time they close their auto loan. The loan officer and member agree on a monthly contribution amount and through automated electronic transfers, the DriveUp Savings is funded at the same time the auto loan payment is made.

Is your CU ready to DriveUp Savings? Or, have you implemented it already? Contact us and let’s get the wheels rolling!

I received an e-mail today from a CU professional who is interested in DriveUp Savings, but worried that the rate match portion of the innovation might be considered unrealistic or that it would detract value from the rest of the institutions savings products becuase of the rate. It’s a very valid question and argument. Having “lived” in this product for several months now, here’s what I came up with:

• [THE CU MISSION] This product targets the moderate means consumer. Most often, institutions require a high opening deposit to “play” in the high savings rates game. For this target group, even a $1,000 opening balance is difficult to produce. This product allows the member to
  • Obtain a high rate
  • Develop a savings habit that systematically builds a savings balance
  • Enables the CU to market to the member as they near the loan/savings maturity to offer them more “advanced” savings accounts (at this point, a $1,000 certificate might be of interest to the member since they now have that amount in all likelihood).      

• [RECOUPING COSTS/ACCOUNT RENTENTION] Loans will stay on the books longer. Members are less prone to Auto Loan Recapture (ALR) and refinance offers from other FIs because they would lose that savings rate if they closed the loan. It would be much easier to take the $50 offer from the other FI if my savings rate was a miniscule 0.25%APY rather than 8%APY. Since you are earning interest on loans longer, you can return some of that value to the member for the desirable behavior.      

• [ACCOUNT ACQUISITION] If you were comparing two FI’s offers and the rates are the same (or very close), would you take the one that also enabled you to save at 8% or the one that gave you a .25%APY Savings account? Even more important, which one would you tell your friends about or blog about (Net Promoter Score anyone)?      

• [PUBLIC RELATIONS] No media source will do any piece on another low-rate savings product. However, they might do a piece on an institution who makes it a mission to return value to member-owners through a high-rate savings program that teaches financial savvy while integrating itself into the lifestyle of their consumer.      

• [RETURN SALES] I equate this to the “same store sales” measure that the restaurant and retail industries use for determining the ongoing value of their stores. CUs who have implemented this program and those similar to it report that their members are coming back for other smaller loans that aren’t auto loans or have savings programs tied to them. My thought here is that these members were banking elsewhere but came to the CU for their loan because they wanted the savings offer. It gave the CU the chance to earn the member’s future business through streamlined applications and superior service.      

• [INDRECT LENDING] If your CU is involved in indirect lending, this product serves two critical functions.
  • 1.) It gives you something to market to the member who originates their loan at the dealership and potentially increase wallet share with that new member
  • 2.) It gives the member less incentive to be redirected to another FI while they are at a dealership

Carolyn Probasco at Members United Federal Credit Union sent along a nice letter today.

She reports that her credit union is still doing about a 30% takeup rate (meaning 30% of the auto loans they open have a DriveUp Savings attached).

She also included a cell phone sticky pad that was used as a give-a-way at her local chamber meeting. What a great idea!

Thanks for keeping us updated Carolyn, and congratz on the great success you are having with the product.

If your credit union is intersted in launching this product or a similar product, we want to hear from you so we can add it to the growing list of credit unions offering the product. We’ve started to draw interest from credit unions in California and New York, so we may see the innovation take off nationwide soon!

And remember, we’re also happy to help you as an advocate if you need help getting it approved, implemented and/or promoted. Just contact us and we’ll help you get started.

Moriss Partee was kind enough to launch a topic about DriveUp Savings at EverythingCUMarketing.com.

Six credit unions in Indiana have launched a cool looking program that helps members save when getting a car loan. Not only does the program help your members build up their savings, it has the additional impact of increasing the CU’s deposit balances.

The Financial Brand has posted a nice profile of DriveUp Savings.

The site is “an online publication focusing on issues and advice that affect bank and credit union brands.”

With a razor-sharp focus, The Financial Brand provides strategic analysis and insight on a range of critical brand-building tools, along with real-world examples, ideas and practical advice about the issues financial institutions face today.

Fresh on the heels of a name change, Via Credit Union has committed to implementing the DriveUp Savings product, with plans to launch in 2009.

This news comes just a couple days following our iGnite presentation at the Indiana Credit Union League Conference. If you were not at that presentation, please feel free to download the presentation we used.

If you have any questions or have plans to implement, please contact us.

Eli Lilly Federal Credit Union and Kemba Federal Credit Union (both in Indianapolis) will begin piloting the product during fourth quarter 2008. ELFCU will offer to Select Employee Groups (SEG). This makes them the fourth and fifth credit unions to commit to DriveUp Savings.

Three Rivers Federal Credit Union in Fort Wayne, Indiana will begin piloting the product during third quarter 2008 with an expected full launch late in the quarter or early 4th quarter. This makes the third credit union who has committed to DriveUp Savings.

How about you? Is your credit union ready to drive up savings for your members? Do it with the DriveUp Savings program. Contact us for more information or to tell us about your launch.

We are happy to report that antoher credit union – one of the Taped Crusaders’ own – has committed to be a part of the inital DriveUp Savings wave. Purdue Employees FCU plans to launch soon. This brings our total to two, but there are at least 2 others considering it.

Want to add your name to the list? Click here to let us know!