Your lending culture may not allow you to attract deposits or relationships

This isn’t fair to any of you with tired old brains like mine but think back ten years ago to what the banking landscape looked like. Many of you were in the midst of a windfall of consumer deposits flowing in the doors. You didn’t have to worry too much about attracting deposits; deep concerns about Wall Street were doing a great job of driving deposit dollars our way. Many of us were welcoming of this flight to safety with open arms and some were in an enviable position of actually needing to turn away deposits.

Now, allow your memories to drift back just five years ago and that same landscape found many of us still flush with deposits and, in addition, our loan engines were revving up and starting to produce on all eight cylinders. Where there was a healthy flow of deposits before, many of us were also starting to experience an equally healthy demand for loan products, especially auto loans. Sure, the landscape become more crowded in the past five years as fintechs become more prominent in many loan markets but the consumer demand for loans remained very robust.

Today, however, that landscape has begun to change in a way that some financial institutions have never faced before. The loan spigot is slowing and the deposit pipes have practically run dry. Unfortunately, many organizations have created cultures that are fixated on one thing and one thing only – generating and handling loan volume. Their cultures have little or no knowledge or experience of generating and handling deposit volume or growing member relationships.

This potentially devastating situation manifests itself in many credit unions in four critical ways:

  1. Incentives. So many credit unions have established incentive programs (some very complicated ones, too) that are focused mostly, if not entirely, on the sales of loan products. Many of these programs are very rich in monetary terms and many are also seen as entitlements to some staff members. A recent client had Loan Officers who were making 25-50% of their base salary in incentives, simply for processing loans that walked in the door. These monetary incentives amounted to an extra $2000 a month in their paycheck. Did they come to expect that income each month? You bet they did. And good luck taking that away from them.
  2. Marketing. Since loans have become so competitive over the past five-to-ten years the marketing campaigns at many credit unions have centered squarely on loan products and pricing. In fact, you could argue that the credit union’s value proposition and differentiation have been largely built around their loan offerings and, in many instances, the fact that they are usually the loan price leader in their markets. Marketing calendars have consisted mostly of the recycling of the same loan promotions every six months or so. Marketing dollars haven’t been spent on differentiating the credit union as much as they’ve been spent on making their loan products and rates standout.
  3. Sales skills. If we’ve been successful with our marketing efforts, our credit union should have had a fairly steady flow of loan opportunities coming in the door. Which means, as noted under Incentives above, that our frontline staff has been in a reactionary mode – service those loan product demands as quickly, friendly, and thoroughly as possible. In some instances there’s been a focus on cross-selling additional products but in many instances those other products have been loan products like extended warranty and gap insurance or refinancing other loans. Rarely have we seen over the past few years a consistent, dedicated focus to cross-sell deposit products or total member relationships when a loan was being processed.
  4. Coaching. The importance of coaching frontline staff has been spotlighted in these pages as much as any other single topic over the past few years. But our observations have revealed in most cases that coaching at many credit unions consists of simply reviewing sales production with staff and that “sales production” generally refers to loan production. Managers, to a great extent, are coaching staff on how to look for additional loans and providing feedback on whether they’re hitting their loan goals are not. And team meeting agendas are usually aimed at identifying ways to generate additional loan product sales.

Not to be a doomsayer, but these four issues have to be addressed promptly or many financial institutions may not be around in another ten years to reflect back on today. Strategic and tactical plans need to prioritize these four issues and identify specific and dedicated efforts to improve each. We can’t sit back and count on another deposit windfall and that fierce loan competition isn’t going to go away anytime soon.

Following are four distinct ways you should tackle these issues:

  1. Move as far away from product-based monetary incentives as possible and toward a well-balanced scorecard approach that includes a heavy focus on non-monetary rewards and recognition.
  2. Reallocate marketing dollars away from regularly pushing loan products and rates and toward a consistent push on differentiating with your brand and mission statement.
  3. Focus skill development on relationship building skills and behaviors – get your member-facing staff asking questions to thoroughly understand all financial needs and establish solid processes for following up on opportunities.
  4. Coaching efforts need to center on conducting observations and providing feedback about appropriate sales and service activity and desired behaviors, not just about sales production numbers.

Performance cultures that have been based predominantly on loan production over the past five to ten years will not automatically remodel into being deposit or relationship based. Credit union leaders must be anticipatory and drive the necessary change – don’t wait for it to happen serendipitously or it will be too late. Disrupt the “we’ve always done it this way” mentality and transform into a “let’s adapt into a new way” performance culture.

If your credit union needs to assess your current culture to determine if you can realistically transition from a loan-centered culture to one that can also grow deposits and relationships, my firm can help. Please contact us at

Paul Robert

Paul Robert

Paul Robert has been helping financial institutions drive their retail growth strategies for over 20 years. Paul is the Chief Executive Officer for FI Strategies, LLC, a small but mighty ... Web: Details

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