Jan 01 2005

Lifestyle Lending Offers Innovation and Growth for Credit Unions: An Investigative Report

Report  
Number  
98

A look into the rapidly emerging business of "lifestyle lending." This is idea, first reported in the 2004 Filene i3 Progress Report, is further explored in this investigative report.

Mark Meyer
Mark Meyer
President + CEO
Filene Research Institute
Report Number 98

Executive Summary

In 2004, twenty-six “next generation” creative credit union leaders joined Filene i3 to identify innovations that:

  • Better meet the needs and wants of members
  • Enhance operational efficiencies
  • Build member loyalty
  • Respond to the special needs of market segments
  • Enhance organizational effectiveness
  • Develop ideas to address issues and opportunities facing credit unions
  • Identify innovations in other organizations
  • Provide a forum for cooperation, collaboration, professional development and succession planning

One idea that emerged from the group and was implemented by a credit union in 2004 illustrates the power of innovation and the importance of responding to the needs of the market. This idea – first reported in the 2004 Filene i3 Progress Report, Innovation: Novel Ideas from Next Generation Credit Union Leaders – is worth further exploration, and is the purpose of this report.

What is the research about?

The American dream is changing. Although the home and automobile remain important, Americans are seeking other avenues of gratification. The needs of the market, including the needs of credit union members, are evolving.

Today, credit unions are managing tighter spreads and looking for new lending solutions that meet the needs of their members. Here we explore a thought-provoking opportunity for credit unions, an emerging idea called “lifestyle lending.” Lifestyle lending has evolved to include loans that can both enhance and finance a member’s lifestyle, including adoptions, cosmetic surgery, infertility treatments and uninsured medical expenses.

What are the credit union implications?

As the membership ages and fewer members are entering the prime borrowing years, creative and alternative ways to offer loans are needed for credit unions to survive. Lifestyle loans are a means of growing loan portfolios while deepening relationships with current and potential members. Credit unions have advantages that other lifestyle lenders lack—a direct relationship with members, a location in the community they serve, and a reputation as a trusted adviser.