Credit Unions

Credit Unions Are Betting On Microbusinesses

Credit Unions Are Betting On Microbusinesses

Microbusinesses, from food trucks to housepainters, tend to be sole proprietorships pulling in $250,000 to $1 million per year top-line. In the developing world, financing microbusiness is big business, and that’s happening with the estimated 30 million U.S. microbusinesses as well.

PYMNTS’ August 2020 Credit Union Tracker®, done in collaboration with PSCU, examines the microbusiness landscape as the fog of COVID-19 begins to lift and new needs are clarified.

“Credit unions (CUs) have been especially invested in helping microbusinesses — 40.8 percent of CUs have interest in unveiling products and services for these firms in the next three years,” according to PYMNTS’ recent Credit Union Innovation Playbook: Microbusiness Opportunity Edition. “Numerous CUs are also working to support microbusinesses and small to mid-sized businesses (SMBs) during the ongoing health crisis by providing swift, digitally focused access to much-needed funding.”

Helping microbusinesses access capital is now a mission that more CUs are taking on, as the role of microbusiness in the overall economic recovery is starting to be better understood.

Advanced Banking Tech for Small Operators

Two-thirds of CU executives saying that microbusiness lending is a next-frontier digital innovation, making it possible for tiny businesses to process transactions like the pros.

“PYMNTS’ findings reveal that 66.7 percent of these credit unions are eyeing mobile banking capabilities, while 61.1 percent are interested in digital wallet solutions,” according to the new Credit Union Tracker®.

That’s consistent with the sentiment in the CU sector that microbusinesses represent an untapped market for financial services that is quite large in the aggregate, thus worth the investment.

“Some smaller entities or entrepreneurs may experience difficulties or even get denied when trying to secure loans from a larger financial institution. Credit unions, on the other hand, are typically more willing to take a chance on individuals and their microbusinesses, representing a great opportunity to put the credit union philosophy of ‘people helping people’ into action,” Denise Stevens, senior vice president and chief product officer at PSCU, told PYMNTS.

Leaning Into Community-First Lending

Microbusinesses without the wherewithal to deal with larger financial institutions (FIs) or even some community banks are turning to CUs more and more, as the sector has a special understanding of the needs of small (and very small) local businesses and the challenges they face.

“In order to differentiate themselves from other financial services providers, credit unions should lean in and promote their community-first values,” Stevens said. “Building strong relationships with microbusinesses will ideally help build relationships with employees of those businesses, creating more awareness for the credit union and its offerings as well as greater brand loyalty among members. This, in turn, can lead to membership growth as loyal members promote their credit unions to their families, friends and others in the community.”



About: Accelerating The Real-Time Payments Demand Curve:What Banks Need To Know About What Consumers Want And Need, PYMNTS  examines consumers’ understanding of real-time payments and the methods they use for different types of payments. The report explores consumers’ interest in real-time payments and their willingness to switch to financial institutions that offer such capabilities.