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By Diane Franklin

Editor's note: This article first appeared in the August 2009 issue of Credit Union Management.

As the world turns increasingly green so, too, do credit unions. One way CUs can show their true green color is by supporting their members' efforts to go green as well. This means offering lending products that encourage a greener lifestyle-permitting economical financing of energy-efficient homes, hybrid cars-even motor scooters. Credit unions can also earn their green stripes by becoming more environmentally conscious in the lending process itself-moving toward more paperless processes, for example, by maximizing the use of online applications and digitized signatures. Moving toward green building processes is another way for credit unions to show members that they not only "talk the green talk" but they also "walk the green walk."

Examples of green lending products and processes are becoming much more commonplace among credit unions, both large and small. A few examples include:

• $1.1 billion Community Federal Credit Union of Florida, Jacksonville, offers several loan products under the title "Green Advantage." The most popular green loan product is the C1 Green Advantage auto financing program, providing a .5 percent discount on the financing rate of all cars that meet or exceed 30 mpg in highway mileage. "Members find this especially helpful in their financing decision since many cars today qualify for the 'green' status," says Susan Verbeck, VP/lending.

  Community First FCU also provides Green Advantage mortgages for energy improvements at a .25 percent APR discount and will soon launch Green Advantage business loans for small-business owners to make their business properties more energy efficient. Another popular product is the "solar water heater" loan, which provides a low rate for terms of up to 60 months.

• Sebasticook Valley Federal Credit Union is offering home equity loans to finance alternative fuel sources. The CU's alternative energy loan features rates as low as 6 percent and terms as high as 15 years. "The product is mainly aimed at reducing use of heating oil," states Jim Lemieux, president of the $56 million CU in Pittsfield, Maine, and a CUES member. "Eighty percent of heat is derived from oil, and the loan came about from looking at alternative fuel sources, such as wood pellet stoves, and wind- and solar-powered energy." The credit union is also offering special 0 percent APR loans to finance winter heating costs. This program allows current and new members to borrow up to $3,000 to cover the cost of home heating in the winter over a 12-month term.

• $20 million Green Mountain Credit Union of South Burlington, Vt., offers attractive rates on home improvements that save energy, such as installing more efficient home systems. "We do a lot of energy loans for solar systems, new heating systems or a new water heater," reports Ginny Fleischman, the credit union's president. "It'll cover such things as a pellet or wood stove or a new furnace. We also have green loans for hybrid cars that get 30-plus mpg." An example rate is 5.74 percent for a three-year term.

  Green Mountain CU received some publicity when The Wall Street Journal reported on an increase in scooter sales due to the high price of gasoline and mentioned that the credit union was providing these loans.

• $8.5 billion BECU, Seattle, has gone "paperless" in its first mortgage processes. Members sign documents electronically in the branch. And, fewer total signatures are required than for most mortgages done on paper. Instead of walking out the door with 60, 70 or 80 sheets of paper, members leave with a USB drive that contains all their closing documents. "This is our second year," says Production Manager Debra Toepfer, "and part of the impetus was to make it green, but also to make it a smoother process. It's a quick application process on line."

Many green lending products have a two-fold advantage: They are beneficial to the environment, and they also help members save money. For instance, at Sebasticook Valley FCU, Lemieux reports that helping members from a financial perspective is the strongest motivating factor for these programs. "We tackle them from the angle of cost savings for the member," he says. "With our 0 percent energy loans, we want to help our members get through the high cost of winter. It's something we've done several times."

Fleischman reports that the demand for energy loans at Green Mountain CU is strong, especially in the winter months and, at the same time, these loans actually allow the credit union to be true to its origins. "Our credit union was founded by employees of the power company and gas company, so it's part of our roots," Fleischman says. "We're receptive to any energy tie-in."

GREEN LENDING PROCESSES
In addition to offering green lending products, CUs can support the green
movement by adding environmentally friendly business practices. Sebasticook Valley FCU is moving in that direction. "We've had pretty good adoption of our e-statement, though it's probably driven more by the cost savings (to the credit union). We're also going to optical signature-based lending," essentially paperless loan documents.

The member would still receive a paper copy but the credit union would store its copy electronically, Lemieux reports.

Green Mountain CU also is true to its name-green-by implementing such environmentally friendly practices as reducing waste and recycling. "We encourage our members to use electronic transactions as much as possible," Fleishman says, "and we also promote e-statements to our members." However, she acknowledges that only a small percentage of members have gone to paperless statements." "There are those who don't want to give up their paper statements, and even in this day and age, there are some people who still don't have a computer," Fleischman says.

Mark Schwanhausser, research analyst/multi-channel financial services for Javelin Strategy & Research, reports that many financial institutions are making a push toward paperless statements, and there's a financial incentive to do so. "If you figure that each statement mailed out costs one dollar, and you multiple that by 12 times a year, and then multiply that by thousands of members, there could be a substantial cost savings," Schwanhausser says. "I've seen a significant push on the Web sites of financial institutions, with pop-up ads and so on, to encourage people to sign up for paperless statements."

According to 2009 research data provided by Javelin, there are three key motivators that would persuade consumers to go paperless: (1) reducing clutter (identified by 63 percent of survey respondents); (2) reducing their impact on the environment (44 percent), and (3) reducing the chance that someone would steal their paper statements (38 percent). "This is evidence that the banking industry's focus on this issue is paying off-and consumers are seeing benefits for themselves as well as the environment," Schwanhausser says. "They're finding that they can live quite comfortably without the stacks of statements, and that their financial lives are a bit simpler as a result. In the meantime, the environmental marketing push appears to be working."

However, the paperless concept still has a long way to go. Even among those who fall into the "green" consumer segment, seven out of 10 still receive a paper statement. About 15 percent of "skeptics" have gone paperless as well, but they are motivated by the desire to reduce the risk of fraud and to reduce clutter vs. any specific green message.

On the other hand, "greens" are more likely to touch their financial institutions more, and they are typically doing so in paperless ways. For instance, they are more likely to contact their financial institutions by telephone and through e-mail. They also appear more comfortable banking on line.

Another way to reduce paper is to encourage members to use bill-pay. Again, success depends on how well you address consumer motivations. The key motivators for bill-pay, based on a Javelin household survey in April, are: the ability to view and pay most bills at a single place (identified by 43 percent of respondents); financial incentives, such as better rates (38 percent), and the ability to expedite payments to avoid late fees (32 percent). "The growth in those interested in viewing and paying bills in one place underscores the fundamental consumer desire to simplify their finances, to have fewer relationships not more, and to consolidate chores, such as paying bills, to give consumers more control over their money and time," Schwanhausser explains.

At BECU, the move to paperless mortgages has been well received by those who wish to go green and/or to simply eliminate the document-overload the closing process has previously entailed. Toepfer reports that BECU funded more than $1 billion in first mortgage loans for 2008. For 2009, the credit union had already hit $1 billion by the end of May.

While there are green advantages to the paperless mortgage process, there also are other benefits, such as greater staff efficiency, more timely service for members and greater loan volume. "Previously, we had a staff of 35 to 45 employees, who had appointments six weeks out," Toepfer reports. "Now, the backlog of appointments has been eliminated, and we've doubled the amount of loans."

BECU's paperless mortgage process is made possible through a Web-based system provided by the Seattle-based credit union service organization Prime Alliance. This system eliminates the need to look up documents manually. "That's a great time savings per employee," Toepfer says. "Employees could spend a couple hours each day looking up documents. The savings in man hours in a day adds up to an estimated overall savings of $206,000 for the year."

BECU is likely to expand its paperless practices to other loan products. For instance, second mortgages are currently not 100 percent paperless, but likely to move in that direction in the future. "BECU is always looking for additional ways to go green, Toepfer says.

GREEN BUSINESS
Green practices that support green lending products make sure what a CU is doing is a matter of "walking the walk" and not just "talking the talk."

Community First CU of Florida explicitly shows its commitment to saving the environment. Specifically, the credit union opened its first LEED-certified (Leadership in Energy and Environmental Design) retail branch in 2008. "A second 'green' branch is under construction and the credit union expects to build its future branches by the green initiative as well," Verbeck states.

Verbeck reports that a LEED-certified branch costs 20 to 25 percent more to build than a traditional branch.

However, the credit union expects to recoup this amount in energy savings within five years.

Going paperless … reducing waste … recycling … using LEED-certified building practices: All of these are ways to show your environmental commitment to the community and your members. This falls into what Javelin has identified as the four "Es" of green banking: educate, enable, make it easy and be earnest.

"Educate" can involve getting the word out about just how much paper can be saved by going to electronic banking and bill-pay. Javelin estimates the typical household received an average of 26 bill statements and checks each month in 2006, representing more than 687,000 tons of paper.

"Enable" allows consumers to take charge by turning off paper statements without losing any benefits. For instance, credit unions can provide statement archiving on line to make them easier
to access. "Make it easy" is just that-consolidating
"green action" steps on one screen so your members can shut off unwanted paper with just a few simple steps. Finally, "be earnest" ensures that members-especially "skeptics" of green initiatives believe in the sincerity of your green efforts.

"You will experience a backlash if you are not earnest about being green," Schwanhausser says. "Paperless statements are just one small sliver. Are you energy efficient in your business practices? Are you doing business with companies that are green? Are you lending to a coal
plant while turning down a solar plant? Are you providing loan products for solar-efficient windows? For hybrid cars? You can be judged based on the ventures you support."

TARGET THE GREEN MESSAGE
It's important to note that not all consumers are equally interested in green lending products. Specifically, Javelin Strategy & Research, a provider of quantitative financial services research, has identified three consumer segments categorized by their receptivity to green marketing concepts:

• Greens, representing 48 percent of the population, say it is extremely important to consider environmental impact when weighing what to buy and who to do business with.
• Moderates, representing about 44 percent of the population, have a neutral opinion when asked if they'd be more loyal to a financial institution because of its environmental activities.
• Skeptics, comprising the remaining 8 percent of the population, are actually less likely to be loyal to a financial institution because of its environmental activities.

"Obviously, 'greens' are most receptive to a green message," says Mark Schwanhausser, Javelin's research analyst/multi-channel financial services. "Moderates are persuadable, but a green message could actually backfire with a skeptic."

Interestingly, "greens" are more likely to be women (59.5 percent to 40.5 percent), whereas "skeptics" are more likely to be men (63.5 percent to 36.5 percent). "Moderates" skew just slightly to the male side. "Greens" have a higher satisfaction rate with their financial institutions (90 percent) vs. "skeptics" (72 percent) and even "moderates" (71 percent, though 22 percent are neutral). "Greens" tend to buy fewer financial products, such as retirement plans, mortgages and CDs than "moderates," but "skeptics" are less likely to own checking and savings accounts-and nearly one in five has no financial banking products at all.

Diane Franklin is a free-lance writer based in Florissant, Mo.

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