A busy professional finances a car at a dealership, thrilled to drive off the lot. Your credit union funds her loan, but she never realizes you’re involved. Weeks later, when the new car smell has faded, she receives a bulky envelope packed with fine print and forms. Overwhelmed, she sets it aside “for later,” but that later never comes. She doesn’t download your app, register for online banking, or set up automatic loan payments. Instead, she makes payments through another financial institution’s bill pay, barely remembering your credit union. Then, inevitably, life gets busy, she misses a payment, incurs a late fee, and her first direct interaction with your credit union is a collections call, hardly the foundation for a lasting relationship. By the time the loan is paid off, she’s gone entirely, another missed opportunity slipping quietly away.
The 1% conversion problem
Credit unions finance billions in indirect auto loans, yet fewer than 1% become fully engaged members. For every hundred dealership borrowers, perhaps one remains after the loan. Credit unions have grown loan portfolios this way, but relationship depth has declined. Studies reveal that indirect borrowers lower the credit union’s share of their financial “wallet” by three percentage points. A consumer’s primary financial institution (PFI) commands about 64% of their financial business, but a single indirect loan doesn’t secure primacy. Once the loan ends, so does the relationship.
Why so few conversions? Because trust isn’t built at the dealership. The auto financing moment is transactional. Borrowers sign forms quickly and toss $5 into a share account, but they feel no real connection. That opportunity vanishes if the credit union doesn’t immediately foster a genuine relationship. Credit unions are invisible precisely when visibility matters most.
First impressions matter: From paperwork to CPI nightmares
In our scenario, the first credit union interaction was delayed, followed by an overwhelming packet of forms. But it can get worse. For some indirect borrowers, the first direct communication is a Collateral Protection Insurance (CPI) notice, essentially stating, “We’ve added an expensive insurance charge because you didn’t provide proof of auto insurance.” Poor follow-up on documentation leads to confusion and resentment. Borrowers unfamiliar with your processes miss insurance notices, triggering CPI. Imagine the first call your borrower receives from your credit union isn’t a friendly check-in, but rather a call about CPI charges, or worse, a collections call after a missed payment. The result is immediate frustration, not loyalty.
Even credit union insiders admit CPI creates negative consumer perceptions, stemming from confusing notices and forced insurance due to communication breakdowns. When a borrower feels punished rather than welcomed, they are unlikely to open a checking account or move their savings. They feel trapped in a bureaucratic maze, and loyalty never forms.
Day-one engagement: What digital banks get right
Contrast this with digital-first banks like Chime. While many credit unions leave new members dangling, Chime treats Day One as sacred. Users receive welcome messages and ongoing, value-driven communications, referral bonuses, direct deposit setup, early wage access, and fee-free overdraft benefits within minutes of opening an account, building immediate trust.
Chime doesn’t leave new members guessing. The app precisely informs when the debit card will arrive and what to do. Transparent communication builds trust. New users immediately deposit funds or link accounts, becoming active from day one. Chime’s proactive onboarding transformed it into a powerhouse with 8.6 million users.
If credit unions want new members, particularly indirect borrowers, to engage, they must immediately offer clarity and value. Without early engagement, someone else will happily step in.
Using data to offer the right product at the right time
Initial engagement is critical, but it’s just the start. Credit unions have an advantage in turning a one-off loan into a full relationship. Unlike a fintech, you offer checking, savings, credit cards, auto loans, mortgages, and insurance. The indirect auto borrower needs more than just a car loan. Will she get these products from you or elsewhere?
The data you already have is key. When financing her car, you pulled her credit report. Perhaps she carries high-rate credit card debt, or her credit score has recently improved, or she has another auto loan balance you could refinance at a better rate. These moments provide opportunities to offer the right products at precisely the right time. Megabanks like Capital One or Chase routinely use such credit insights for targeted offers.
Your credit union can do this even better because members trust your institution to provide genuinely beneficial solutions. After six months of timely payments, offer a credit card to replace her higher-interest option or refinance her loan at a better rate with direct deposit setup. Trust isn’t built at the dealership but afterward, through proactive, helpful outreach.
Chime leverages onboarding data like external balances and direct deposits to drive future cross-sells effectively. Your credit union, with broader product suites, can similarly utilize spending patterns and credit profiles to present helpful, relevant pre-approved offers and options. Done right, this feels like genuine care rather than salesmanship.
From transaction to relationship: A better way forward
How do you stop losing 99 out of 100 indirect borrowers? It begins with acknowledging the initial scenario—a busy professional whose excitement long faded due to delayed, overwhelming paperwork. Immediate, intentional engagement is essential. Clearly outline her next steps with prompt digital onboarding to avoid confusion, CPI mishaps, and disengagement. Encourage instant online banking setup, app downloads, and quick electronic document submissions, such as insurance verification and loan agreements, reducing the friction that causes paperwork delays and frustration.
By proactively addressing her needs early, you prevent frustration and confusion down the road.
Continue nurturing engagement by consistently highlighting relevant member benefits, like insurance savings, better credit rates, or refinancing options, based on her financial profile. Invite her into your credit union community through social media or member portals. Follow up personally to show genuine interest and support.
The minimal effort of targeted, intentional engagement compared to the lifetime value of a member underscores the importance of treating indirect borrowers as valued partners from day one. By leveraging intentional interactions and strategic data insights, you transform transactional encounters into lasting, trusted relationships.
Ready to rewrite your credit union’s onboarding story?
Swaystack helps credit unions fix first impressions and transform indirect borrowers into lifelong members. Discover a better way forward.