You probably know the K-Shaped Economy. We already wrote about how it affects your messaging and your leadership development. But there’s a new descriptive economic model surfacing…the E-Shaped Economy. And just like the K-Shaped Economy, it also impacts credit union strategic planning and branding.
But what is the E-Shaped Economy?
Rather than splitting the economy into two diverging lines (forming a “K” on a graph), the E-Shaped Economy shows the economy as three lines (forming an “E” on a graph). Each line represents a different financial reality for those within it.
The Three Arms of the “E”
Here’s what each arm of the “E” represents:
- The Upper Arm – These are the wealthiest individuals. The top earners and top spenders. According to a CNBC report, this 20% of folks is responsible for 60% of the consumer spending. Persistent affordability issues do not bother this group much. They have the resources to continue spending without fear.
- The Middle Arm – The best way to describe this group is middle class. They are still spending but at a significantly reduced rate. They are cutting prior discretionary spending, trading down and discount shopping to save money. They have enough money for a decent lifestyle but not enough to spend fearlessly. Economic instability makes them anxious.
- The Lower Arm – These people are those who not only earn less but also dive into debt to survive. Data from the Federal Reserve shows 59% of those earning from $25,000 to $49,999 a year carried a credit card balance – higher than other groups. 19% of that earning bracket also used Buy Now, Pay Later (and 26% of those BNPL users paid late). They are in the most financially risky position of all the arms of the “E.”
Credit Union Strategic Planning for the E-Shaped Economy
Tackling the E-Shaped Economy is going to take some clever credit union strategic planning. Growing your business while continuing to serve those most in need is not an easy problem to weave through. But let’s give it a try…
- Top spenders can fuel growth if you make it worth their time. Charge a fee for premium services or cards that offer special perks to these folks. See AmEx’s Platinum Card as an example.
- The right messaging will be key for the anxious middle class. Highlight stability. Say “everyone else is adding fees but not us.” Give them a reason to get a loan with you when they do have to spend on cars, home improvements and more. Play into their lifestyle changes. “Trading down to a used car? We’ll help you do it easily.”
- The debt-ridden lower arm is at biggest risk of credit trouble. Payday lenders prey on these struggling individuals. Can you offer credit card consolidation and win business? Are there opportunities for you to give people a chance and build long-term relationships? Of course, manage risk and control delinquencies. But remember…risks are sometimes veiled opportunities.
Survive the Alphabet Economy
Whether it’s a K-Shaped Economy, E-Shaped Economy or whatever letter they choose next…you need to survive it. We’ll help you form a strategy and brand that does. Book a free consultation now.
