The tables and graphs contained with the Market Share Guide will help decision-makers assess where their current core provider — or others they might be considering — stands in the industry and among its peers. That includes market share data by provider and platform as well as Platform Profiles that dig deep into aggregate overviews of select providers accompanied by minimum, average, and maximum financial performance metrics for credit unions on their respective cores.

Staying current with financial technology is essential to providing the kinds of services members demand. Choosing and converting platforms can be arduous, and making the most of the features and capabilities of a current system or other alternatives is a continuous process. This year’s guide includes insight from industry leaders on those topics and more.

Symitar Rebrands While The Giants Remain Just That

Perhaps the biggest news in core processing in the past year is the August announcement that Jack Henry & Associates has consolidated its three industry brands — Jack Henry Banking, ProfitStars, and Symitar — into one brand: Jack Henry.

The Episys name is being dropped and the credit union platform will simply be known as Symitar. Brand names aside, it remains a major player, combining with Fiserv to claim 39.4% of the credit union market by number of clients.

Fiserv actually lost 51 basis points of market share from 2021 to 2022 but remains the market leader, with a share of 28.9%. At this writing, 1,432 of the 4,957 cooperatives represented are on Fiserv platforms.

Jack Henry grew its share by 15 basis points over the same period, but its 522 clients include 185 institutions with more than $1 billion in assets. That’s eight more than last year. Fiserv, meanwhile, added two and now has 158 that top the $1 billion mark. In the $250 million to $1 billion segment, Jack Henry holds a close second at 211 to Fiserv’s 228 credit unions. Fiserv also leads the market in clients in every other asset band.

The Momentum Leader Among A Shrinking Market

Corelation reported the most significant client growth in 2022, adding 23 new users to its KeyStone platform. That pushed the company’s roster to 145 credit unions and increased its market share by 55 basis points to 2.9%.

There were only four new credit unions joining the movement in 2022, and the total number of active shops fell by 179 during the past 12 months to dip below the 5,000 mark at 4,957 as of June 30, 2022. Fiserv was the core processor of record for 25.7% of those 183 credit unions lost to mergers or closures in the past year. But the global financial services technology giant still has 1,432 credit unions on its cores, by far the most of any individual firm.

Eight out of the 29 cores with client lists totaling at least $400 million in assets gained clients year over year; 16 lost clients, and five maintained their number of users.

The Platform Players — The Episys Name Leaves A Leading Legacy

The Episys name is no more, but in 2022 it remained the leading single platform, with 689 credit unions across three providers — Jack Henry (522), Member Driven Technologies (99), and Synergent (68). In total, 13.9% of credit unions in the country use that system.

Meanwhile, Platinum, FedComp’s platform, came in second, with 468 total credit unions and a 9.4% market share. That marks a decline of 37 clients during the year as the presence of very small credit unions — this venerable company’s market — continues to fade. There also are 19 fewer users of Finastra’s UltraData platform.

On the plus side, the CU*BASE platform gained 35 new users, the most for any single platform over the year.

Credit Union Core Engagement In A Dynamic Market

Although the number of credit unions continues its decades-long decline, some key measures of the industry’s health just keep hitting new highs. Shares, for instance, increased $140 billion, or 8.1%, from $1.7 trillion as of June 30, 2021, to nearly $1.9 trillion as of June 30, 2022. Loans were up $194.5 billion (16.1% ) from $1.2 trillion to $1.4 trillion during the same period.

And perhaps most importantly, the number of members increased by 4.2% from June 30, 2021, to June 30, 2022, adding 5.4 million in a single year to reach 133.9 million. The industry must be doing something right as it sticks to its core values while responding to new fintech imperatives.

Indeed, the explosion of digital and mobile banking and payments hasn’t changed an essential dynamic: the core platform’s essential role as the central repository and transactor of data needed to meet daily banking needs.

That platform also is typically a credit union’s largest expense after personnel and physical space. In the Market Share Guide: Credit Union Core Processors, credit union leaders can find data-driven information and insights they need to assess their current provider, consider the competition, or both.

To learn more about the core provider landscape, contact Callahan & Associates and ask how you can gain access to this year’s Market Share Guide: Credit Union Core Processors.

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• Credit union branch numbers are declining even as membership in the movement grows.

• To accommodate the growing volume of members, credit unions have increased their digital capabilities and deployed flexible staffing models.

The number of branches operated by U.S. credit unions continues to decline, but surviving locations are evolving to encompass all aspects of retail delivery.

There were 18,135 credit union branches operating in the United States as of June 30, 2018, according to data from Callahan & Associates. That’s 646 fewer than one year earlier, which translates to an annual decline of 3.4%. During the same period, banks increased their overall branch count by 0.3%, or 296 branches, bringing their total count to 87,971 as of June 30. Banks report branch-level data only in the second quarter of the year. Callahan analysts use credit union branch data from the same quarter for uniform comparative analysis.

Along with branch count, the total number of credit unions in the United States has also dropped. The 5,596 operational credit unions as of June 30, 2018, represented an annual decrease of 3.8%. Total membership, on the other hand, is on the rise. It increased 4.3% to 115.4 million. The average number of members per credit union consequently rose 8.0% from 5,891 in the second quarter of 2017 to 6,362 in the second quarter of 2018. To accommodate the growing volume of members, credit unions have increased their digital capabilities and deployed flexible staffing models.

Branching Efficiency

Credit unions nationwide are lowering overhead expenses by reducing branch counts and pushing members toward online and mobile channels. In the branch, they’re encouraging members to use digital channels such as in-branch ITMs or tablet-equipped kiosks for routine transactions and applying a universal employee model to encourage more productive face-to-face interactions.

The efficiency ratio, including the provision for loan loss, at U.S. credit unions was 78.1% as of March 31, 2019. That’s a drop of 2.6 percentage points since the first quarter of 2014. The efficiency ratio measures how much a credit union spends to earn $1, so lower numbers are generally more desirable. Additionally, credit unions generated $3.24 per dollar spent on salaries and benefits in the first quarter of 2019. That’s up 3.2% in the past year and 10.2% in the past five, a potential sign the reimagined models are creating more-productive employees.

Annualized operating expenses as of March 31 increased 7.2% year-over-year, from $43.6 billion to $46.8 billion. However, thanks in part to a rising rate environment, interest income grew 16.5%, from $51.3 billion in the first quarter of 2018 to $59.8 billion one year later, eliminating the gap between the operating expense ratio and the net interest margin.

From the first quarter of 2018 to the first quarter of 2019, the operating expense ratio increased 3 basis points while the net interest margin rose 9. As of March 2019, both ratios were equal at 3.12%. Just five years ago, the operating expense ratio was 24 basis points higher than the net interest margin. Current performance signifies credit unions are covering operating costs through the margin they collect from interest-earning assets. Accordingly, the average return on assets (ROA) increased 5 basis points year-over-year to 0.95%.

$ REVENUE PER $ SALARY AND BENEFITS

FOR U.S. CREDIT UNIONS | DATA AS OF 03.31.19

Callahan & Associates | CreditUnions.com

The amount of revenue generated per dollar spent on salary and benefits among America’s credit unions has risen 10.2% in the past five years.

EFFICIENCY RATIO (INCL. PLL)

FOR U.S. CREDIT UNIONS | DATA AS OF 03.31.19

Callahan & Associates | CreditUnions.com

The efficiency ratio, which represents how much it costs a credit union to generate $1 in revenue, has dropped 2.6 percentage points in five years to 78.1% as of March 31, 2019. This is due largely to retail delivery, including branching, becoming more efficient.

NET INTEREST MARGIN VS. OPERATING EXPENSE RATIO

FOR U.S. CREDIT UNIONS | DATA AS OF 03.31.19

Callahan & Associates | CreditUnions.com

The operating expense ratio and net interest margin increased 3 and 9 basis points, respectively, both reaching 3.12% as of March 31, 2019. In the first quarter of 2014, the operating expense ratio exceeded the net interest margin by 24 basis points.

DELIVERY CHANNEL DEPLOYMENT & ONLINE INTERACTION

FOR U.S. CREDIT UNIONS | DATA AS OF 03.31.19

Callahan & Associates | CreditUnions.com

Larger credit unions, which can take advantage of economies of scale, are more likely to offer a variety of electronic services.

MEMBERSHIP AND ANNUAL GROWTH

FOR U.S. CREDIT UNIONS | DATA AS OF 03.31.19

Callahan & Associates | CreditUnions.com

Credit union membership in the United States has grown 20.5% in the past five years. As of March 31, credit unions reported 118.6 million members. That’s 36.1% of the total U.S. population, which was 328.2 million as of Jan. 1, 2019, according to the U.S. Census Bureau.

AVERAGE MEMBER RELATIONSHIP

FOR U.S. CREDIT UNIONS | DATA AS OF 03.31.19

Callahan & Associates | CreditUnions.com

The average member relationship among U.S. credit unions has increased 19.9% since 2014. It exceeded $19,000 in the first quarter of 2019.

PENETRATION RATES

FOR U.S. CREDIT UNIONS | DATA AS OF 03.31.19

Callahan & Associates | CreditUnions.com

Member penetration in credit cards, auto loans, and checking accounts has grown strongly over the past five years; the proportion of members with a mortgage has held steady.

Adding Members

Total credit union membership approached 120 million in the first quarter of 2019. From March 31, 2018, to March 31, 2019, credit unions added approximately 5 million new members, a growth rate five times that of the U.S. population (0.62% for 2017-2018) and the fastest recorded since 2002.

Despite the declining number of physical branch locations, cooperative membership increased 4.0% year-over-year. But credit unions haven’t simply added members, they’ve deepened relationships. The average member relationship reached $19,156 in the first quarter of 2019, a $570 increase in the past year. Broken out, the average loan balance per member increased 5.0% year-over-year to $8,400; the average share balance per member increased 1.6% annually to $10,756.

Product penetration also is increasing across the board. Most notably, share draft penetration has risen 5.1 percentage points in the past five years to 58.1% as of March 31, 2019. Credit card, auto, and real estate penetration rates are up 1.5, 4.5, and 0.1 percentage points, respectively, from five years ago.

Market share metrics at U.S. credit unions have improved, too, in all major loan products. Cooperatives financed 18.6% of auto loans nationwide as of March 31, 2019. That’s up 3.6 percentage points from five years ago. Credit unions funded 8.0% of all mortgages in the first quarter. That’s up 1.6 percentage points from 2014. And, credit card market share was 6.1% as of the first quarter, up 90 basis points over the same five-year period.

Larger credit unions, employing economies of scale, often offer a more diverse range of electronic delivery channels than their smaller counterparts. For example, fewer than 2.0% of the 1,403 credit unions with less than $10 million in assets offered remote deposit capture and only 9.6% offered mobile banking as of March 31, 2019. Alternatively, among credit unions with more than $1 billion in assets, 97.2% offered remote deposit capture and 99.1% offered mobile payments. As the table displays, these percentages are heavily correlated with the asset range of credit unions.

It is almost impossible to maintain a physical presence in every location a member or potential member might live. However, technology enables credit unions to offer a supplementary, centralized virtual support model that accommodates the changing needs of members while offering consistent and reliable service.

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In addition to attracting members, credit unions have expanded their relationships with members old and new. The average member relationship is on track to hit $19,147, a $561 increase over the first quarter of 2019. Loan balances per member are projected to increase 5.0% year-over-year to $8,395, whereas the average share balance per member on track to hit $10,752 represents a more tempered annual growth of 1.6%.

AVERAGE MEMBER RELATIONSHIP

FOR U.S. CREDIT UNIONS | DATA AS OF 03.31.19

Callahan & Associates | CreditUnions.com

Analysts from Callahan & Associates project the average member relationship at U.S. credit unions increased $561 over the first quarter of 2018.

Members are diversifying the way they interact with their credit unions, which is evident in improvements in credit card, share draft, and auto loan penetration in the first quarter. According to early results, 58.1% of credit union members had a share draft account as of March 31, 2019. That’s up 82 basis points year-over-year. Share draft penetration, the backbone of a member’s relationship with the credit union, hit an all-time high of 58.1% 6.4 percentage points higher than five years ago.

PENETRATION RATES

FOR U.S. CREDIT UNIONS | DATA AS OF 03.31.19

Callahan & Associates | CreditUnions.com

Credit card, real estate, share draft and auto penetration are all on track to increase year-over-year.

Credit card penetration is also on the rise, with Callahan analysts projecting an annual increase of 16 basis points to 17.5%. Elsewhere in the loan portfolio, Callahan analysts expect auto penetration to increase 58 basis points to 21.2%.

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Analysts at Callahan attribute a full 98.9% of this increase to interest income. Loan income and investment income rose 13.0% and 24.2%, respectively, from this time last year. Operating expenses grew at a slower rate of 7.4% to $11.7 billion. This dynamic fueled year-over-year net income growth of 11.1%, with aggregate net income for the industry totaling $3.2 billion.

Larger bottom lines allow credit unions to use excess earnings to return value to members in the form of immediate savings, dividends, and improved service offerings.

The Federal Open Market Committee (FOMC) raised its benchmark interest rate four times in 2018. As a result, funding costs have moved higher even into the first quarter of 2019. The average cost of funds rose 25 basis points year-over-year to 0.93%. As of March 31, credit unions have paid $2.7 billion in member dividends, an increase of 52.4% from the same time last year.

YIELD ANALYSIS

FOR U.S. CREDIT UNIONS | DATA AS OF 03.31.19

Callahan & Associates | CreditUnions.com

Four rate bumps in 2018 by the Federal Reserve of its benchmark funds rate has resulted in an annual increase in yield on investments, cost of funds, and yield on loans at U.S. credit unions.

Total investment balances increased 1.6% year-over-year. The share of the investment portfolio held by products maturing within a year increased 46 basis points from the first quarter of 2018.Short-term rates growing faster than long-term rates has caused an increase in average investment yields. Up 55 basis points year-over-year, yield on investments reached 2.34% as of the first quarter.

Yield on loans increased 17 basis points annually to 4.76% as of March 31. The relatively large portion of the portfolio held in consumer loans has allowed credit unions to gradually reprice at higher rates. In the near-term, these yields will likely continue to move in lockstep as the FOMC conducts monetary policy through the management of short-term interest rates.

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The efficiency ratio helps credit unions monitor the relationship between operating revenue and overhead expenses by providing a measure of how much an institution spends to earn $1 of revenue.

As of Dec. 31, 2018, U.S. credit unions reported an average efficiency ratio (excluding provision for loan losses) of 69.9%. That’s down 169 basis points from one year prior.

EFFICIENCY RATIO (EXCLUDING PROVISION FOR LOAN LOSSES)

FOR U.S. CREDIT UNIONS | DATA AS OF 12.31.18

© Callahan & Associates | CreditUnions.com

The 2018 year-end efficiency ratio of 69.9% is the lowest fourth quarter level credit unions have reported since 2009, when it was 69.7%.

Total income (less interest expense) increased 10.1% year-over-year, outpacing the 8.1% growth in operating expenses credit unions reported at year-end. Underlying the double-digit growth in income is a strong annual growth in net interest income, other operating income, and fee income which increased 12.0%, 13.5%, and 4.9%, respectively.

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A lower efficiency ratio indicates a credit union is dedicating a smaller percentage of income to overhead expenses, whereas a higher efficiency ratio suggests the opposite. There are many factors that contribute to a declining efficiency ratio, the first of which is operating expense management.

The efficiency ratio divides operating expenses by total income and subtracts interest expense. Long-term expenses, such as office rental and loan servicing fees, can negatively impact the efficiency ratio. Short-term expenses, such as travel and conference expenses and miscellaneous operating expenses, can also skew the ratio. The efficiency ratio extends its usefulness beyond what is typically measured in the standard operating expense ratio by taking into account a credit union’s primary non-interest income components fee and other operating income. The result is a metric that provides insight into an institution’s operational income and expense structure.

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• Credit union consolidation has been accompanied by core processor consolidation but there are still dozens of choices.

• Core processors Fiserv and Symitar continue to dominate among the largest credit unions while FedComp is still the leader in client count among the movement’s smallest members.

Choosing the right core processor is critical to the success of credit unions large and small, whether they choose a single provider for all their processing and delivery needs, or select multiple vendors to fit different needs.

And just as there’s a plethora of providers, there are multiple options to choose from among the playing field of core providers themselves. The core system is typically the credit union’s largest expenditure behind only people, and it’s important to play the field.

Here are three best practices in that regard:

1. Analyze core processors that have clients similar to your credit union; check for gains made in relevant performance categories.
2. Reach out to peers using a core in which you are interested to solicit an unbiased testimonial of the user experience.
3. Develop core conversion guidelines, vendor management policies, and vendor risk-rating worksheets to make a smart decision and help ensure a smooth transition.

There’s been significant consolidation in the core processor space over the years, but there are still multiple choices. In fact, there are 29 different core processors offering 43 different platforms and that’s just among competitors serving at least $400 million in aggregated assets.

That said, there are clear leaders in the core provider marketplace. Fiserv and Symitar had a combined market share of 43.0% as of mid-2018. Fiserv alone served 31.7% of the credit union industry.

With 131 clients of more than $1 billion in assets running on the Episys solution, Symitar has the edge in large credit unions. Across the industry, Episys is the most commonly used platform. It’s 655 credit union total includes credit unions using third-party Symitar providers Member Driven Technologies (90) and Synergent (65).

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Next up is small credit union specialist FedComp, which serves 597 credit unions.

But in sheer number of clients, Fiserv dominates, with 1,775 of the nation’s 5,551 credit unions running on the fintech giant’s various cores as of mid-year 2018. Two of those Portico and CUSA were third and fourth on the list, at 328 and 290 credit unions, respectively.

The distribution of client adoption among providers varies through the asset bands tracked by Callahan & Associates. For example, in the $50 million to $250 million group, significant market share remains in the hands of CU*Answers (92), CMC-FLEX (90) and Finastra (70).

As size begins to increase, Finastra owner of the UltraData platform gains more traction, moving into third behind Fiserv and Symitar with 40 credit union clients between $250 million and $1 billion in assets.

It’s also interesting to look at year-over-year net gains in client numbers. There were 10 that showed a net positive from the second quarter of 2017 to 2018. Most of the gains were small, with Corelationclaiming the top spot there with a net gain of 6.

Properly choosing and effectively partnering with the right core processor can allow credit unions to respond to a changing marketplace with product and service enhancements, all while controlling expenses.

That’s true regardless of size, as shown in the table that compares performance by asset size.

Callahan’s annual Supplier Market Share Guide: Credit Union Core Processors offers an in-depth examination of the core processor market. Download the 2019 edition today.

Click the tabs below to view graphs.

TOP PROVIDERS BY NUMBER OF CLIENTS <$50M

TOP PROVIDERS BY NUMBER OF CLIENTS <$50M

FOR U.S. CREDIT UNIONS | DATA AS OF 06.30.18

© Callahan & Associates | CreditUnions.com

Fiserv had 823 core processing clients of less than $50 million in assets in the second quarter of 2018. That’s from a client count of 1,775 credit unions. FedComp, meanwhile, had 596 in that asset group, all but one of its total client count in the second quarter of 2018.

TOP PROVIDERS BY NUMBER OF CLIENTS $50M-$250M

TOP PROVIDERS BY NUMBER OF CLIENTS $50M-$250M

FOR U.S. CREDIT UNIONS | DATA AS OF 06.30.18

© Callahan & Associates | CreditUnions.com

Fiserv claimed as core clients 595 of the 1,436 credit unions in the $50 million to $250 million asset class as of mid-2018. Symitar was a distant second at 166.

TOP PROVIDERS BY NUMBER OF CLIENTS $250M-$1B

TOP PROVIDERS BY NUMBER OF CLIENTS $250M-$1B

FOR U.S. CREDIT UNIONS | DATA AS OF 06.30.18

© Callahan & Associates | CreditUnions.com

There were 600 credit unions of $250 million to $1 billion in assets as of June 30, 2018. Fiserv and Symitar together, at 234 and 210, respectively, accounted for approximately 75% of the market share for that group. Finastra’s UltraData platform claimed 40.

TOP PROVIDERS BY NUMBER OF CLIENTS >$1B

TOP PROVIDERS BY NUMBER OF CLIENTS >$1B

FOR U.S. CREDIT UNIONS | DATA AS OF 06.30.18

© Callahan & Associates | CreditUnions.com

Symitar had the most billion-dollar credit union core clients, at 131, with Fiserv close behind at 123. Together, that’s 83.3% of the market share for the big credit unions.

MARKET SHARE FOR TOP 20 CORE PROVIDERS BY NUMBER OF CREDIT UNION

MARKET SHARE FOR TOP 20 CORE PROVIDERS BY NUMBER OF CREDIT UNION

FOR U.S. CREDIT UNIONS | DATA AS OF 06.30.18

© Callahan & Associates | CreditUnions.com

Fiserv’s market share as measured by client count dropped slightly from 31.99% to 31.72% in 2018. Symitar’s rose slightly from 10.83% to 11.28%. Small credit union specialist FedComp remained virtually unchanged, moving from 10.67% at mid-2017 to 10.64% a year later.

CORE PROCESSOR CLIENT PERFORMANCE COMPARISON BY ASSETS

CORE PROCESSOR CLIENT PERFORMANCE COMPARISON BY ASSETS

FOR U.S. CREDIT UNIONS | DATA AS OF 06.30.18

© Callahan & Associates | CreditUnions.com

The 211 credit unions running on FIS core platforms average $863.2 million in assets and 2.85% in operating expenses/average assets, which is considered a key efficiency measure. Meanwhile, the 597 credit unions on the FedComp platform average $5.1 million in size and have a similar opex ratio. Click here to view larger.

PLATFORM MARKET SHARE: TOP 25 IN NUMBER OF CLIENTS

PLATFORM MARKET SHARE: TOP 25 IN NUMBER OF CLIENTS

FOR U.S. CREDIT UNIONS | DATA AS OF 06.30.18

© Callahan & Associates | CreditUnions.com

For the past two years, more credit unions have run on Symitar Episys than any other platform.

This article initially appeared in Credit Union Times in February 2019.

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Notably, as the loan portfolio has grown, delinquency and charge-offs have decreased. Analysts at Callahan & Associates project overall delinquency declined 10 basis points across 2018 to 0.71% as of Dec. 31. This is the lowest fourth quarter rate since 2006, when credit unions reported a rate of 0.64%.

See how asset quality has improved over the past 10 years.

After hitting 1.78% in fourth quarter 2009 as a consequence of the Great Recession, asset quality for the industry has improved substantially in the past decade. Net charge-offs and delinquency are down 29 and 58 basis points, respectively, to 0.55% and 0.71%.

ANNUAL CHANGE IN DELINQUENCY

FOR U.S. CREDIT UNIONS | DATA AS OF 12.31.18

© Callahan & Associates | CreditUnions.com

Asset quality improved across every major loan product, with the exception of credit cards.

Credit unions recorded improved asset quality in every major segment of the loan portfolio aside from credit cards. From the fourth quarter of 2016 to the fourth quarter of 2017, credit card delinquency increased 15 basis points. That annual growth was down to 6 basis points as of the fourth quarter of 2018, when credit card delinquency was 1.35%.

Credit card balances at credit unions swelled to $62.2 billion at year-end, with the average credit card loan balance at $3,023. Credit card utilization was down 140 basis points over the past five years to 31.8%. That decrease can be the result of credit unions extending larger lines of credit or members spending less. From the fourth quarter 2013 to the fourth quarter 2018, unfunded credit card commitments increased 54.1% whereas the actual dollar amount of outstanding balances increased by 44.6%, demonstrating that limit expansion is outpacing draws.

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Auto loans accounted for 35.1% of the total loan portfolio at credit unions in the fourth quarter of 2018. Behind first mortgages, autos represented the second-largest segment of lending. Growth slowed for all segments of the loan portfolio apart from other real estate. At 10.3%, auto loans were the only segment for which credit unions recorded double-digit growth. New auto loan growth of 11.9% surpassed used auto loan growth of 9.3%. Five years ago, credit unions captured 15.0% of the auto finance market. Today, credit unions fund one out of every five auto loans nationwide 20.5% of the market according to Experian Automotive.

In a rising rate environment, auto loans are attractive. According to the DMV, auto loan terms range from 48 months (four years) to upwards of 84 months (seven years), whereas real estate loans have terms of up to 30 years. The shorter loan duration of auto loans allows credit unions to more actively manage interest rate risk.

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