Credit unions head into 2020 with an enviable profile as both financial performance and member engagement measures continue to reach new heights. Third quarter results show member loan balances nearing $1.1 trillion and share balances topping $1.3 trillion. Asset quality remains sound at a time when the loan-to-share ratio exceeds 84%. Return on assets is approaching 1% for the first time in more than 15 years, and the net worth ratio reached 11.4% at the end of the third quarter.
The average member relationship as measured by loan and share balances is higher than $19,000 for the first time. Member product usage is growing, too. Credit union membership, which has grown by 21% in the past five years, neared 121 million in the third quarter of 2019. The percentage of members using a credit union credit card is approaching 18%, and more than one in five members has a car loan with their credit union.
Notably, nearly 59% of members also have a checking account with their credit union a telling indicator that member relationships are strong. The checking account often indicates which organization is a consumer’s primary financial institution. That measure for credit unions has risen by more than 13 percentage points in the past decade, during a time of unprecedented growth in membership.
The movement, however, is not without its challenges as a new year begins. Credit unions national share in auto and mortgage lending, the two largest components of the credit union loan portfolio, has fallen over the past year. Perhaps those performances are blips on the radar, as credit unions have posted increasing market share in both products over the past decade, but they are worth tracking.
More concerning is the report from the American Customer Satisfaction Index (ACSI) that credit unions have fallen below banks in overall customer satisfaction for the first time ever. The gap between credit union and banks has narrowed considerably in the past five years as credit union satisfaction trended down while bank satisfaction trended up. Of the 12 categories that ACSI measures, 11 declined over the past year for credit unions, whereas only one held steady.
Key Questions For Credit Unions
The current environment provides ample opportunity for credit unions, but competition is intensifying, as the ACSI survey reflects. Competition is coming not only from traditional providers but also from fintechs that are playing by different rules and re-defining how consumers think about financial services. How are credit unions navigating this landscape?
Callahan & Associates facilitates dozens of credit union planning sessions and engages with hundreds of industry executives through its Executive Roundtables every year. These engagements shed light on the priorities of leadership teams across the country. In planning for 2020, a common refrain emerged, with one credit union summarizing it as the ‘3 Ts: Technology, Talent, and Telling Our Story.
How do we make it easier to do business with us?
Consumer service expectations continue to rise. Amazon, Apple, Starbucks, and others have raised the bar for how consumers define great service. The ACSI survey results underscore the need for credit unions to continue to invest in their service delivery. Digital First is a mantra several credit unions are pursuing. This does not mean branches are going away, but the mobile channel is increasingly comprising the bulk of member transactions. Making the mobile interface intuitive, insightful, and effective in helping members accomplish what they need to is paramount.
Ensuring consistency across call centers, branches, online, and mobile also is critical, even while credit unions continue to evolve each of these channels. Call centers are incorporating artificial intelligence to more efficiently respond to frequent member questions. Branches are undergoing significant changes that include smaller footprints and layouts designed to foster discussion, not just deposits. The goal of these investments is to reduce friction in the member’s experience while driving deeper engagement.
In planning for 2020, a common refrain emerged: Technology, Talent, and Telling Our Story.
How do we attract, develop, and retain the talent we need to compete?
CEO’s often say, our people are our most important asset. In today’s market, that is increasingly true.
Credit unions need strategic leadership at the senior level, new specialist roles in areas such as business intelligence, and member-facing staff that can interact with members while identifying opportunities for the credit union to provide greater value. With record low unemployment, finding talent is a challenge. In some markets, it means paying more to draw talent away from other organizations. In other markets, the right talent is simply not available and credit unions are adapting their operations to include remote staff.
Once talent is in place, the next challenge is retention. Credit unions are developing programs that equip team members with the skills needed to advance their career. These programs often target all levels of the organization, not just management. Younger workers are demanding more from their employers, and credit unions must be prepared to meet those needs or risk losing good employees.
Are we clear about who we are? How do we tell our story more effectively?
The last topic is the most important. The most successful decade in credit union history is coming to an end, and this success has prompted many leaders to think bigger and more deliberately about the impact their organizations can have. As a result, they are refocusing on purpose as the filter for how they do business. They are redefining what success means for their organization. This goes beyond financial results to the very ways the credit union impacts the lives of its members and the communities it serves.
Gaining clarity around purpose is challenging but energizing for credit unions and their teams. Once the organization has mission clarity, it must live it every day. It also must continually communicate this vision to teams, members, and communities. This communication extends beyond marketing and into the priorities the credit union pursues and the actions it takes. Most credit unions have a mission statement, but does that statement shape behavior? Do credit unions demonstrate their mission in an authentic way that resonates with members and potential members?
Investing For 2020 And Beyond
Although other topics did regularly emerge during Callahan’s planning work with credit unions, these three elements were a part of almost every discussion. Of course, every credit union approaches technology, talent, and story telling in their own way based on their resources, operations, and membership. Many paths lead to success, and what works for one might not work for another, but this is a strength of the cooperative model.
The diverse and creative ways in which credit unions address these challenges will become more apparent in 2020 and beyond as organizations execute their plans. The credit union approach to meeting consumer financial needs has attracted millions of new members over the past decade. There are opportunities ahead that no one even considered 10 years ago. To build on today’s successes, credit unions must continue to ask the right questions, listen to member needs, and invest in member value.
But where to start? In the following pages, Callahan’s analysts have collected 27 charts and graphs that break down macroeconomic and industry-specific financial trends. This offers a perspective on where the movement stands today; use these insights to prepare your organization for the hard questions coming tomorrow.
This article appeared originally in Credit Union Strategy & Performance. Read More Today.