Think And Act Boldly

Changing market dynamics mean that credit unions have to redouble their efforts to secure their position as members’ go-to financial provider.

Credit unions started 2013 on a strong note. The pace of growth picked up from 2012, a year that saw a record number of new member owners and an all-time high in lending activity.

The results come as the U.S. economic outlook also continues to improve. Over 900,000 jobs have been added through the first five months of the year. Stocks are near all-time highs. Home prices are rising at a double-digit pace in the latest Case-Shiller Index. These and other trends are helping to push consumer confidence to a five-year high, and consumer credit is expanding as a result.

With the economy returning to a more normal state, the environment is changing for credit unions. In the first two years of the downturn, there was a flight to quality by consumers that resulted not only in double-digit deposit growth but record loan originations in credit unions. In 2010 and 2011, consumers became more vocal in their push for a financial system that would act more in their interest rather than those of the largest institutions. The Occupy movement and Bank Transfer Day in November 2011 were expressions of this push, which helped provide a lift in credit union membership that carried into 2012.

As 2013 begins, capitalism has reasserted itself. The U.S. economy, despite the cutbacks in government spending due to the sequester, is the strongest in the world. Companies are reporting strong profits and banks recorded their highest quarterly earnings ever in the first quarter. Competition is back in lending, particularly for consumers with solid credit profiles.

The changing market dynamics mean that credit unions have to redouble their efforts to secure their position as members go-to financial provider. An improving economy will lead to a wind down of the Fed’s expansionary policies and interest rates will begin to rise. When this occurs, will it become a rate game that credit unions play versus their competitors, or will they be able to continue to convey a unique, cooperative value proposition that goes beyond rates and fees?

Credit unions countercyclical design played out well during the downturn. Now it is time to establish their role in an emerging growth environment. Will the cooperative financial services model continue to demonstrate its difference when times are good, or do cooperatives exist just to respond in times of crisis?

Certainly credit unions have played a valuable role in members lives throughout their over 100-year history. But they have never before had such a visible market presence, and with success comes new challenges. Can they continue their momentum in 2013 and beyond?

Acting Boldly as the Environment Changes

Credit unions have continued to steadily move forward since the Great Recession began. The ongoing focus on serving members has resulted in record results in a number of measures. However, the uncertain economic and regulatory environment kept some from taking on major initiatives while others needed to focus on buttressing their internal operations to manage through the challenges.

Although uncertainties remain regarding the interest rate environment and the effect of Washington’s inaction on the federal budget on the U.S. economy, both national and local economies are on stronger footing than they have been in the past five years. As a result, credit unions are looking to invest in people and technology at levels unseen in recent years.

The challenge for credit unions is to shift from managing through near-term uncertainties to planning for the critical long-term investments that are needed to enhance member value. While competition is returning, credit unions have come through the downturn in a stronger position than ever. The ongoing commitment by credit unions to the communities they serve shone through as others pulled back. As a result, opportunities are available to credit unions that weren’t there five years ago.

Realizing opportunities to affect the well-being of their members in new ways will likely involve not only individual initiatives but also partnerships that leverage the strength of the industry and the communities that credit unions serve. The opportunity is there. So is the momentum. It is time for credit unions to think and act boldly.

January 11, 2017

Keep Reading

View all posts in:
More on:
Scroll to Top