The 2025 Innovation Series from CreditUnions.com and Callahan & Associates is underway. Every year since 2018, this series has offered a select group of suppliers 10 minutes each to impress an audience of credit union decision-makers. It’s simple: Each vendor pitches its offerings and attendees vote on their favorites.

The Innovation Series was a hit from the get-go and continues to grow in popularity. This year’s focus areas include financial wellness, member experience, lending, digital, analytics, and member engagement.

Read on for more from this year’s lending finalists Exagens — MoneySparxs, Prizeout, Pulsate, and Spiral. Plus, make sure to join us for the Innovations In Member Engagement webinar. Register today!

Exagens – MoneySparxs

Describe your innovation.

Behavioral Banking enables emotionally significant relationships to be created and nurtured, cost-effectively, individually, and at scale, with the growing pool of members who now rarely interact with your credit union in-person. It makes possible the benefits of customer engagement, loyalty, and financial wellness in an era when most interactions and transactions occur through digital channels. MoneySparxs, exagens’ latest Behavioral Banking solution, fuses behavioral economics, neuroscience, advanced data analytics, psychology, and AI to understand the financial decisions of individuals, and then effectively engage and influence them to make smarter financial decisions. It adds incredible new value to your existing data and enriches it further. Behavioral Banking is needed because people are constantly being swayed by cognitive biases, emotions and social factors, and therefore rarely make rational decisions when it comes to their finances. Behavioral Banking solutions enable credit unions to grow with their members by catalyzing them to save, spend, invest, and borrow wiser both through their digital channels as well as in-branch.

What opportunity or challenge does it address?

• The Challenge: The ease and convenience of digital banking has yielded an explosion in the frequency of banking interactions and significant cost savings for financial institutions. It has also fractured financial relationships and their benefits. People who primarily bank through digital channels report being significantly less engaged with their Financial Institution, resulting in lower share of wallet, reduced loyalty, decreased customer satisfaction, and an adverse impact on financial health.
• The Opportunity: This disconnect provides credit unions with a unique opportunity to differentiate and grow by leveraging their historical strengths to differentiate their member experience and compete with big banks who otherwise far outspend them on technology. Exagens MoneySparxs enables credit unions to elevate their digital and in-branch experiences and move beyond providers of mostly commodity products and services to trusted and valued financial partners in the lives of their members.
• The results: Credit unions utilizing Behavioral Banking have benefited from increased deposits, expanded wallet share, higher card utilization, membership growth, and great loyalty, all while helping improve the financial lives of their members.

How does it increase member value?

MoneySparxs enables credit unions to grow financially with their members by delivering Behavioral Baking at scale through their digital channels. It delivers emotionally and financially engaging Sparks* (personal and community money-related tips, wisdom, suggestions, and fun insights) which catalyzes individuals to save, spend, invest, and borrow wisely.

What differentiates this innovation from competitors?

Based in behavioral science and leveraging AI, MoneySparxs goes well beyond traditional methods of segmenting, personas, and journey mapping by treating and interacting with each individual member in terms of their unique financial situation. With a deep understanding of human behavior and financial decision making (why decisions are and are not made), MoneySparxs is able to catalyze members in ways beneficial to them and their credit unions. Exagens designed MoneySparxs from the ground up with the sensibilities and realities of credit unions in mind. It is cost-effective, requires no PII, produces results quickly, and does not require any additional credit union resources to operate – exagens does most of the work, credit unions and their members get all of the benefit.

Prizeout

Describe your innovation.

CashBack+ is the first platform to centralize all cashback rewards into a single balance within credit unions’ online and mobile banking platforms. Unlike traditional rewards programs that redirect members offsite or rely on confusing points systems, CashBack+ provides a seamless, co-branded experience that keeps credit unions top of wallet. There are three different ways to earn cashback, each designed to maximize member engagement, loyalty, and non-interest income. Built by credit unions for credit unions, CashBack+ enables institutions of all sizes to compete effectively against larger banks.

What opportunity or challenge does it address?

Credit unions face increasing competition from large financial institutions, as they don’t have the same access to digital tools and talent. Traditional rewards programs often fail due to complexity, poor user experience, and limited accessibility to debit cardholders.

CashBack+ solves these issues by offering an embedded rewards platform directly available to members from their account page within online banking, making rewards easy to explore, access and use. This innovative program helps credit unions retain members, grow engagement, and boost revenue without requiring significant infrastructure changes.

How does it increase member value?

For members, CashBack+ simplifies earning and redeeming rewards. Instead of tracking points or navigating multiple platforms, all cashback earned flows into a single, growing balance within their accounts. Members can earn cashback when they shop with their credit union account, complete incentived actions and pay at checkout with their credit union account. At Michigan State University Federal Credit Union ($8.2B, East Lansing, MI), CashBack+ users are projected to earn between $91 and $190 annually, with rewards averaging 8-10% per purchase — far exceeding typical credit card cashback rates.

What differentiates this innovation from competitors?

Unlike most cashback platforms, CashBack+ is fully integrated within credit unions’ digital banking environments, eliminating friction and keeping members engaged. It supports both debit and credit transactions, ensuring broader accessibility. Additionally, CashBack+ provides a revenue stream for credit unions, outpacing debit interchange fees. The platform has already been adopted by leading credit unions, including Golden 1 Credit Union ($19.6B, Sacramento, CA), Suncoast Credit Union ($18.4B, Tampa, FL), and MSUFCU, with proven results in increasing digital engagement, transaction volume, and member satisfaction. By combining ease of use, high-value rewards, and seamless integration, CashBack+ stands out as the most effective cashback solution tailored specifically for credit unions.

Pulsate

Describe your innovation.

Pulsate’s Opportunities Engine transforms digital banking into an active engagement channel, helping financial institutions build lasting, profitable relationships in a mobile-first world. By leveraging real-time behavioral data, the platform delivers personalized, contextual offers directly within an FI’s banking app — where members are already managing their finances.

Key capabilities include:

• Next-best engagement: AI-driven campaign recommendations with pre-built creative and audience targeting.
• Engagement summary: Actionable insights into user trends and campaign impact.
• Opportunities file: Lists of high-intent users for outreach via digital campaigns or outbound calls.
• Seamless data integrations: Connects with core banking systems, CRMs, and fintech solutions.

With Pulsate, FIs can cut through digital noise to deliver timely, relevant offers — from debit card incentives to loan preapprovals — strengthening relationships and increasing engagement, deposits, and lending.

What opportunity or challenge does it address?

With 90% of consumers preferring to bank from their phones, community FIs are at risk of losing 90% of growth opportunities to big banks that dominate digital mindshare. Without in-branch interactions, members miss out on tailored product recommendations, and traditional outreach methods like email often go ignored.

Pulsate bridges this gap by enabling FIs to proactively engage members inside the banking app — where trust is highest — with hyper-personalized, data-driven micro-engagements that keep them top of mind and therefore top of wallet.

How does it increase member value?

Pulsate enhances the digital banking experience by delivering:

• Timely, relevant engagement: Members receive the right offers at the right time, creating a more intuitive and seamless experience.
• Stronger financial well-being: Personalized recommendations help members make smarter financial decisions.
• Convenience and trust: Unlike email or SMS, in-app messaging ensures secure, non-intrusive engagement within a channel members already use.
• Better financial outcomes: By responding to members’ real-time behaviors, FIs increase adoption of high-value products like loans, deposits, and credit cards.

What differentiates this innovation from competitors?

Pulsate delivers engagement where it matters most — inside the digital banking app. Unlike generic email campaigns or generic notifications, Pulsate’s real-time, behavior-based messaging ensures higher visibility, more relevance, and greater response rates.

By leveraging an FI’s own data, Pulsate anticipates member needs, making interactions feel intuitive, not intrusive. No other platform offers the same depth of personalization, multi-channel reach, and seamless banking integration, positioning Pulsate as the premier engagement solution for community FIs.

Spiral

Describe your innovation.

Members have a lot of options. On average, every household has five accounts across various financial institutions. Members constantly evaluate who provides the greatest value, trust, and personal service in today’s competitive market.

Spiral is the award-winning platform that enables credit unions to grow deposits, increase engagement, and build deep member relationships — making them the primary institution for savings, loans, cards, and more. By turning member engagement into an emotional connection, credit unions can become the go-to choice for your members’ financial needs.

What opportunity or challenge does it address?

With 73% of community financial institutions concerned about losing deposits to bigger banks and fintechs, standing out has never been more critical. As interest rates decline and 80% of recent homebuyers consider refinancing, growing deposits and deepening member engagement is key to meeting loan demand.

Spiral empowers credit unions to win and retain members, grow deposits and loans, and empower millions of people to build better lives and support their communities.

How Spiral helps credit unions:

• Boost member engagement to deepen relationships.
• Increase card transactions and fee income.
• Grow deposits from members.
• Become the primary financial institution (primacy).
• Expand savings account penetration and wallet share.
• Drive charitable donations and strengthen nonprofit partnerships to attract deposits.

How does it increase member value?

With Spiral, members can:

• Swipe. Save. Impact: Save money and achieve community impact easily with everyday purchases.
• Easily save for life’s dreams: Get personalized insights, build easy savings habits, and save automatically without thinking about it.
• Be community heroes: Help other people and achieve community impact easily with each transaction. Donate to favorite charities and manage all charitable giving from their digital banking.

What differentiates this innovation from competitors?

Spiral stands out by combining seamless user experience, financial wellness, and community impact into turnkey, fully personalized experiences within digital banking that drive proven business impact for credit unions.

Key Differentiators:

• All-in-one engagement platform that engages members through their entire banking journey (savings, loans, giving).
• Savings combined with community impact: The only solution that seamlessly integrates savings with giving, empowering members to support causes they care about.
• Superior user experience and easy enrollment with gamified member experiences: Interactive digital widgets and pop-ups that keep members actively engaged while growing deposits and card usage.
• Customizable and turnkey: Credit unions can personalize impact and savings areas, ensuring alignment with their mission—all seamlessly embedded within their existing online banking.

Proven results:

• Spiral’s clients achieved 500,000+ savings transactions in seven months.
• Spiral’s clients achieved on average 15% higher monthly deposits, 30% more monthly card transactions, and 15% higher digital engagement.
• Hundreds of thousands of dollars saved and donated via Spiral’s digital banking experiences.

The post Meet The Finalists For The 2025 Innovation Series: Member Engagement appeared first on CreditUnions.com.

Top-Level Takeaways

• PSECU uses segmentation to personalize member communications.

• To keep segmentation manageable, the cooperative groups 12 segments into three key personas.

• Long-term loyalists, power members, and working families represent approximately 80% of PSECU’s total membership.

The mission of PSECU ($8.3B, Harrisburg, PA) is to provide life-long value to members, thereby empowering them to achieve more. To ensure it is communicating effectively with its members based on their needs, the digital-first cooperative uses data-defined fictional characters to represent members that might use the credit union in similar ways.

Although PSECU has used some type of segmentation for years, the cooperative decided to create a new segmentation strategy last year. Initially, this strategy included dividing its membership into 12 key segments. Then, to make its segmentation strategy more useful, PSECU further narrowed those segments into just three buckets: Long-Term Loyalists, Power Members, and Working Families. These three personas represent approximately 80% of PSECU’s total membership base.

“We wanted to become more data-driven as we determine how to best segment our market,” says Sharon Eiswert, PSECU’s director of marketing and deposit strategy who spearheaded the effort in her previous position as director of marketing analytics and research. “We needed to take something overwhelming, like the initial 12 segments, and use rational thought to narrow it down into something manageable.”

The Right Approach

Eiswert has worked on segmentation strategies for the grocery industry, and she has experience with bigger, more costly strategies. According to the PSECU director, there are many ways to approach segmentation. PSECU started by purchasing Experian’s Mosaic segmentation data, which groups households based on demographics and socioeconomic characteristics. The cooperative then appended its own database with the Mosaic data, which provided instantaneous insights into attitudes, behaviors, lifestyles, financial thinking, and more.

Personas At PSECU

Working Families: Medium-tenured members with high digital savviness. Typically with higher loan balances and lower deposit balances, these members are working to better their financial life. Family focused content and financial education are relevant concepts to help them on this journey.

Power Members: Medium-tenured members with high digital savviness . Typically having both high loan and deposit needs, these members are looking to enjoy their wealth and continue to build upon and utilize it. The credit union model appeals to their philanthropic interests, as do rewards for their loyalty.

Long Term Loyalists: Longer-tenured members with lower digital savviness. Typically having shorter-term loan and deposit needs, these members are comfortable in their financial lives and looking to stay that way. Being PSECU’s most loyal members, encouraging continued use and sharing their positive experiences with PSECU are extremely relevant.

“It was a great starting point,” Eiswert says.

Next, the credit union added individual member data such as total loan balances, loan types, and membership eligibility categories that outlined affiliations that would enable potential members to join PSECU. It also added more Experian data to focus on wallet share of total loans within its core market the overall population in Pennsylvania.

“Together, all that data gave us a good understanding of these groups and their potential needs, Eiswert says.”

According to Eiswert, segmentation strategies can be large or small. PSECU took a realistic approach by starting with something already available, then customizing it for the credit union’s needs.

Using Insights

PSECU took a deep dive into the three personas, considering how to approach them and learning how much of the current and potential markets they represented. It created one-page persona sheets to help the member experience team better understand each of the three groups’ needs. The marketing team also learned about the personas so it could customize future campaigns and offerings and teach the credit union’s other business units about the concepts.

PSECU is still developing its measurement framework to evaluate the success of its segmentation, which will likely include A/B testing to evaluate the impact of personalized communications based on the three personas, but Eiswert says the credit union has already notched some early success.

Last year, the cooperative embedded customized content into member communications.

“We might have one master email or landing page but can insert custom objects into that,” Eiswert says. “So, Working Families receive content on financial education while Long-Term Loyalists receive information on how to use our digital tools because they’re not quite as comfortable with technology.”

Automation like this enables the marketing team to use the personas in a way that’s not extremely cumbersome.

“It’s been a really big win for us,” Eiswert says.

Lessons And Advice

The concept of personas has a learning curve for people who are used to targeting members based solely on demographic data, which Eiswert says a credit union can do without adopting an advanced segmentation strategy.

Of note, personas are meant to be a guide; they are not an absolute or actual person. Explaining that across the institution has been a challenge.

“You want to bring the personas to life, and the best way to do that is to have an image and context about their lives,” Eiswert says. “It’s important to keep in mind this is a picture of an aggregate, not a real person.”

For example, long-term loyalists don’t automatically equate with older members. Rather, they are more apt to share a certain mindset and use the credit union exclusively. Likewise, personas don’t automatically represent a life stage. Personas include how a member might think about or use money, attitudes, and lifestyle in general.

“Personas are not the same as demographics,” Eiswert says. “There are varying degrees to which someone fits or does not fit each profile.”

PSECU is continuing to develop its key personas through an online research community of approximately 2,000 members and non-members who have agreed to provide ongoing qualitative context that will help staff members better connect with each of the key groups. The online community provides a full range of flexible activities, including online focus groups, moderated chats, discussion boards, and even self-recorded videos that help the cooperative understand more about these group’s lives and attitudes toward money.

In terms of advice for others, Eiswert says to keep an open mind to develop a strategy that works best for the organization.

“I had in my mind that we have to do it this way and have this huge project,” Eiswert says. “But when I sat down and thought about how the organization is actually going to use it, the approach became clearer.”

The marketing director also recommends keeping the number of segments or personas manageable.

“It has to be useable and tangible for the organization,” Eiswert says.

And, lastly, obtaining buy-in from leadership is essential. At PSECU, using segmentation for personalization is a strategic goal; for others, it’s important the leadership team and board are committed before the credit union embarks on its own segmentation strategy.

This article originally appeared on CreditUnions.com on May 23, 2022 

The post Member Segmentation Paves The Way To Personalization appeared first on CreditUnions.com.

Dora named for credit union pioneer Dora Maxwell provides banking services for un- and underbanked consumers via mobile app, along with a bilingual option to make the service more appealing for Hispanic consumers. Organizers estimate as many as 50 million people across the country could be served by the offering.

Initially launched by USALLIANCE Financial FCU ($2.4B, Rye, NY) which holds all funds as non-member deposits the project evolved into a CUSO, now backed by DCU ($9.9B, Marlborough, MA), Service Credit Union ($5.4B, Portsmouth, NH), and Affinity Plus FCU ($3.9B, St. Paul, MN) and Inclusiv, a trade group serving community development credit unions.

In this QA, Kristi Kenworthy, Dora’s managing director, looks back at the fintech’s first year, lessons for the industry in how to reach consumers in need, what’s next for the fintech, and more.

You’re almost exactly a year out from launch, though obviously this process started long before Aug 2021. What has the last year been like?

Kristi Kenworthy: Dora was launched at the Inclusiv annual meeting in September [2021]. Dora received lots of positive press and lots of interest from credit unions across the country, both from the sense of wanting to know how to be an investor, and how to be part of the CUSO and participate in this. So that was exciting. There was interest from the credit union industry from NACUSO, NAFCU, and the NCUA and we were guest speakers at several conferences. We’re now focused on our go-to-market marketing direct to the consumer, and making relationships to get to the end user.

So the idea behind this is to reach low- to moderate-income consumers, roughly 50 million of whom don’t participate in mainstream banking. What are current Dora user numbers?

KK: We have about 4,500 accounts to date and we haven’t even started our big marketing push yet we’re still creating our marketing collateral for that. We did a great field study with Prudential, who helped us look at target-market messaging and preferred channels, and we got a lot of data that was really cool. We learned some new things but also got affirmation of some things we were already planning on doing. Having a bilingual app will be key to penetrating into the Hispanic market, where trust is a big barrier to entry.

Lots of credit unions have a mandate to serve low- and moderate-income consumers. What have you learned about that market?

KK: The Prudential study was really interesting for us. While it’s easy to think just about minorities in big cities [when considering low-income and underbanked consumers], the Prudential study revealed there’s a big portion of white Americans who are un- or underbanked, and a lot of them live in very rural areas. That was surprising to us we just conceptualized that populations were more dense in city environments, but obviously there’s a big impact with banking deserts and a lack of access to financial institutions in rural areas. I would imagine that’s been further exacerbated by COVID. So many FIs closed branches during COVID and maybe just didn’t reopen them, so that created more of a banking desert in some areas.

What has been the key to reaching those consumers?

KK: One thing we’re seeing is that they probably wouldn’t have qualified for a checking account with a traditional FI. Dora doesn’t require a credit check and we don’t do ChexSystems, so if a person has poor credit or a blemish on ChexSystems, they would have a negative ChexSystems report and wouldn’t be able to open an account at most credit unions and banks.

That’s exactly what we were hoping for that was the basis for this account: Can we build a BankOn-certified account that meets national BankOn standards, and target this segment of Americans who probably don’t qualify for an account for a myriad of reasons.

I know the focus here is on checking accounts, but how does this make money? Are there ways to transition these folks into deeper relationships with the credit union?

KK: That’s the model getting them their first transactional account, letting them get their direct deposit, or be depositing their checks and managing their funds within the account and using the debit card. Hopefully when they need their next product whether it’s a personal loan, car loan, or first mortgage we’ll then matriculate them into a participating credit union who will have to be in their field of membership, and then they’ll have the benefit of full credit union membership.

Is there a timeline for that?

KK: Some of this is still being built out, and we have some other functionalities being built into the app through the end of the year. We envision part of it will be user-driven. We’ll be integrating event-based financial coaching into the app in the third quarter of this year. With that partnership of financial coaching in the Dora app, we feel like we’ll have the data and they’ll have the relationship building, so when [users] express the need for the next product, that partnership will help us know when the person is ready or the person will express interest themselves.

What has been the biggest challenge since you launched?

KK: We have a small team and working in a very agile methodology, where things are moving fast. One thing that was a little different for us was we built the product, then built the app, and then built the CUSO. The model is usually the exact opposite you form the CUSO and then figure out how you’re going to build your product and take it to market. But I feel like maybe that gave us an advantage to make it easier to talk to potential investors.

I don’t want to say things have been going swimmingly and there haven’t been any huge hurdles, but it’s been well received. We have a great bunch of partners as investors and things are going well.

There are an awful lot of neobanks out there, how do you make Dora stand out?

KK: Part of our tagline is Better Than A Bank, Powered By Credit Unions,” so having that association with credit unions is a big differentiator. When you think about the core philosophy of credit unions and their core mission, it aligns with what credit unions do best: people helping people. What’s really cool about the credit union industry is collaboration among credit unions, and we have credit union investors and we’re going to create a network of credit unions, leveraging what’s already so excellent about our industry.

What’s the biggest lesson you’ve learned in the last year?

KK: We built Dora from scratch on a whole new technology stack. We didn’t leverage any of our legacy systems. Having the liberty of doing it that way gave us an advantage because we weren’t encumbered by old systems or processes or policies. That enabled us to move a lot faster and use newer technology and gave us a distinct advantage.

This has obviously been a collaborative process with multiple credit unions, have you learned lessons about collaboration, or reconsidered any ideas you had about collaboration strategies?

KK: Collaboration is one of the coolest things about the credit union industry you certainly wouldn’t find that culture among banks. We talked to a lot of people about Dora and some people got it, some didn’t, and some were really excited and wanted to participate. We were fortunate in the partners we had they’re very like-minded and committed to serving this market. The social impact Dora will have means a lot to them. It’s not about the balance sheet, it’s about making a difference. A lot of credit unions are excited to see where this is going to go. Maybe they’re on the sidelines now, but maybe they won’t be later when they see the success it has.

What lessons are there here for other credit unions that want to do a better job of serving this market?

KK: You have to always think about what you’re doing and how can you constantly be improving. Dora definitely has a culture of that. Just because it’s always been the way you did it doesn’t mean it’s the way you should still be doing it.

Are there takeaways here for smaller shops that may not have the resources to launch this type of digital solution?

KK: Well, USALLIANCE is the smallest credit union in the CUSO DCU, Service and the others are all bigger. But I’d say looking for opportunities where you can, and looking at your processes and procedures, and continually striving and doubling down on your commitment to service markets. If you can’t do it, then look for partnership opportunities where you can have someone help you. That’s a big part of it.

What’s next?

KK: We’re still working on core functionalities in the app we’re adding event-based coaching, and we’ll be joining a deposit and cash-out network to give people more access so they don’t have to rely on ATMs or in-app services. That’s going to be a nice value add. We are actively doing marketing in specific geographic areas where we know there’s a large population of un- and underbanked Americans. We’ll have to assess our success with that marketing and refine, refine, refine.

We’re trying to build a network of partnership groups that are also trying to serve people in low-income, modest-means communities, folks like Habitat for Humanity and First Step Alliance, trying to help formerly incarcerated people. We’re trying to create that network of partnerships to help partners service this group, and looking for participating credit unions so that when Dora account holders are ready for that next product, they’ll have a network of credit unions to turn to.

This interview has been edited and condensed.

The post Lessons From A Fintech’s First Year appeared first on CreditUnions.com.

Top-Level Takeaways

• A collaboration between DC Credit Union and Bank on DC has provided thousands of teens and young adults with savings accounts, financial literacy, and occupational success.
• The credit union’s Youth Advisory Council provides insight into what what’s working well and how the program could be improved.
• The initiative creates lasting relationships with young members and helps the credit union live its mission as a CDFI.

Over the course of nearly a dozen years, a financial education program from DC Credit Union ($82.6M, Washington, DC) has impacted the lives of thousands of youngsters in the nation’s capital.

Launched in 2010, DC Credit Union’s Summer Youth Employment Program was designed to provide banking services for teenagers holding down their first jobs primarily those between the ages of 16 and 18 but the initiative proved so popular that after its first year the credit union expanded the age range from 14 to 24.

The program is part of a partnership with Bank On DC, a collaboration between the Office of the Deputy Mayor for Planning and Economic Development, multiple financial institutions, and nonprofits focused on providing access to affordable financial services for un- and under-banked households in the region. Organizers at the credit union envisioned it as a way to not only help DC teens and later young adults develop savings accounts and financial literacy but also expose them to the benefits of credit union membership.

“We needed to engage and keep the attention of our new young members,” says LaTesha Wheeler, the credit union’s youth outreach coordinator. “We found that once you lose their attention and interest, it’s like starting all over again.”

Through its affiliation with the Department of Employment Services (DOES), the program offers a wide range of job opportunities, such as working for community-based organizations, along with district and federal agencies, including the Department of Parks and Recreation.

As the program was developed, certain rules were established, such as requiring participants to receive payment either through direct deposit or via a pre-loaded debit card. Accounts for each age group 14 through 17 and 18 through 24 are also in place to address risks that could result in losses to the credit union.

For example, youths from 14 to 17 years old have non-custodial accounts, which restricts their account access to ATM-only cards for cash withdrawal transactions up to $300. Program participants aged 18 and older have custodial accounts, which require a cosigner and include a checking account and debit card that offers point-of-sale transactions up to $300 a day and online banking access.

Regular, high-touch communication with participants via email and phone is also a key component, Wheeler says.

“If I speak to kids at an event, the youth present can put a face to the name of the person who calls or emails them,” she says. “It’s a matter of building trust. After all, we are a financial institution they need to trust with holding their money.”

The DOES built in an incentive for participants reach their summer savings goals. The Super Saver award provides $1,000 to a deserving summer saver who meets of exceeds their goals during the program. The more money saved, the better the chances of winning the drawing and having $1,000 deposited directly into their savings account.

A Lasting Legacy

Now in its eleventh year, the program has exceeded expectations and created a lasting legacy. Championed by three mayoral administrations including DC’s current mayor, Muriel Bowser, the program was renamed in 2014 in honor of former DC Mayor Marion Barry, who campaigned tirelessly on behalf of Bank on DC and the institutions that support it, including DC Credit Union.

Thousands of teens and young adults have found meaningful employment, built savings, and learned money management through the program, and many alumni have maintained their credit union membership, even referring family and friends to DC Credit Union.

We needed to engage and keep the attention of our new young members. Once you lose their attention and interest, it’s like starting all over again.

The program’s success also offers a blueprint for how other CDFI-certified credit unions can fulfill their mission of enhancing members’ lives. One of DC Credit Union’s loftier goals is to help young consumers in the region find long-term occupational and financial success, and Wheeler says helping them find ways to earn an income and save was a cornerstone of that effort.

Wheeler says marketing and communications efforts including engaging with participants via social media helps retain new members and keeps them engaged.

“Even if we don’t capture that young person in the summer program, they still tell their relatives and friends about the credit union,” she says. “Just having that one person in the house can engage and intrigue other family members to join.”

DC Credit Union supplements its email and retention strategies with a Youth Advisory Council that appoints a youth advisor in each DC ward to meet with residents and gauge interest from potential participants or would-be members. These leaders meet one Saturday per month to share insights and inform the credit union about new developments or concerns in the wards. All council members are volunteers serving one-year terms on the panel, and the credit union rewards their participation with an entrepreneurial award in the spring and the fall.

Wheeler is quick to note the impact the program has made on DC area youth.

“Many tell me, ‘DC Credit Union gave me my first account when I was 14, and I’ve been with them ever since,'” she says. “Now, those kids’ are young adults in their twenties and early thirties and applying for car loans and mortgages.”

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The post DC Credit Union’s Decade Of Changing Young Lives appeared first on CreditUnions.com.

• Greenwood operates as a full-service credit union for members that live within five miles of the cooperative’s lone branch.

• It also serves members from all corners of the country that have loan-only relationships.

Greenwood Credit Union($657.4M, Warwick, RI) is a mid-size credit union headquartered not from T.F. Green airport, the largest airport in the small state. The creditunion’s name comes from the neighborhood from which it has been operated for more than 75 years, in that time supporting the needs of a core group of members with its traditional banking services.

But that’s just the half of it.

Greenwood is a state-chartered, federally insured credit union with a single branch but a nationwide charter that allows it to do business across the United States, says CEO Fred Reinhardt.

Fred Reinhardt, CEO, Greenwood Credit Union

We see ourselves having two distinct purposes,Reinhardt says.

First, it wants to help its core members those who live in a five-mile radius around its lone branch achieve their long-term financial objectives. But Greenwood is also an active indirect auto lender and works with correspondent lendersof manufactured homes to add mortgages to its books.

We think this is an important role we can take in the financial services industry,the CEO says.

A Core Member

Checking account penetration at Greenwood shows a clear divide between core members and others. Its checking penetration in the second quarter of 2021 was 10.0%, which lagged state peers by nearly 35 percentage points and asset-based and nationwide peers by even more.

CU QUICK FACTS

Greenwood Credit Union
Data as of 06.30.21

HQ:Warwick,RI
ASSETS:$657.4M
MEMBERS:79,054
BRANCHES:1
12-MO SHARE GROWTH:5.6%
12-MO LOAN GROWTH:5.5%
ROA: 1.19%

But that number by itself is misleading, Reinhardt says. In his experience, most consumers maintain checking accounts with the bank or credit union near where they live or work. Combine that preference to the already difficult challenge of deepening wallet share among indirect members and it explains why Greenwood is happy to maintain a loan-only relationship with a segment of its membership.

Most people have a checking account with an institution that is close to them,Reinhardt says.If we have a member that lives in South Carolina, he or she is not going to have a checking account with us in Rhode Island.

On the other hand, more than 55% of members who live within five miles of the credit union have a checking account with Greenwood, Reinhardt says. For those core members, Greenwood offers, on average, a higher interest rate on checking accounts than asset-based and state peers 0.15% compared to 0.10% and 0.05%, respectively. Additionally, Greenwood ranks second among asset-based peers in total dividends paid, and its dividends/income ratio, 24.7%, far outpaces the 8.0% at those same peer credit unions.

But the majority of the credit union’s members join Greenwood through its lending channels. And there’s a strategy behind that,too.

Lender Partners

When Reinhardt joined the credit union as CEO in 2016, he inherited an organization that had originated at least half of its loans from indirect channels since 2004,when Callahan’s indirect lending data begins.

INDIRECT LOANS/TOTAL LOANS

FOR GREENWOOD CREDIT UNIONS | DATA AS OF 06.30.21

In the past three years, Greenwood’s indirect loans to total loans has decreased by 12 percentage points, to 51.5% as of second quarter 2021. That’s still more than double state, asset, and national peer average.

Greenwood had developed hundreds of relationships with auto dealers and does business with some 300 dealer partners across the northeast and as far as Wisconsin and Iowa, Reinhardt says. And although the percentage of indirect loans on its books continues to decline, it remains a primary channel of focus.

We continue to refine our strategy to be as effective, profitable, and efficient as possible,the CEO says.

But in a crowded market, it’s not always easy to stand out.

To do so, Greenwood aims to be as efficient and responsible as possible, investing in technology, like automated decisioning software and other digital tools, to make the application process quicky and easy. In fact, its investments in technology stemfrom a long-term strategy to maintain a single branch, despite asset-based peers managing nine on average.

We made the determination that technology and digital channels would replace the need for more branches,Reinhardt says.We’ve continued to operate with a focus to meet the member digitally as best we can.

In addition, Greenwood does not make loan decisions based on credit score alone, an ethos the CEO believes gives it an edge against other lenders when faced with more challenging applications. Rather than focus solely on FICO, Greenwood’s underwritersfocus on the ability to repay, keying in on income, time in current job, and additional debts, among other items.

Akin to its indirect auto strategy, Greenwood works with a smaller, select number of correspondent lenders that originate manufactured homes across the country. Greenwood underwrites the originated loan itself before paying the originator a fee and portfolioing the loan. In some states, manufactured homes are treated as traditional mortgages whereas in others they are considered chattel, but, in the end, they are interest-earning loans on the credit union’s books that provide homeownership opportunity to the borrowers and help Greenwood’s lending partners achieve their own goals.

Ultimately, Greenwood’s strategy is loan-based, but that doesn’t mean it isn’t driven by core values. It wants to help its core members grow financially and its partner dealers and lenders extend capital to those who need loans. Andif that sounds different, that’s the point.

Our employees embrace our core values every day they come to work, whether they are working with a core member or one of our partners,Reinhardt says.That helps differentiate us against all the competition out there.

The post 2 Sides Of The Coin: How Greenwood Credit Union Serves Core Members And Everyone Else appeared first on CreditUnions.com.

• Members, both new and existing, continued to increase their credit and debit use over the last decade.

• Delinquencies and charge-offs are also on the rise but remain below 2009 levels.

• Despite rising credit card asset quality, a well-managed card portfolio is still a profitable venture and an important tool for member engagement.

More members at U.S. credit unions use debit and credit cards than a decade prior. As of June 2019, 58.4% of credit union members hold a share draft account with their credit union, while 17.6% have a credit card.

According to the Federal Reserve’s Quarterly Report on Household Debt and Credit 16.8 million credit card accounts were opened by all card issuers in the past year. The Fed also says that in the second quarter of 2019, credit card debt made up 6.3% of total household debt that’s 2 basis points more than the same time last year. At the same time, credit card lending increased $39 billion to $870 billion, which is the highest it has been since the fourth quarter of 2008.

The past four years have been the most profitable for card issuers this century. The credit union movement’s experience with plastic has shown product engagement increasing alongside growth in credit union membership overall.

Engagement Through Checking Accounts Continues Post Recession

Share draft balances have steadily grown in the past decade. As of the second quarter of 2019, share draft balances at the U.S. credit unions totaled $207.5 billion, up 6.0%, or $11.8 million, year-over-year accounting for 16.2% of total share growth.

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Total share draft accounts make up 30.5% of overall share accounts, a 5.5 percentage point increase over the past 10 years. Balances for this deposit product were 16.0% of total deposits as of June 2019. The average share draft balance among U.S. credit unions increased $16 in the past year, and $1,064 in the last 10 years, to $2,967 as of June 2019.

Share draft penetration, an indicator that a credit union is a member’s primary financial institution, reached its highest point yet: 58.4% as of second quarter 2019. That’s up 12.4 percentage points in the past 10 years.

Credit Card Balances Continue To Expand

Credit unions held $62.9 billion in unsecured credit card balances at midyear. That’s a $4.7 billion increase in the past 12 months. At the same point, 62.2% of U.S. credit unions offered credit card loans to their members, an increase of 87 basis points year-over-year.

Average credit card balances grew 7.7% year-over-year, up $130 during that period to top $2,900 at midyear. As of June 30, 2019, 17.6% of America’s 119.7 million credit union members held a credit card with their cooperative, accounting for just more than 21 million accounts.

Credit card market share also moved up. Revolving consumer loan balance market share, largely composed of credit cards, reached 6.2% in the second quarter. Unfunded commitments expanded 9.0% to $129.1 billion as credit unions extended credit faster than members used it. The industry average credit card utilization rate as of June 30, 2019, was 30.9%, down 22 basis points from the year prior.

Delinquency Upswing Calls For Careful Management

The credit card delinquency rate as of June 30 was 1.21%, the highest among any loan products. That rate had peaked at 1.92% in 2009. It declined every year until 2014, when it hit a low of 0.82%.

Delinquent credit card loans account for 11.2% of all delinquent loans, 1.2 percentage points higher than the previous year. In 2009, delinquent credit card loans made up 7.2% of that total.

Net charge-offs reached 3.05% for credit cards in the second quarter of 2019. That’s a year-over-year increase of 17 basis points. Overall, credit cards accounted for 32.3% of total net charge-offs across all loan products at midyear. This is an increase of 7.7 percentage points since 2018.

Now, while credit cards might have above-average losses compared to other loan products, they also offer above-average returns in a well-managed portfolio. The decision to implement or expand a credit card program should be done in accordance with a credit union’s risk policy and specified parameters. And, along with debit accounts, consumer loans, and mortgages, they’re an important part of a member’s relationship with their credit union.

SHARE DRAFT BALANCES AND ANNUAL GROWTH

FOR U.S. CREDIT UNIONS | DATA AS OF 06.30.19

Callahan & Associates | CreditUnions.com

Emphasized by spikes in 2012 and 2017, share draft balances among U.S. credit unions have grown from less than $80 billion in 2009 to more than $200 billion in 2019. They now account for 16.0% of all share balances, a 5.3 percentage point increase over the past decade.

AVERAGE SHARE DRAFT BALANCES AND ANNUAL GROWTH

FOR U.S. CREDIT UNIONS | DATA AS OF 06.30.19

Callahan & Associates | CreditUnions.com

The average share draft balance among U.S. credit unions increased $1,066 over the past 10 years, from $1,901 to $2,967 as of June 2019.

CREDIT CARD BALANCES AND ANNUAL GROWTH

FOR U.S. CREDIT UNIONS | DATA AS OF 06.30.19

Callahan & Associates | CreditUnions.com

Credit card balances grew 7.7% year-over-year to $62.9 billion as of June 2019, nearly double the $32.9 billion reported by U.S. credit unions a decade earlier.

AVERAGE CREDIT CARD BALANCES AND ANNUAL GROWTH

FOR U.S. CREDIT UNIONS | DATA AS OF 06.30.19

Callahan & Associates | CreditUnions.com

Average credit card balances held by credit union members has grown 17.9% over the past 10 years.

SHARE DRAFT PENETRATION

FOR U.S. CREDIT UNIONS | DATA AS OF 06.30.19

Callahan & Associates | CreditUnions.com

Share draft penetration, considered a hallmark of member engagement, hit another record high of 58.4% as of June 30, 2019, continuing this metric’s growth since the Great Recession.

CREDIT CARD PENETRATION

FOR U.S. CREDIT UNIONS | DATA AS OF 06.30.19

Callahan & Associates | CreditUnions.com

Credit card penetration reached 17.6% in the second quarter this year, up 3.3 percentage points from the 14.2% recorded in the second quarter of 2009.

CREDIT CARD BALANCES AND UTILIZATION

FOR U.S. CREDIT UNIONS | DATA AS OF 06.30.19

Callahan & Associates | CreditUnions.com

The average credit card utilization rate was 30.9% at the end of June as credit unions continue to extend credit faster than members can use it.

CREDIT CARD DELINQUENCY AND NCO

FOR U.S. CREDIT UNIONS | DATA AS OF 06.30.19

Callahan & Associates | CreditUnions.com

At 1.21%, the delinquency rate for credit cards was the highest among any credit union loan product. Overall asset quality in the loan product has risen in the second quarter since 2014.

The post Credit And Debit Use Grow, But So Do Delinquencies appeared first on CreditUnions.com.

The Pine Ridge Reservation is a true bank desert. The nearest bank, Security First, is 40 miles away from the center of the reservation in Martin, SD. First National in Gordon, NE, is 50 miles away. And except for a mobile banking van from Security First that made the rounds in parking lots across a few communities, Pine Ridge had never had a federally insured financial institution until Lakota Federal Credit Union ($4.1M, Kyle, SD) opened its doors in 2013.

CU QUICK FACTS

lakota FCU
Data as of 03.31.16

• HQ: Kyle, SD
• ASSETS: $4.1M
• MEMBERS: 2,402
• BRANCHES: 1
• 12-MO SHARE GROWTH: -22..08%
• 12-MO LOAN GROWTH: 10.81%
• ROA: 2.52%

The lack of access to banking services and poverty conditions for Oglala Sioux tribal members had created a mostly cash and prepaid card economy. In fact, a 2012 study found that 60% of residents on the reservation were unbanked.

Today, Lakota FCU has attracted nearly 2,500 members and made more than $2.5 million in loans. Most telling are statistics from a member survey in 2015, which found 31.37% of members had opened a savings account for the first time in their lives and 30.39% were saving more money.

We have a matched savings account for kindergartners and first-graders in which Lakota Funds matches deposits 3-to-1 through eighth grade for educational expenses, says Tawney Brunsch, executive director of Lakota Funds, a community development organization that promotes socio-economic sustainability,and chairman of the board of Lakota FCU. We really get to see the impact. The kindergartner comes in to open his or her first savings, which is no surprise, but it’s also a first account for the mother and maybe even the unci, the grandma, is opening her first account. This is about the individual, but it’s also about the bigger impact on the economy, and that’s exactly what we wanted.

In conjunction with National Financial Literacy month in April, Lakota FCU introduced the Rolling Rez, a mobile banking van painted with colorful Native American art that offers a full range of services to residents, including check cashing, account opening, and loan applications.

Lakota FCU’s Rolling Rez brings a full range of services to residents, including check cashing, account opening, and loan applications. The vehicle also offers workshops related to financial management.

The credit union has been swamped since it opened its doors, and Brunsch expects membership to continue to increase as services are expanded across the reservation.

We’re seeing people increase their savings and not having to get title loans, she says. They’re spending less on gas.

Bank Deserts On The Rise

The community served by Lakota FCU poses daunting challenges in terms of distances and getting the word out to potential members, but banking deserts in the United States occur in both rural and urban areas.

In the study Banking the Unbanked: Bank Deserts in the United States, authors Russell D. Kashian, Ran Tao, and Claudia Perez-Valdez of the University of Wisconsin, Whitewater, define a bank desert as an area that has fewer than .02 branches per 1,000 in population. Using postal ZIP code data, the researchers identified 350 urban and 650 rural bank deserts. Those numbers are growing and disproportionally affecting minority populations.

The growing inequality and lack of economic opportunities our country is experiencing has resulted in millions of people becoming disfranchised from the financial mainstream, says Pablo DeFilippi, vice president of membership and business development for the National Federation of Community Development Credit Unions. When a bank closes a branch, there’s an obligation to those communities, and some banks ought to be more responsive to supporting a credit union that’s willing to step in.

DeFilippi has personal experience with bank deserts. Prior to working for the federation, he served as CEO of the Lower East Side People’s FCU ($45.4M, New York, NY), which was established as a result of a Community Reinvestment Act (CRA) challenge to the closure of the last bank branch serving that community.

CRA encourages banks to rebuild and revitalize communities through sound lending and access to services. Stepping in to fill the gap, Lower East Side People’s FCU has helped more than 8,000 mostly Hispanic members access credit, establish savings, and build wealth.

The federation helps low- and moderate-income people and communities achieve financial independence through credit unions. A big responsibility facing all credits unions, DeFilippi says, is finding ways to serve communities that banks have abandoned.

Credit unions that have adapted their business model to meet the needs of low- and middle-income consumers and have modified their underwriting and collection processes to extend loans to these populations are doing well financially, DeFilippi says. More importantly, they’re doing good in these communities.

It Takes a Federally Funded Village

In South Dakota, Brunsch says Lakota FCU would not be here today without help from the government and the surrounding community, including three credit unions in the region, Black Hills Federal Credit Unio ($1.1B, Rapid City, SD), Highmark Federal Credit Union ($109.4M, Rapid City, SD), and Sentinel Federal Credit Union ($107.29M, Box Elder, SD), which committed to being the new credit union’s first depositors.

The U.S. Department of the Treasury also played a major role through its Community Development Financial Institutions (CDFI) Fund.

Last year, Lakota FCU received $750,000 from the Native American CDFI Assistance Program, created by Congress in 1992 to increase access to credit, capital, and financial services to Native Communities. Treasury grants covered startup costs and staff salaries for the credit union’s four employees.

We wouldn’t have been able to get it off the ground without this support, Brunsch says.

Having a credit union on the Pine Ridge Reservation has always been a dream for Brunsch. She spent eight years working at Black Hills FCU covering almost every position, including branch manager, before taking over the reins at Lakota Funds.

I’m a big believer in credit unions and the fact that they’re member-owned, Brunsch says. You can see the power of credit unions and how they can change lives.

Tawney Brunsch, Board Chair, Lakota FCU

Lakota Funds, founded more than 30 years ago, is one of the oldest Native American CDFI-funded entities, focused on business development, employment, and training on the reservation. Lakota Fund’s loan portfolio exceeds $7 million, with a maximum loan size of $300,000. Since 1986, it has helped thousands of artists and aspiring entrepreneurs, created more than 1,400 permanent jobs, and helped establish hundreds of businesses.

Lakota Funds, however, cannot accept deposits or make auto loans, so a significant amount of money was leaving the reservation every month. Tribal elders approached Lokota Funds regarding the March 1, 2013, deadline when all Social Security checks and other federal benefits were to be distributed electronically only. They feared unbanked tribal members would stop receiving their checks.

Demonstrating The Need

Lakota Funds pledged its support, including free office space for the new credit union in the Lakota Trade Center, but Brunsch says NCUA officials had a difficult time seeing beyond the major challenges to the opportunity the application presented.

We’re seeing people increase their savings and not having to get title loans.

The reservation is located in the nation’s third-poorest county, and average annual income is well below the national average, so the NCUA questioned the demand for loans. Brunsch had to convince a representative to visit the reservation to witness firsthand the area’s poor access to financial services.

It wasn’t until he saw how remote we are that he understood the need for a credit union, Brunsch says. There are no city blocks. There isn’t ATM access in every community, and the communities are 50 miles apart.

Lakota FCU received its charter from the NCUA on Aug. 29, 2012, and conducted a soft launch less than three months later. The credit union offers savings, secured loans up to $50,000, unsecured term loans, and lines of credit up to $5,000.

We’ll take any type of collateral, including a horse trailer or a four-wheeler, Brunsch says.

So far, 12% of members have purchased new vehicles with Lakota FCU loans.

Next Steps

In addition to increasing banking services in its communities through the Rolling Rez, Lakota FCU plans to offer checking accounts. The credit union already offers online banking and members use pre-paid debit cards for most transactions. Checking and debit cards will give members access to thousands of shared-branch ATMs, extending the reach of Lakota FCU.

Two telling statistics about Lakota FCU: It has virtually no debt, so its ROA was 2.5% as of first quarter 2016, and even though it’s in one of the poorest areas of the country, delinquent loans account for only 4.2% of the total portfolio. That’s not so bad when compared to the 1.9% average reported by all credit unions with $2 million to $5 million in assets.

Our members are people who save and who repay, and I attribute that to relationships, Brunsch says. They understand the $5 to open their account reflects their ownership in this credit union. Our whole staff is from here. We know everybody, so it’s a very user-friendly environment.

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The post The Role Of Lakota Federal Credit Union In A Banking Desert appeared first on CreditUnions.com.

• 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.

The post Branching Evolves As Membership Grows appeared first on CreditUnions.com.

Check out more must-know ratios in 15 Ratios For Board Members and 21 Ratios For All Credit Unions.

Benchmarking performance relative to other credit unions and community banks helps educate personnel about their credit union’s business model and helps managers advance projects. Comparing credit unions with similar business models, membership demographics, or geographic range lends credence to new marketing programs and helps measure success. Credit unions can track the metrics featured in this article using 5300 Call Report data.

Of course, well-rounded marketing plans also consider ratios outside of the metrics featured here and link marketing plans to the institution’s strategic objectives.

CLICK ON THE TABS BELOW TO LEARN ABOUT THE 12 RATIOS

1. Member Growth

The population of the United States is approximately 319 million in 2014. Credit unions’ potential membership base is more than 1.5 billion, which means each consumer is eligible to join nearly five credit unions. Members per potential members measures the credit union’s penetration relative to the total potential membership base. The credit union’s field of membership (FOM) is the predominant driver of this ratio and acts as a proxy for market share.

2. Member Per Potential Members

The population of the United States is approximately 319 million in 2014. Credit unions’ potential membership base is more than 1.5 billion, which means each consumer is eligible to join nearly five credit unions. Members per potential members measures the credit union’s penetration relative to the total potential membership base. The credit union’s field of membership (FOM) is the predominant driver of this ratio and acts as a proxy for market share.

3. Net New Members Per Branch

This ratio matters more for credit unions that have a significant brick-and-mortar investment. Credit union branches, through placement and service, are billboards for the institution. Combined with marketing campaigns and word-of-mouth, credit unions should be measuring how many members, on average, each branch location brings in. Elevated levels can result from word-of-mouth referrals, high traffic, promotions, events, or an influential business development program. Negative values indicate a net loss of members for the previous 12 months at the credit union.

4. Annualized Loan Originations Per Member

The amount of loans granted year-to-date demonstrates the credit union’s success at executing its lending strategy. The dollar amount of loans granted is a function of the demographic make-up of the field of membership, the breadth of the credit union’s lending operations, and the effectiveness of the credit union’s marketing and sales culture. Average member age, a FOM’s socioeconomic makeup, a FOM’s cultural makeup, and home ownership percentages all impact the balances of granted loans.

The types of products a credit union offers is a key determinant of the number of loans it will grant. Additionally, real estate and new auto loans generally have higher balances than used car and signature loans, which will drive this ratio higher. Measuring the change in loans originated in a given quarter over the previous year helps demonstrate marketing successes; however, take note of economic climate, consumer attitudes toward credit, and the management of the credit union’s balance sheet as these will influence increases or decreases.

As cooperatives, credit unions are not able to measure their market performance via daily changes in stock price. Without this type of market benchmark, credit union performance can be more difficult to gauge; therefore, identifying appropriate measurement standards is a significant aspect of credit union management.

Member loyalty is a significant benchmark for credit unions, and quantifying the member relationship is a great way to gauge loyalty. Metrics about member relationship help marketing departments track how well they are succeeding at communicating the value of credit union membership and participation.

5. Average Member Relationship

The average member relationship reflects how much the retail member is using the credit union’s share and loan products. This calculation should remove outstanding business loans to focus on the consumer relationship. The credit union’s pricing strategy, underwriting policies, product mix, service levels, and sales culture contribute to this performance measure, as does the makeup of the field of membership (FOM) and the economic environment. Offering products at competitive rates, having a more affluent membership, and offering a variety of loan and deposit products all contribute to higher share and loan balances. The credit union’s ability to market and sell loan and deposit products also has a measurable impact on the average member relationship.

How to calculate: (total shares + total loans outstanding member business loans) / number of members=average member relationship.

6. Year-Over-Year Change In Average Member Relationship

Several factors that affect share and loan growth such as the credit union’s pricing strategies, new product offerings, the level of risk the credit union is willing to manage, the membership’s demographic and socioeconomic composition, and the state of the economy can also change average member relationship. Credit unions with memberships composed of growing industries or communities typically post higher rates of growth than their peers. Demographic factors that influence loan growth include: the average age of members, the wealth distribution of the membership, and cultural attitudes toward debt and borrowing. A credit union’s marketing, product development, delivery channels, technology, and sales culture also influences its ability to grow loans and deposits. If a credit union cleans its membership rosters or purges single-service accounts, this ratio might spike.

How to calculate: (average member relationship new year) – (average member relationship original year)/ (average member relationship original year)=year-over-year change in average member relationship.

7. Number Of Accounts Per Member

The number of accounts per member loans and deposits is driven primarily by the credit union’s business plan but also by its FOM. A credit union that offers a full array of financial services as well as the resources required to deliver those services should have a higher account-to-member ratio.

Credit unions can use a four-step business plan to increase the number of accounts per member.

• First, a credit union must develop products and services such as checking accounts, investment-type deposit products, credit cards, and real estate loans that meet member needs.
• Second, a credit union must develop the delivery channels that fit the FOM. A credit union must have the appropriate number of branches, but it also might consider a call center that processes loans and an online system that provides both transaction and deposit and loan account processing.
• Third, the credit union must offer competitive pricing.
• Fourth, the credit union’s sales culture must be able to promote both deposit and loan products.

Credit unions that want to provide niche or limited services need to continually monitor the membership to validate such a strategy and be aware of competitive forces that could copy the strategy. Credit unions that do not have a strategy to routinely purge dormant or single-service, inactive accounts will likely also have a low account to member ratio.

How to calculate: (number of loan accounts + number of share accounts) / total members=number of accounts per member.

Although technically a single metric, penetration is a valuable way to evaluate ROI on marketing expenses, and there are several subsets to consider on a product-by-product basis.

Credit unions can analyze penetration metrics in two different ways:

• The percentage of membership that has an outstanding account.
  For example, 16% of credit union members nationwide have an auto account (some members might have two or three, some none, but on average it works out to 16%). This is an easy way to evaluate the depth of a certain product within the membership. In this example, 84% of credit union members do not have an outstanding auto loan with their credit union.
• The number of accounts each member has.
  This is another way to think about penetration. Continuing the above example, each member has on average 0.16 auto loans. This viewpoint is helpful in constructing the average member. When used in conjunction with other loan products it reflects the composition, by number of accounts, of the credit union’s loan portfolio.

Both of these metrics is calculated: number of product-specific accounts / number of members=product-specific penetration rate.

Few credit unions excel in each and every one of the five subsets below. Depending on the credit union’s membership demographics, overall strategy, and individual product strengths, a credit union might grow some of these metrics while keeping others in a maintenance mode with steady penetration rates.

8. Checking/Share Draft Penetration

8a. Checking/Share Draft Penetration

A credit union’s share draft penetration is an excellent measure of the membership’s participation in the credit union. The checking account is generally the central account for most households. It indicates the financial institution is the one the member contacts first when looking for additional financial services. The credit union’s ability to penetrate its share draft account market is based on how well the product or products meet the needs of the members and on how well the credit union is able to communicate the product’s benefits to members. Debit card activation and usage along with associated direct deposit relationships are critical to building a sticky relationship through the checking account product.

8b. Auto Penetration

Auto loans are the primary source of income for most credit unions as they are both profitable and broadly appealing. When done right, they can also be a productive use of operational resources. However, they do carry risk, particularly if the credit union does not have adequate risk control procedures. Auto loans are also not great relationship builders and the marketplace is highly competitive.

Successful auto lending credit unions generally have the following characteristics some sort of relationship with auto dealerships either through buying programs or indirect lending programs, solid risk management policies, multiple delivery channels for loans, and effective marketing and sales programs. Credit unions in urban areas will post noticeably lower auto loan penetration rates than those credit unions located in suburb or rural areas.

8c. Mortgage Penetration

Real estate loan penetration is a measure by which credit unions can determine the percentage of members that are using the credit union’s first or second mortgages or home equity lines of credit. Several factors contribute to the value of this ratio. For example, if the credit union is mainly a consumer lender or has a young mortgage program, this ratio might be lower. This ratio also might be lower if the credit union primarily sells mortgages to the secondary market rather than keeping them on their balance sheet (the ongoing record-low rate environment makes this increasingly the case).

Use care when comparing the real estate loan penetration rates using 5300 Call Report data. Advanced analysis using a combination of additional metrics such as amount of loans sold or serviced, average mortgage balances, and market share provides a more accurate comparison for credit unions that are strong mortgage lenders.

8d. Credit Card Penetration

As a financial service, the credit card is as ubiquitous as a checking account. At year-end 2009, according to the Nilson Report, there were 2.7 credit cards per person in the United States in circulation. Having a credit card is nearly essential to function in today’s increasingly cashless society. A credit card account can therefore be a relationship-building account along with the checking account and a real estate loan.

Operationally, credit cards generally require more resources and a higher level of expertise. And if not managed correctly, credit cards also have risk management characteristics that can lead to significant losses relative to the portfolio. Credit unions that have sold their credit card portfolios will report few, if any, outstanding accounts on their call reports.

8e. Online Banking Penetration

Member usage of the credit union’s online banking portal indicates a strong relationship. Most consumers expect the availability of online account access, bill pay, and eStatements. Additional online services such as personal financial management, remote deposit capture, online loan applications and pre-approvals, and mobile banking are gaining prominence in serving members regardless of their physical location. Credit unions that do serve a disparate group of members or have a large number of Gen X and Y members are more likely to have or be investigating these delivery channels.

We’ve already examined metrics relating to membership base and new business, reviewed the member relationship based on balance sheet totals and the number of accounts, and tackled product penetration rates. Now, we consider the income and expense items related to marketing.

9. Fee Income Per Member

The level of fee income per member is driven by the credit union’s fee strategy, which is a function of the credit union’s field of membership (FOM) and financial structure. A credit union’s fee strategy is generally designed to fill in the shortfall between net income and the credit union’s ROA goal. Other issues include the FOM’s tolerance for fees, competitive pressures in the credit union’s trade area, and the board’s attitude toward fees. Beyond this, fee income per member can also indicate member usage. As they would at any financial institution, credit union members generally pay some type of fee to use products and services. Marketers must not only be cognizant of competitors’ fees but also be able to support the credit union’s fee strategy by communicating how the credit union’s products, services, pricing, and fees fit into the market landscape.

How to calculate: (annualized fee income)/number of members=fee income per member

10. Education & Promotional Expenses Per Member

The amount of money a credit union spends per member on education or marketing expenses is driven by the credit union’s business plan, market commitment, and sales culture. Education and promotional expenses are an investment in the success of the credit union’s products and services. To ensure the investment is producing results, credit unions should evaluate the expense in terms of other measures that indicate market penetration. These measures include accounts per member, average share balance, share draft penetration, and average loans per member.

How to calculate: (annualized educational & promotional expenses)/number of members=educational and promotional expense per member

11. Education & Promotional Expense Per Loan Origination + Net New Deposit Account Balance

This metric, while somewhat similar to the one above, tries to reconcile education and promotional expenses in a given year with the new business generated that year. Although measuring average balances and accounts per member is important, those two aspects are cumulative over time. It is equally important to measure the new business generated in a single year. Measuring the promotional expenses relative to the loans originated year-to-date and the net new share balances helps measure the more immediate return of the marketing spend. As there is a seasonal trend to savings and lending, credit unions should evaluate this metric in full year (i.e., 12-month) increments only. A year-to-date review significantly skews the data.

The credit union’s demographics and members’ financial behavior will greatly affect this metric. For example, older members are less likely to take out new loans and might be spending-down retirement savings. A credit union with these members might have to increase marketing spending to entice members to open a new loan versus a credit union serving a younger membership in their prime credit years.

How to calculate: (annualized educational & promotional expenses)/{(annualized loan originations) + (annualized YTD change in deposit balances*)}=educational and promotional expense per new dollars in loan originations and deposit account balances

*Current deposit balances less deposit balances as of the prior year-end.

12. Net Income Per Member

Ultimately the credit union exists to serve members; however, each credit union manager must work with the board of directors to determine profitability goals. Marketers are key employees in helping to meet those goals. Credit unions can measure success at the institutional level such as through ROA or ROE or at the member level. Net income per member is one way of thinking about how each member contributes to the credit union’s success. Profitability levels vary depending on member product usage, engagement, and organization contact, and the credit union’s chosen delivery networks such as branches, call centers, and online services as well as FOM help drive these variables.

How to calculate: (annualized net income)/number of members=net income per member.

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This article appeared originally on CreditUnions.com in December 2012.

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