Is your credit union ready for the next recession?

Recession fears have grown in recent months. New CU performance data does hint that a slowdown is occurring.

  • As of June 2019, CUNA estimates 5,529 credit unions were in operation, 21 fewer than May and 179 fewer than June 2018.
  • During the first half of 2019, approximately 74 credit unions ceased to exist because of mergers, purchase and assumptions or liquidation.
  • Credit union memberships grew 381,000 in June (0.32%) which is below the 494,000 new members (0.43%) added in June 2018.
  • Total credit union memberships have now reached 120.5 million – 36.6% of the total U.S. population of 329.3 million. Last June, 35.6% of the U.S. population belonged to a credit union.

Amidst this backdrop, here are 3 things every credit union should to focus on:

  1. Competitive advantage becomes increasingly important – In the days of social media and smartphones, user experience and member satisfaction are very important factors. As non-profit cooperatives, credit unions traditionally pass on this advantage to members and, and when compared to banks offer higher rates on savings accounts and lower rates on loans and credit cards. In addition, credit unions charge lower fees and are unlikely to require a minimal balance. While credit unions should continue to leverage these competitive advantages, they should also focus on additional attributes to maintain their superior consumer satisfaction ratings.
  2. Digitization is increasingly becoming a competitive differentiator – Members today expect ease of use and 24-7 service through digital banking from their financial institutions. Digitization has two benefits: improved convenience for the consumer as well as lower operating costs for organizations. Credit unions still have time to embrace comprehensive, connected banking suites for multiple account and loan types to digitize every step of the member journey. For example, few banks offer a fully automated platform or take advantage of digital opportunities for commercial and small business loans, but rather focus on mortgages and consumer loans according to the American Bankers Association. To capture more active mobile banking consumers early, credit unions should complete digital transformation to a comprehensive omnichannel platform in three main areas of the account acquisition and lending process:
  • Analytics
  • Information collection featuring common database, one-time data entry, and auto-update
  • Flow and access to information, including a capability to upload third party data and access it in one centralized interface

3. Enhancing value of in-branch visits through advanced technology – Despite growing importance of digital banking and declining number of transactions at the brick-and-mortar branches, consumers still crave personal interaction and prefer to open accounts at institutions with physical branches according to a study by TimeTrade, a provider of customer engagement services. Member-owned status coupled with community-oriented philosophy give an advantage to the credit unions compared to the banks. Credit unions would benefit from mobilizing their branch staff through additional training, access to omnichannel transactions, as well as transforming branches with technological advances to reduce wait periods, offer personalized services and provide integrated online-branch experience.

While it may be a bit daunting to consider a recession, but its best to consider the future now so that your credit union can not only to survive but thrive during an economic downturn. Fortunately, there are many opportunities for proactive credit unions willing to embrace digital transformation while strengthening in-branch experience by developing new solutions in-house, partnering with or acquiring another organization like a fintech, and investing in CUSOs. The key for credit unions is to stay true to the credit union ethos by focusing on the needs of your members and determining how to best serve them regardless of market

A part of this post was originally published by John Dearing (Partner at Capstone) on CUInsight.