Navigating the Evolving Credit Union Landscape in 2024

The frontrunner CUs will prepare to capitalize on fluctuations in the economy, technology and regulations.

By Jody Bhagat | March 22, 2024 at 09:00 AM

As we find ourselves nearly three months into 2024, several developments are shaping the credit union landscape faster than ever before. Greater member attrition, increasing digital migration, heightened regulatory scrutiny and the emergence of artificial intelligence are coming together against economic uncertainty. Credit unions face difficult prioritization in this fluid climate. One prediction seems sure: We'll see further divergence between top-tier credit unions and the rest of the pack over the next 18 to 24 months.

While most concentrate on driving efficiencies and cost reductions in 2024, progressive institutions are strategically boosting investments in critical capabilities for an edge. History shows this advantage can expand when competitors simply hunker down. What priorities should lead the agenda ahead? Here are four key areas credit unions should consider moving up on their priority lists.

1. Realizing tangible value from major initiatives.

Many credit unions have started on ambitious modernization initiatives across four areas: Data infrastructure, core system upgrades, digital platform enhancement or post-merger integration. For some, these resource-intensive undertakings are long-term plays focused on building essential competitive strengths over time. However, with mounting cost pressures, these complex attempts may demand that their efforts prove material, near-term returns that warrant ongoing expenditure. Credit unions should identify high-impact applications that can speed up the realization of benefits, re-evaluate transformation roadmaps for phased rollouts that extract value faster and combine them with operational efficiency programs.

Credit unions have to strike a balance between making progress on modernization while also demonstrating concrete dividends from early accomplishments. For instance, rather than rolling out a wholesale data transition over two years, credit unions could prioritize specific "use cases" based on a narrower collection of data assets. This generates ROI through better member intelligence while methodically strengthening the overall environment.

Leading credit unions recognize that transition for its own sake no longer cuts it. They have to maintain a sharp focus on step-by-step priorities that move them to modern systems while also fueling momentum through early wins.

2. Battling for deposits through member engagement.

The intense competition for core deposits is now a top priority for most credit unions. Rising funding costs, account outflows and thinning margins put institutions in a battle for any advantage to attract and retain deposits. However, promotional rates alone rarely work on their own anymore amid the current competitive landscape.

McKinsey research found two key demographics – young/high income and middle age/high income – account for over 60% of deposits prone to switching institutions. The former shows a switching likelihood 3x higher than the latter. Credit unions that understand and fulfill distinct member preferences can draw more deposits compared to rivals.

While pricing stays important, the focus should shift toward member engagement by providing customized solutions grounded in behavior and product innovation. Such personalization represents the main factors in securing future deposits.

Savvy credit unions engage members through tailored offerings – like "savings boosters" – that benefit both sides. Adoption of these tools can as much as double the credit union's ability to capture more wallet share through additional product relationships.

As credit unions empower members with more control through customized insights and tools, they build trust and loyalty beyond temporary rate incentives. The winners in this intensifying battle will be those that leverage rich member understanding to demonstrate they have each person's best interest in mind. Prioritizing engagement and trust now yields higher account balances later.

3. Journeys become the priority.

Members have many financial objectives, like increasing savings, reducing expenses or improving credit health. These goals evolve as people's financial situations change over time. These "jobs to be done" require more than a single move – they're a journey.

In 2024, credit unions will get better at identifying members' most critical financial journeys. They will then curate products, tools, trackers and content to quicken progress along those paths. Rather than promoting generic offerings, credit unions will facilitate members spelling out their goals and tailor solutions to streamline their achievement.

Of course this will be a phased approach, initially focusing on the top priority journeys detected. The key is coordinating across channels and products to smooth the complete trip. An added payoff for credit unions is heightened member loyalty and deeper relationships with those who allow the institution to assist them with these journeys.

4. Targeted proposals that showcase genuine personal value.

The era of bland, generic marketing banners is coming to an end. Today, members simply disregard credit union marketing banners, even with sophisticated back-end targeting. Even targeted banners on authenticated sites convert at around just 1%. Members feel credit unions are just trying to sell them something, so it's understandable that few people actually click them. The only real justification for using banners is that credit unions can display them at high volumes, meaning a small fraction of clicks still accumulates.

In 2024, we may see the inception of a new concept: Personalized engagement marketing. Credit unions can harness their knowledge of individual member transactions and behaviors to deliver personalized proposals that show precise personal savings based on spending habits. This is a big shift – fundamentally evolving the whole engagement process between credit unions and consumers.

This breed of data-driven personalization is an example of the future of credit union marketing. Leveraging the latest data and analytical capabilities, credit unions can put together targeted guidance that can foresee what members need. This tailored advice resonates not only because it comes from the member's own activity, but also because it's highly customized to the member's conduct and needs. Targeted guidance grounded in a person's behavior converts because it proves the credit union truly understands them and has a genuine interest in strengthening their financial life.

Looking Ahead

Credit unions face some tough choices in 2024. Compounding the fiscal strain is that these choices will have a lasting influence on a credit union's competitive stance and financial performance. Credit unions need to purposefully concentrate on their abilities that augment the value they provide members, and have that value be unique. Even with so much uncertainty, one thing holds steady – only slashing expenses won't suffice.

The frontrunners in this new credit union world will prepare to capitalize on fluctuations in the economy, technology and regulations. They'll cultivate skills not just to keep pace, but to refine their unique value. Credit unions that embrace change and original ideas can sidestep stagnation, even as fights escalate over deposits, trust and members.

With intensifying competition ahead in 2024, forward-thinking credit unions will prioritize building stronger member loyalty and service, expanding the gap with lagging institutions.

Comments

Growing Your Credit Union Without Expanding Your FOM

For many firefighter and other credit union primarly serving first responders, growth often feels tied to one big decision: expanding the Field of Membership (FOM). But what if you didn’t have to? What if growth could come from within —by deepening relationships, increasing engagement, and capturing more of the financial lives of the members you already serve? The truth is: it can. But it requires a shift in strategy. Rethinking What “Growth” Really Means Most institutions define growth as adding more members. But for single-sponsor credit unions, especially those serving first responders, a more powerful definition is: Growth = more value per member Many members only use one or two products—often a checking account and maybe an auto loan. Meanwhile, larger banks capture mortgages, credit cards, and investments. The opportunity isn’t just new members. It’s: More products per member Higher balances per relationship Greater share of wallet Your Biggest Advantage: The First Responder Life...

Read Complete Article HERE>»

Newly Released Fed Minutes Show Policymakers Seeking to be Flexible on Rates

04/13/2023 Tweet WASHINGTON — Newly released minutes from the Federal Reserve’s March meeting show officials are seeking to remain flexible when it comes to future rate decisions. The paradox for the Fed remains that the labor market remains strong, even as inflation continues to be high, although it cooled in March, according to new data from the Bureau of Labor Statistics. “Central bankers have spent more than a year waging a battle against the most painful burst of price increases in decades, raising interest rates to slow the economy and to wrestle price increases under control,” noted the Wall Street...

Read Complete Article HERE>»

Growing Use of Stablecoins Could Reshape How FIs Manage Liquidity, Allocate Assets, NY Fed Report Suggests

NEW YORK — The growing use of stablecoins tied to the U.S. dollar could reshape how banks manage liquidity and allocate assets, potentially leading institutions that support the digital tokens to hold more reserves and make fewer loans, according to a new study from the Federal Reserve Bank of New York . The paper, titled “ Stablecoin Disintermediation ,” was authored by economists Michael Junho Lee and Donny Tou and examines how stablecoin activity affects the balance sheets and liquidity management of banks that partner with stablecoin issuers. The researchers found that while stablecoins rely on traditional banks to function, the relationships can alter the liquidity demands placed on those institutions. Banks serving stablecoin issuers tend to hold larger reserve balances and reduce the share of assets devoted to lending, shifting toward a more reserve-heavy banking model. Focus of Study The study focused on developments following the March 2023 collapse of...

Read Complete Article HERE>»

Facial recognition to secure payments will exceed 1.4 billion globally by 2025

BASINGSTOKE, U.K.– The number of users of software-based facial recognition to secure payments will exceed 1.4 billion globally by 2025, from just 671 million in 2020, according to a new study from Juniper Research. “This rapid growth of 120% demonstrates how widespread facial recognition has become; fueled by its low barriers to entry, a front-facing camera and appropriate software,” Juniper said, noting the research identified the implementation of FaceID by Apple as accelerating the growth of the wider facial recognition market, despite the challenges to facial recognition during the pandemic with face mask use. The research recommends that facial recognition vendors implement robust and rapidly evolving AI based verification checks to ensure the validity of user identity, or risk losing user trust in the authentication method as spoofing attempts increase, Juniper reported. Fingerprint Sensors The new research, Mobile Payment Authentication: Biometrics, Regulation & Market Fore...

Read Complete Article HERE>»

Credit unions lending rose at a faster pace in most sectors than the small banks last year, according to data released this week by the FDIC and CUNA Mutual Group.

What credit unions lacked in size they made up for in speed compared with community banks and savings institutions in 2017. Credit unions lending rose at a faster pace in most sectors than the small banks last year, according to data released this week by the FDIC and CUNA Mutual Group. CUNA Mutual’s monthly trends report showed credit unions held $984.8 billion in total loans at Dec. 31, up 10.7% from a year earlier and a growth rate more than twice as fast as community banks. Credit union assets rose 6.3% to $1.4 trillion due to a 6.3% increase in deposits, a 3% drop in borrowings and a 7.7% increase in capital. With loan balances growing faster than assets, the loan-to-asset ratio ended 2017 at 70.4%, up from 67.5% a year earlier. The fast loan growth also helped loan delinquency rates fall to 0.79% in December, down from 0.83% a year earlier, according to CUNA Mutual. The FDIC’s Quarterly Banking Profile showed loans at the nation’s 5,670 community banks ...

Read Complete Article HERE>»

Don't say NO to your members anymore!

Does the following scenario occur at your credit union? If it does, we have a solution for you! A member comes in into your credit union and wants to know if you will loan them a couple of hundred thousand $$$ to buy a building, or can you loan him some seed money to start a new business or purchase equipment for the company they currently own, and you say, “the credit union doesn't do those kinds of loans”. Does this sound familiar? How many times do you and your staff say NO and literally tell a member to “go down the street or go somewhere else” ? Well, now, you have another option. CU First Responders Finance (CUFR) CU First Responders Finance, LLC (CUFR) is a partnership between the National Council of Firefighter Credit Unions, Inc. (NCOFCU) , and Biz Lending & Insurance Center, Inc. to provide business lending origination programs to NCOFCU member credit unions. CUFR will provide you with a turnkey operati...

Read Complete Article HERE>»

Americans are using alternative financing arrangements, such as rent-to-own

CUToday PHILADELPHIA–Many Americans are using alternative financing arrangements, such as rent-to-own, that a new report from Pew Charitable Trusts indicates are generally riskier, more costly, and subject to far weaker consumer protections and regulatory oversight than traditional mortgages. Pew Trusts sad the “evidence suggests that a shortage of small mortgages, those for less than $150,000, may be driving some home borrowers (i.e., people who purchase a home with financing) who could qualify for a mortgage into these alternative arrangements. And other factors related to a home’s habitability and the ownership of the land beneath a manufactured home—the modern version of a mobile home—can make certain homes ineligible for mortgage financing altogether.” According to Pew, the evidence of potential consumer harm, little is known about the prevalence of alternative financing in the U.S., primarily because no systematic national data collection exists. Pew said approximate...

Read Complete Article HERE>»

What should your credit union budget for in 2025?

As we enter the fourth quarter, many credit union leaders are starting to turn their attention toward planning for 2025. With a myriad of options and new technology, it’s crucial to prioritize services that set credit unions apart while encouraging growth. In this article, we explore several key areas credit unions should consider when preparing their budgets for the coming year. Expanding membership One significant trend shaping the financial landscape is the exodus of big banks from rural communities . This presents a golden opportunity to expand membership to new communities. However, this expansion doesn’t necessarily require traditional brick-and-mortar branches. Credit unions can leverage technology to provide services efficiently and cost-effectively. Some alternative service delivery methods include: Interactive Teller Machines (ITMs) : These advanced ATMs allow members to interact with a live teller via video, providing a personal touc...

Read Complete Article HERE>»

Mike Richards CPA Industry Trends

Weekly News Summary Here are some things that were in the news last week. Please share these articles with your Supervisory Committee and Board of Directors. If you missed previous editions of the weekly news, summaries of those can be viewed at our archive. Happy Holidays! Mike Richards, CPA Economic and Industry Issues Knowledge is the key to effective corporate governance. Staying abreast of economic and industry issues affecting your credit union will prepare you for those responsibilities. Facing year-end cut off, U.S. banks scramble to extend COVID accounting relief Read More NCUA Quarterly U.S. Map Review – Third Quarter 2020 Read More Payments Trends In The Age of Coronavirus Read More The lasting impact of COVID-era audits Read More Regulatory and Accounting Issues ...

Read Complete Article HERE>»

Boston Firefighters Credit Union sets up fund

Posted Mar. 27, 2014 @ 7:35 pm ROSLINDALE The Boston Firefighters Credit Union has created a fund to help support the families of Lieutenant Ed Walsh and Firefighter Michael Kennedy. "In difficult times like these, I am so proud to be mayor of a city that comes together to help our neighbors in need," said Boston Mayor Martin J. Walsh. "Since yesterday's tragic events, we've experienced an outpouring of support from across the city, state, and country. So many people have expressed a willingness to help, in some way, as we grieve the loss of Lieutenant Walsh and Firefighter Kennedy." "Although no donation can heal the wounds suffered by the Walsh and Kennedy families, we are grateful to the Boston Firefighter's Credit Union for helping us create a focal point for peoples’ generosity, and to the people of Boston, of Massachusetts, and of the United States, who have once again shown the power of a community to help healing process begin." ...

Read Complete Article HERE>»

First-responder Credit Union Newsroom

Search This Blog