ARLINGTON, Va.—It’s a myth that the main competition for credit unions is other credit unions, according to one person.
Lucy Ito, president and chief executive of the National Association of State Credit Union Supervisors (NASCUS) here, points out that credit union asset share, currently 7.1% of depository institution assets, has stayed relatively flat for many years.
Her assessment is that credit unions would be better off competing against the 93% share commercial banks have, rather than the much smaller slice credit unions represent.
And their target should not be community banks, which might be closer in size to the average credit union, but the big national banks.
Why? To paraphrase bank robber Willie Sutton, that’s where the market share is. Ito points out that the big banks have been taking away share from community banks rapidly in recent years, so that’s where the opportunity is.
Ito’s remarks are part of a series CUToday is doing on “fake news,” that is myths and misperceptions about credit unions that boards and executives should be thinking about.
“Credit unions think of other credit unions as the competition,” she says. Partly this is because the data they have access to often is siloed just for credit unions, so that is what they use to benchmark against, she said.
New Peer Comparisons
Ito noted that Callahan & Associates and CUNA have both started to add more bank data to the numbers they publish, so credit unions now can begin to see how they stack up against banks.
In particular, they should note “a precipitous decline” in share for smaller banks, Ito beieves. In 1992, these had a 53% share, according to data from CUNA, NCUA and the FDIC. In 2016, that had shrunk to 18%. All that share increase has gone to the 100 biggest banks (who moved up from 41% share to 75%), and credit unions have so far missed their chance to join the feast.
“There is a huge market out there,” she feels.
Another Myth: State Vs. Federal
Meanwhile, addressing another myth within the credit union community, Ito pointed to the belief held by some that the federal credit union universe is a lot larger than the state credit union field.
Of 5,818 credit unions nationwide currently, 2,250 are state-chartered, she says, almost a 40% share.
Lucy Ito
Parity is even closer in the asset size and member categories, she says.
Of the $1.37 trillion in industry assets, $669 billion (49%) belong to state charters, she pointed out. And in member numbers, of 110.6 million total members, state credit unions control 52.7 million (also 49%).
A Myth in Credit Union Marketing
A third myth, she said, is similar to the first. It’s that in credit union marketing “we are the audience,” she claims. “In fact, we’re not the audience.”
A lot of credit unions use “credit union language and concepts” more likely to capture credit union members than those that use megabanks. They don’t target “those folks where the biggest opportunity lies,” she opined.
Credit union executives sometimes resist the kind of edgy, non-traditional marketing campaigns that might catch bank customers, saying “we don’t want to be seen that way.”
Ito said that credit unions do get the occasional member windfall when banks screw up, such as the recent Wells Fargo account opening scandal.
“But instead of waiting for a mistake, the key is how do you get noticed by megabank customers?”
An interesting metaphor she uses is that credit unions should be targeting “the underserved and over-tattooed.”
Her point is that credit unions should not just market to people who look like themselves, but to people that don’t.
There are an awful lot of them, she says. Going back to that 110 million national membership number, Ito feels the more incisive stat to look at is the national population of 327 million, and the 220 million of them who are not credit union members.
—Mark Fogarty