TAMPA, Fla.—After slowing during 2020 due to the pandemic, overall growth among credit unions rebounded in 2021 and 2022 could be even better, especially for CUs that focus on checking and credit cards, according to one person.
Suchit Shah, VP of professional services at Trellance, told attendees during a recent webinar hosted by the company that credit unions must capitalize on the resurgence of credit cards, while also defending checking deposits by improving rewards and rate. Indeed, Shah suggested a battle over checking accounts could be heating up in the market right now.
Shah told attendees Trellance is seeing rates beginning to rise on checking now and not just as a result of the Federal Reserve pushing rates up, saying it is an intentional move by depositories to attract and retain the low-cost funds.
One example, as CUToday.info has reported, is evolve FCU in El Paso, Texas, which paying 7% on checking if members meet certain qualifications.
Shah said credit unions must begin to think about how they will pay greater dividends to members on the product.
“We are seeing that there is higher interest from credit unions—and I'm talking about a handful of credit unions—that are starting to focus on higher-dividend checking accounts,” Shah said.
Shah suggested a shift could be occurring within CUs, moving from rewards-based checking to more eye-catching, higher-rate checking offers.
“A handful of credit unions are looking at how do we make sure we provide better returns to our members,” he said. “We are seeing this increasingly being asked for. We may have a better idea next quarter as to what is going on in the industry, but something is changing there for sure. I recommend that credit unions look at their deposit strategies now.”
Shah said data reveal credit unions that are growing well all have something in common—their credit card portfolios are growing in double digits, from 15%-20%.
“People are traveling more and that will continue in 2022,” said Shah. “I expect we will go back to the same credit card growth we saw pre-pandemic.”
Another Benefit
In addition to creating more revenue, driving more card usage is sound, inexpensive marketing for credit unions, according to Shah.
“Your credit and debit cards are two vehicles that put your credit union’s logo toward the consumer multiple times a day. Every time members bring your card out of their wallets they remember they do business with you,” Shah reminded. “I encourage you to work on active portfolio management strategies that drive higher usage of cards and checking. Have something every month, go in front of your members. I call it aggressive portfolio management.”
Turning to member growth, Shah reflected on a trend that began more than a decade ago in response to one person’s angry Facebook post over how their bank had treated them and urging people to switch to credit unions.
“Going back Nov. 5, 2011, which was Bank Transfer Day, we actually started that day… I would call it an awakening. And since then we have seen amazing member growth,” Shah said.
A ‘Revival’
But Shah noted that decade’s worth of steady growth began to slow as pandemic unfolded, before credit unions in 2021 began to see those numbers move higher again.
“So, 2021 brought in what we were looking for, essentially the revival of membership growth,” he said. “Recapturing what we were in terms of member growth…continuing to be trusted by consumers. They know what we are good at—charging less fees, giving good rates…”
To maintain that growth, added Shah, more credit unions will need to “embrace digitization.”
“It means really catching up on the new technologies,” he said. “As we move forward, things are rapidly changing. You need to embrace and work towards digitization, work towards member satisfaction, work towards sophisticated member outreach strategies that rely on data analytics.”
Shah said that in his work with credit unions they are increasingly leaning on data analytics.
“We are seeing more and more credit unions talking about how can I get help with channel optimization,” he said.
The Right Steps With Members
Not only can data analytics help with channel optimization, data can be used to help credit unions take the right steps with members, offering them the right products and services at the right times in their lives. That, Shah said, is leading to “propensity models.”
“What we mean by propensity models is what are the next best offerings that I should share or reach out to my member with daily?” he explained.
Shah noted that Trellance, for example, offers CUCompare, a web-based descriptive analytics solution that provides credit unions a way to benchmark and track performance through national, state, and asset-band peer comparisons. CUCompare is based on data drawn from NCUA on all federally insured credit unions and from the FDIC on commercial banks.
“With CUCompare you can assess a wide range of pre-defined and fully customizable performance metrics across a variety of peer logics,” Shah said.
The Year for ROA
Shah noted that 2021 was the “year for ROA” for credit unions, because net income was higher. He emphasized much of that was due to the lower interest expenses because of all the low-cost deposits on hand and CUs had to borrow less.
NCUA data show that in 2021 CUs as an industry topped 1% ROA (1.06%), the first time in more than 15 years, Shah noted.
“As you are starting to see, with loan growth increasing, you will see (net income) go down due to the higher interest expenses,” he said.