By Tony Ward-Smith
No. Not really!
Once again, NCUA’s year-end 5300 data shows some growth in members and assets. But the number of CUs continues to plunge, and one-out-of-five-still-alive ended the year in the red.
But a little gain is better than none at all, right?
OK, you’re seeing only the broad picture here. If you’ve followed us over the years you know that the key measure of CU success, to our thinking, anyway, is the extent to which a credit union actually serves its members. Each year we track accounts-per-member and call it the “High Performance” metric. Many CUs do remarkably well in the “engaging members” department, but sadly, only 8% of all U.S. CUs meet the relatively simple “HP” criteria (see charts, below).
And so, like it or not, our industry is consolidating rapidly, with 280 fewer credit unions in 2014, and it’s likely that 900 to 1,200 more will close their doors over the next three years.
But even more troubling is the amount of banking members don’t do with their credit unions. Except for a slight but encouraging gain in checking relationships, all other account connections are stuck in the mud, going nowhere! Every report about consumer finance shows people aren’t saving enough (especially for retirement), but CUs don’t seem to be able to get members to do what ’s good for them financially. And lending, too, isn’t going anywhere overall.
In the face of all this we see three critical strategic priorities that credit unions must— yes, must— commit to:
1. Re-Establish Market Relevance as HELPING places! Banks are selling places, credit unions are helping places! And research shows that today people of all ages and financial levels desperately want more help, more advice, more “smart-move” suggestions. This is the role CUs should play. And as for branding, this is the vital who we are, what we do, how we are different— market distinction to promote loud and clear!
2. Strive For “HP” Performance! Fact: Credit unions with higher accounts-per-member ratios generally show higher ROAs. And since CUs deliver earnings back to members as added services and benefits, those that consistently do more business with members are, in turn, able to do more for members. And that's what it's supposed to be all about!
3. Go Digital! Get this—the Internet IS the future for retail banking! It enables CUs to do more for members at much lower cost while emphasizing the critical market distinction as a help-source. Stop, thinking branches ,start thinking website! This calls for an entire rethinking of your entire operation. Get with it!
Bottom line? Ironically, the market opportunity for credit unions, if played properly, couldn’t be better. Those that “get it” will survive and prosper (yes, even some of the small ones). Those that don’t— sayonara.
Tony Ward-Smith is with Ward-Smith & Co., Seattle. He can be reached at www.ward-smith.com or at wardsmith@seanet.com.