June 2, 2010

If you’re wondering what might be keeping credit union leaders up at night in our competitive environment, the best people to ask are those leaders themselves. That’s what Credit Union 24 did in a survey taken between January and February, 2010. Approximately 77 percent of those polled cited consumer misunderstanding of credit union benefits over banks as the greatest challenge in attracting new members. That represents an increase of 10 percent over a similar survey taken in 2009, when 67 percent cited this as the greatest challenge (see Figure 1). For the second year in a row, the perception that credit unions have limited offerings compared to banks followed as the second-greatest challenge (45 percent of respondents in both 2009 and 2010).

While consumer misunderstanding is the greatest challenge affecting growth in membership, attracting new members is the second-greatest overall concern. Approximately 70 percent of those polled cited the current economic climate and NCUA assessments as two of the greatest challenges facing credit unions, an 11-percent increase over last year. Retaining current members and developing successful marketing tools were also seen as significant challenges (see Figure 2).

Figure 1:

Figure 2

“An economic cloud still hovers over our nation’s credit unions, as evidenced by credit union leaders’ concern about attracting new members having decreased by only two percent since last year,” said Jim Park, president and CEO of Credit Union 24, a leading credit union service organization (CUSO). “It’s rather interesting that the concern of attracting new members and the economic situation have reversed this year, with the economy being the number one cause of anxiety among credit union leaders. We’re starting to see rays of sunshine peek through the cloudy economic climate, yet credit unions are focusing very intently on maintaining and enhancing their bottom lines as the economy slowly starts to rebound.” 

In 2009, approximately 61 percent of polled credit union leaders cited attracting new members as their greatest challenge, while 59 percent cited the economic climate as their greatest challenge.

Despite the challenge of attracting new members, 56 percent of credit union leaders said that their credit union’s membership has increased since 2009 (see Figure 3). Forty-one percent said the downfall of failing banks was a major factor in increasing their membership. Fifty-one percent of respondents believe that better customer service is the credit union’s strongest competitive advantage over banks, compared to 22 percent citing lower interest rates on loan products as their strongest competitive advantage (see Figure 4). 

Figure 3

Figure 4

“Many credit unions are finding unique ways to remind consumers that fall within their charter’s target audience of the benefits they provide to consumers,” said Park. “These methods of member outreach include marketing competitive interest rates on savings and loan products.” 

Member behavior has evolved since 2009 as well, with 63 percent of respondents saying that their members’ use of point-of-sale (POS) has increased. Thirty-seven percent of respondents said that POS usage has remained steady since 2009, and none of the respondents said that POS use has decreased among their membership (see Figure 5). Utilization of POS for cash-back among credit union members is also on the incline, with 89 percent of credit union leaders saying that up to 40 percent of their membership utilizes POS for cash-back. Yet while POS usage is increasing, ATM usage appears to be gradually slowing down, with seven (7) percent of respondents saying that their members’ use of ATMs has decreased since 2009. Only 50 percent cited an increase in ATM usage over 2009 (see Figure 6). 

Figure 5

Figure 6

“Member behavior directly influences the balance of income and expense, and credit unions have become more effective at driving members to utilize financial products and services that provide increased revenue,” said Park. “POS and cash-back at the POS serve a similar purpose as ATMs, yet they serve as an income generator for credit unions and can be more functional to members by allowing them to automatically track their expenditures. Educating credit union members about the value of using POS can positively influence a credit union’s bottom line—and it seems that credit unions are doing just that.”