Technology is giving large credit unions an advantage in attracting new members, so much so that the growth the industry experienced over the past 12 months is concentrated almost entirely among those with $1 billion of assets and up.
The credit union industry experienced 4.4% annual membership growth, to 134.3 million, in the third quarter compared to a year earlier, according to the latest data from the National Credit Union Administration. Credit unions with at least $1 billion of assets grew their memberships 8.1% year-over-year in the third quarter.
The largest credit unions in the U.S. — including
By contrast, each of the NCUA's asset categories below the largest saw a drop in membership. The $100 million-asset to $500 million-asset group saw membership fall 4.3% during the year.
"We'll likely see greater dichotomy between the haves and have-nots, unfortunately," said Vincent Hui, managing director at Cornerstone Advisors.
Larger credit unions can invest in technologies that have frictionless member experiences, such as with new account openings and loan originations, and that will always give them an advantage over smaller institutions, Hui said. In addition, the mega-credit unions can better afford marketing and partnerships with fintechs that can expand their market reach.
"This is why strong credit unions are considering mergers — so they have the economies of scale to invest in those strategic capabilities," Hui said.
Achieve Credit Union, a $178.1 million-asset institution in Elyria, Ohio, has seen its membership stagnate in recent quarters and stood at about 11,600 in the third quarter.
"The struggle is similar to what we see in retail between mom-and-pop stores, big box superstores and now internet commerce," said Bret Fisher, Achieve's chief executive. "The smaller stores survive and grow by being involved in their communities, having a superior level of service and connection, all while still maintaining competitive products and services."
Fisher, who became Achieve's
"Member growth is always a concern, but making sure we keep within our identity and expand it properly, to provide the best services and features we can for our members and community, cannot be lost," he said. "Having a realistic vision of what your members want you to be is imperative."
There are often options and
And the credit union is concentrating on low rates and strong customer service to bring in new accounts, he added.
Credit unions of all sizes must constantly adapt to changes in consumers' preferences and to technologies, said Luis Dopico, chief economist for the consultancy CU Collaborate.
The statistical evidence available during the last four decades clearly shows that members flow to credit unions that provide them with better pricing, wider offerings and better service, Dopico said.
Credit unions must redouble their efforts to provide members with attractive loan and share pricing — particularly in the current interest rate environment — while investing in member service, he said.
"Put simply, offering good rates alone is not enough. Expanding your (field of membership) alone is not enough. Increasing your marketing budget alone is not enough. To attract more members and more of their funds, credit unions need to offer a good deal, open their doors to ever broader communities and inform their communities that they are a good deal," Dopico said.
Some credit unions have turned to indirect auto lending to spur member growth. The only problem, Dopico said, is that this strategy doesn't work.
During the last 12 months, credit unions with above-average levels of indirect loans grew their members at a similar rate (5.2%) as those with fewer indirect loans (4.7%). Credit unions without any indirect loans also grew members at a similar pace (5.0%).
Sharonview Federal Credit Union in Indian Land, South Carolina, increased its membership 11% year-over-year, to 113,360, at the end of the third quarter of 2022.
President and CEO Herb White, who
"Scale allows us to focus on membership growth as a single initiative and apply the necessary resources to be successful," he said. "The changes in consumer behavior are rapidly shifting with technology advancements that were deployed and accepted on a wide scale during COVID."
