Regardless of the organization you're talking about, all credit unions operate with the same basic goal in mind: to serve their members. To do this as effectively as possible, they have to keep growing and establish a strong foothold in their community.
The over-arching way to do this is to make sure that you're always offering A) the highest quality services at B) the most attractive rates that you can. But at the same time, looking at the world through this simplistic lens will only get you so far.
The reality is that in order to grow as consistently and as efficiently as possible, you need to better understand the key elements that contribute to asset growth in the first place. Within the context of a credit union, that means gaining a better understanding of two things: the relationship between marketing expenses and your ability to scale, and the deposit benefits that you are offering to your members on a regular basis.
The Power of Marketing Expenses
One of the most significant factors that help empower credit union asset growth has to do with marketing expenses. In the case of a credit union, you're likely talking about educational expenses for community members, promotional expenses, or some combination of the two.
Yes, on the one hand, it seems obvious that if you increase the amount you spend on marketing, it will increase the number of new members coming in. But the reality of the situation is a bit more nuanced than that. Research has indicated that strategically increasing marketing expenses not for the entire credit union, but on a per-asset basis, had a major impact on the asset growth rates of those assets.
That was something that was consistent among virtually all asset size ranges, keep in mind. Likewise, this is a trend that experts have been observing for decades.
All of this is especially impressive when you consider that marketing is one of the smaller categories of expenses among all of your day-to-day operating activities. One recent study indicated that in 2020, the average credit union only spent about 0.10% of all credit union assets on marketing on average. This equated to roughly 3.5% of all non-interest expenses.
Looking at the bigger picture, this could easily mean that significantly increasing your marketing expenses could maintain a consistent (read: high) return on investment. The old saying "You have to spend money, to make money" really does seem to apply in this case.
For example, recent studies have indicated that between 1980 and 2020, those credit unions that increased the amount of money they were spending on marketing at a rate equivalent to 0.1% of assets saw growth rates that were 0.82% or higher on average. Those growth rates were again consistent among most asset size ranges, and have largely been consistent for decades.
All of this is to say that if you're looking for a way to make a positive impact on credit union asset growth in a reliable and easy-to-manage way, increasing the amount of money you're spending on marketing on a per-asset basis is arguably the strongest way to do it.
The Importance of Deposit Benefits
Another one of the key elements that contribute meaningfully to credit union asset growth has to do with offering large deposit benefits to members.
That is to say, paying higher interest rates on deposits is obviously a revenue generator, and it has a noticeable impact on asset size growth. According to one recent study, in the period between 1980 and 2020, credit unions that made a concerted effort to increase interest rates on member deposits by at least 1% achieved asset growth rates that were significantly higher than everyone else. Not only that, but they were an average of 2.2% higher, too.
The only actual exception to this took place in 2020, as the COVID-19 pandemic began to work its way across the world. Because of all the sudden changes that were happening to people's financial situations, just about all credit unions experienced a massive influx of deposits. The trend will likely be proven to have continued, but there isn't enough data to adequately analyze 2021 and 2022 yet.
In the end, these are just a few of the key elements that contribute to credit union asset growth across the board. The larger and more efficient you are, the better positioned you are within the community. That makes it easier to offer the right types of services to members that positively impact their lives, which in and of itself is the most important benefit of all.
At FLEX, we've authored a Member Services guide that not only goes into detail about concepts like those outlined above but also takes things to the next level by demonstrating how to apply them in your own situation. To read it for yourself and jumpstart your own credit union's asset growth, click the button below to get started.