credit union metricsThe current success of your credit union is directly related to your credit union's core technology. Few scenarios have made that clearer than the COVID-19 pandemic. Specifically, credit unions with the right core technology were able to quickly adjust, go digital, and deliver the solutions required to meet member needs.

One of the prevailing winners of this all-but-required digital transformation has been open banking. But this victory isn't by default: open banking can completely transform virtually every facet of your credit union (CU), bolster new member growth, and strengthen member retention.

A Quick Primer on Open Banking & Open APIs

Open banking provides third-party financial partners and service providers access to member financial information by using application programming interfaces (APIs). APIs are pieces of code that allow two applications to seamlessly communicate and work together. Through open banking, your credit union will be able to meet member needs via third-party apps, which is much more cost-efficient than having to build solutions from the ground up. An example of open banking is when members use Zelle or other Peer-to-Peer (P2P) apps to quickly transfer money in and out of their accounts in real-time.

Over the last decade, open banking and APIs have transformed the way business is done. It has even enabled traditionally non-financial firms—such as Amazon, Google, Facebook, and Uber—to grab substantial market share from established banks and credit unions that are slow to adopt. Unfortunately, this trend is showing no signs of slowing down.

Aside from the real pressure of adopting open banking and open APIs, these protocols and strategies offer credit unions a host of benefits. Let's explore some of the ways your core technology and open banking can transform key credit union metrics.

Leveraging Technology to Work Smarter and More Efficiently

One of the most critical metrics for credit unions is the efficiency ratio. This metric measures how much operating expense is required to generate one dollar of revenue. And the lower the efficiency ratio, the better. When many credit unions are looking to improve their efficiency ratio, the obvious solution is to cut expenses.

However, cutting expenses to the bone doesn't work in today's complex environment. Instead, it's about—ironically—spending more and ensuring those dollars go further and work smarter toward producing results. In other words, it's not what you spend, but how you spend it. A strategic investment in innovative cloud-based core technology will build stronger, more multifaceted relationships with the right members.

This goal is achieved by leveraging and augmenting member data through open banking. By sharing member data and combining it with third-party data, your credit union stands to understand your members in ways like never before. More so, your credit union will be in a much better position to identify the most promising members and their needs. Through this data-driven, open banking approach, you can begin personalizing your credit union's offering to delight members and grow in virtually every direction imaginable. Most importantly, this growth will be efficient.

Efficiency Is Key for Growth

One excellent example of how the right core processing can drive efficient growth is the Freedom Northwest Credit Union case study. In 2010—prior to upgrading to FLEX core processing system—this credit union from Kamiah, Idaho reported total assets of $40 million. After implementing FLEX core processing system, the credit union underwent a dramatic revitalization and transformed virtually every growth indicator in a remarkable way. Here are a few highlights:

  • Increased assets from $40 million in 2010 to more than $268 million when last reported in 2021.
  • Net income per employee increased from $27,238 in 2010 to more than $60,000 in 2020.
  • More than doubled member growth from 4,608 in 2010 to 9,429 in 2020.
  • Offered members more services, such as competitive loans, improved returns on deposits, and relationship pricing for members.
  • Increased member capital at an average annual rate of 17.5% since 2010.

A Multi-Dimensional Attack on Members Per Employee Metric

Another important metric for credit unions to track is the member-per-employee metric--and it's relatively straightforward. It is equated by dividing the number of members by the number of full-time employees. This number is a tell-tale sign of the productivity of your credit union's employee base. For the most part, the higher the member-per-employee ratio, the more productive your credit union is.

When the right core technology is coupled with open banking, you can attack this quintessential metric from many angles:

  • Technology—in its essence—should create efficiencies and empower your credit union to do more with less. A solid core, along with open banking, can maximize the output of every employee to sustain growth while reducing the number of employees required to serve more members.
  • Because many of the younger, growing demographic expect state-of-the-art banking solutions, open banking can help your credit union efficiently offer the solutions they want. Best of all, your credit union can do so without the time and monumental investment of building it from the ground up.

Increasing Members Per Employee without Sacrificing Service

Eastern Utah Community Credit Union (EUCCU) serves as an excellent case study of how the right core technology can help improve this metric. As a part of EUCCU's digital transformation, they implemented personal teller machines (PTMs). While PTMs look like ATMs, they are operated by live tellers at another location. This unique design offers a number of benefits that all work to improve the member-per-employee ratio:

  • They reduce the need for unnecessary employees, which lowers operating costs in a smart way.
  • PTMs can create a presence and help the credit union grow its membership throughout rural areas or less populated areas in the footprint.
  • Tellers are able to efficiently service a greater number of members in less time.
  • PTMs help increase brand awareness at a much lower price point compared to a human teller.
  • Members can quickly perform virtually any transaction they would in a traditional teller environment.

Most importantly, members are served and greeted by the tellers they have come to know, so they still receive the personalized attention of in-person banking that has become synonymous with credit unions.

Lending a Helping Hand to Loan Originations Per Employees

Lending has always played a fundamental role for credit unions. If lending revenue isn't a part of your business model, perhaps it's time to reexamine your strategy. In either case, most credit unions take pride in being able to offer members extremely competitive interest rates on loans and higher savings rates compared to other financial institutions. The best indicator of whether your lending strategy is working is by reviewing the loan originations per employee metric.

The loan originations per employee metric can be calculated by dividing the number of full-time equivalent employees by the annual number of loan originations. A higher loan originations per employee ratio means each employee has the ability to generate more loans. And open banking can completely transform your credit union's ability to originate and close loans. Here are a few ways open banking and the right core technology can drive loan originations without increasing employees:

  1. Deliver an efficient digital lending solution that provides lending at the tap of a finger and is without geographic boundaries.
  2. Get creative with lending by offering skip-a-pay, teaser rates, as well as variable terms and rates.
  3. Deliver automated lending decisions, so members will no longer have to wait days or more to learn their approval status.
  4. Utilize simplified document integration from beginning to end, including e-signatures to achieve a truly paperless lending solution.
  5. Provide flexible mortgage solutions that empower your credit union to service each member's home loan with a streamlined solution.
  6. Enable indirect lending with automated funding and real-time approvals, so you can easily have a real or virtual loan officer at every dealership.

Let's Improve Your Credit Union Metrics

Because your core technology touches so many areas of the credit union, it's imperative to get it right. Designed for credit unions of all sizes, FLEX can help you drive efficient growth while moving key metrics in the right direction and improving the ever-important member experience.

Learn about seven key performance indicators that can help you judge how well your technology is keeping up with demand.

7 Key Ratios for Core System Efficiency

Topics: Core Technology, credit union growth, key ratios, digital banking, Core Integration, credit union challenges, website metrics, credit union trends, API, member experience, open banking

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