The past two years have seen strong credit union industry growth, which has been attributed to pent-up demand, in what has been called a rebounding economy. NCUA reported loan growth of 14.7 percent, membership growth of 8.1 percent, and net worth increasing at 13.9 percent in Q1 2021. This was met by digital transformation initiatives across many credit unions in an effort to meet member expectations in a transitioning consumer economy. Changes in card technologies, enhancements to digital wallet capabilities, and an evolving payments landscape have driven focus and investment over this time and heading into 2023.
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Digital transformation has ushered in the fintech revolution and credit unions have now been flanked by these non-traditional competitors while still facing their traditional forms of competition. Keeping track of the competitive landscape is now as demanding as meeting member expectations. Maintaining pace with the competition, while adding third-party solutions to avoid broad-scale disruption to business models is noble, but potentially suffocating.
Gain a Competitive Edge Through Technology
The past is not the present, just as “past performance is not a guarantee of future returns.” While a growing economy was the action verb of the recent past, economic models are now forecasting a drop in growth through 2024. The Federal Reserve Bank of Atlanta has reported GDP growth in Q3 2022 at 2.9 percent, while the U.S. Bureau of Economic Analysis is predicting GDP growth to trend around 1.2 percent in 2023 and 1.7 percent in 2024. Couple these economic indicators with downward pressure to continue to enhance technology offerings and we are looking at an equation that is predicting reduced margins.
Credit unions are not strangers to business constraints compared to larger competitors, our industry has operated with these limitations since the beginning. Constraints shouldn’t be the focus however, competitive advantage should be. Competitive advantage in this case refers to factors that allow credit unions to provide services better or more cheaply than the competition. These factors are tied directly to cost structure, technology offerings, and member service. In some cases, the competitive advantages can be one in the same, such as cost structure and technology offerings. Delivering better and more integrated technology offerings should impact the bottom line.
Optimizing core system architecture and infrastructure is one key to improving competitive advantages while providing a path to increased operational efficiency. Without optimized core system architecture, credit unions cannot be as efficient as necessary to gain significant competitive advantages. This is generally a result of manual processes or layered third-party solutions to perform operations that otherwise should be core-based functions.
At the heart of efficiency is the simple notion of doing more with less. If your core architecture requires you to do more with more, a review of your business processes is in order. Efficiency is realized when all credit union processes and objectives are aligned, this includes staff as well as technology. As consumer behavior has changed and focus has increasingly become digital, core systems must adapt. This would include the ability to open new accounts, approve and fund loans, capture photo IDs & supporting documentation, and provision cards to be used in mobile wallets and retailer apps. If these digital components require separate vendors, the core equation becomes disparate and expensive. Some credit unions are leveraging their core architecture to do more with less. These credit unions are experiencing growth through efficiency, while marshaling and creating competitive advantages.
Growth through Efficiency
Tucked against the backdrop of the Columbia River and protected by the Portland International Airport is Ironworkers USA Federal Credit Union. Ironworkers USA may not seem “big” at approximately 12,000 members and $100 million in assets. However, credit union size is relative and at first glance never tells the whole story.
Teri Robinson, CEO, started with the credit in 2009, with $9 million in assets and 3,000 members. Teri took over a credit union that had suffered deep losses during the financial crisis and began working with her NCUA examiners through their net worth ratio restoration plan. With only 6 full-time employees Teri began to make changes that would impact the credit union’s bottom line, increase member engagement and facilitate a growth strategy that would take her credit union from $9 million to over $100 million through organic growth!
According to Robinson, everything changed with technology. The first piece Robinson implemented was to transform the member experience. “If you look like a bank and smell and taste like a bank, how can members differentiate you from a bank?” To this end, the credit union removed their teller counters and implemented desks as a strategy to be more consultative with members.
This was soon followed by technology investments such as remote deposit capture through the credit union's mobile app. At this point, Robinson notes, “things really began to change.” Providing traditional banking services through technology created a path for more important services to the credit union, such as lending.
Robinson notes that her core architecture allows members to apply for loans digitally and complete the process in minutes. “That’s a game changer, having the ability to process loans in a matter of minutes without a third party sitting on top of that process.”
Robinson said having technology that helps her staff know her members has been a big part of their growth. For instance, making the credit score a part of the member view provides an ease in helping staff know their members. Knowledge is power in this case, because “you know who you are dealing with, which then allows you to meet their needs with products and services.” Having a holistic view of members through a single platform also allows the credit union to ask questions such as, “do we offer you everything, or do we not?” Efficiency then shines because the credit union does not waste time getting to know the member, because having access to credit scores, account histories, etc. in a single location provides a framework for who they are dealing with already, even if it is a new member.
Robinson has been able to secure a national charter for ironworkers and their unions, expanding her footprint. Having put the correct core architecture in place before expanding her charter was serendipitous. The credit union has seen strong adoption of checking accounts and loan products from new members in other states compared to those who are local and have been with the credit union for 20+ years. This serves to underscore how technology has assisted Ironworkers USA growth.
Onboarding members in new areas and seeing immediate adoption without brick-and-mortar branches is attainable. Ironworkers USA has seen growth across all aspects of their business. In addition to asset and membership growth the credit union has seen checking accounts increase from 616 in 2009 to over 5,000 in 2022, loans have increased from $7.5 million in 2010 to $70 million in 2022. The credit union has experienced loan growth of 20.1 percent, membership growth of 10 percent, net worth growth of 24 percent as of Q2 2022. Today, Ironworkers USA has 17 staff members, with a growth rate of 10x over the past 12 years, while adding only 9 employees!
How to Create Growth For YOUR Credit Union
Reading about Ironworkers USA's journey and seeing their impressive growth can really make you stop and think. Is it time for your credit union to review its core platform structure and business strategies? Click below to learn how to facilitate your own impressive growth strategy!
