According to Investopedia, a credit union by definition is "a type of financial co-operative." They follow the basic model of any co-operative and pool their money in order to be able to "provide loans, demand deposit accounts, and other financial products and services to each other." They are classified as 'Not-For-Profit' and their unique ownership structure, in which all members are co-owners, allows for the profits to be reinvested and for members to benefit directly through lower fees, rates, etc. Credit unions being labeled as 'Not-For-Profit' can be misleading or confusing to some. In order to function and cover overhead and operating costs, not to mention great rates, a credit union must generate a profit. And, as with any business, the more revenue generated translates to growth and a thriving credit union.
Generating and maintaining a viable cash flow is essential for any credit union to succeed. Further, creating and recognizing opportunities to increase this cash flow, and being able to capitalize on it is important. Techniques and strategies that create efficiencies are one way to boost your cash flow. Taking advantage of opportunities to automate processes, integrate and outsource certain tasks and incorporate smarter technology are great ways to trim expenses, and provide a lift to your bottom line. While traditional financial institutions are often recognized as the ones having the resources to accomplish this, credit union core technology has advanced as well and is able to offer many of these same fintech advances and efficiencies to members.
One way credit unions have increased efficiency is through working together in the true sense of co-operatives. One example that illustrates this well is Navy Federal Credit Union. It is the largest credit union in the U.S. based on assets and has 300 branches. In working in conjunction with other credit unions and establishing a network of shared ATMs and branches, they increased their member reach by including over 52,000 ATMs. Increasing accessibility for its members provides the opportunity for increased transactions, and helps to attract new members.
Expediting loan origination and the approval process is another great way to create efficiencies. Software exists, such as Experian's Prescreen that can facilitate and help prescreen loan applicants, automatically passing on the best candidates and providing information needed to make a decision in a timely manner. Working with this or similar software can drastically cut down the time needed to make an informed lending decision, allowing for quick approval of the most qualified applicants. Another helpful automation is the use of SimpliRisk, which is an efficient and affordable compliance solution that monitors transactions, risk rating and member due diligence in an effort to support credit union AML and BSA requirements.
Still, other efficiencies can be generated by working with third-party vendors to provide services to your members that would otherwise be too costly to develop in-house. Setting yourself up with the best core technology that allows for API integration will enable you to integrate tools that provide compliance support, P2P payment options, additional security measures like fingerprint access, and the ability to accept remotely deposit checks through mobile banking apps. Being able to integrate best of breed fintech products through API integration will allow you to capitalize on efficiencies that not only benefit your members but your credit union's bottom line too.
When it comes to profitability for your not-for-profit credit union, creating efficiencies is key to boosting your bottom line.