Obviously, one of the most important priorities for any credit union is growth. Now, new research seems to suggest that this emphasis has been paying off in spades. According to the experts at CUNA, credit unions can see loan growth of 20% on average by the end of 2022. To put that into perspective, it is the highest rate of growth of its type since 1984. All told, research suggests that credit union loan balances for members grew by 16% in 2022 compared to 2022. Not only that, but they were also up 10.2% from the beginning of the year.
It's clear: This level of growth was relatively unexpected, but it's also largely unprecedented. Many attribute it to a lingering level of uncertainty from the COVID-19 pandemic. People are putting off big-ticket purchases and things like vacations in favor of what they absolutely need, not what they want.
That means auto loans. That means mortgages. This means other specialty services that members have long said were a priority in their lives that credit unions are fully embracing. All of these are things that credit unions do incredibly well.
But at the same time, it's important to dive deeper into these numbers to get a better understanding of what is going on. Only then will you and your credit union leadership be able to not only better understand the actions that got credit unions to this point, but also how to carry this growth and optimism well into the future.
Credit Union Growth Factors: An Overview
Thankfully for all involved, one of the major contributing factors to credit union growth stems from the advantages that members simply won't be able to find with a traditional banking institution.
It has been estimated that through digital services like auto loans, for example, members can save as much as $1,500 on average compared with what they would pay for the same loan at a traditional bank. Not only is this more money in their pocket, but it also translates to roughly a year's worth of gas on average during a period when gas prices were sky-high. This is a legitimate perk for banking with a credit union and, once someone has come through the door to a satisfying experience, they're more likely to explore some of the other features that the same credit union has to offer.
The same is true of other broad-based loan growth, too. According to the experts at NCUA, there were $1.4 trillion in loans at credit unions by the end of March 2022. That's almost 8% of the household credit market worldwide.
Indeed, you see these same trends in many of the high-quality products that credit unions have to offer. Mortgage-related loans, for example, make up just over 50% of all the loans that credit unions provide. The aforementioned auto loans are about 32%, while various other unsecured loans are 10%.
Taken together, about 92% of a credit union's income is made up of these types of services. These are things that people want and need and they're looking for the most convenient--not to mention cost-effective--place to give it to them. Therefore, playing into this and heavily marketing these types of services is an opportunity that cannot be ignored.
Other Important Considerations
Of course, there are other outside factors that were certainly contributing to the growth outlined above. Thankfully, the country is going through a period of relatively low unemployment right now. This is combined with wages that are growing at a faster rate than in recent years. This means that people are more likely to be looking for these types of opportunities.
That's why it's so important for credit unions to give it to them. Again, it all comes back to why credit unions were able to find success in the first place--rather than forcing everyone into a "one size fits all" box that doesn't really exist when it comes to financial services, they built their foundation from a personalized array of services and a level of attention-to-detail that more traditional banking options are simply not in a position to offer.
What this means is that the foundation for credit union growth is already strong. Now, it's a matter of savvy organizations building upon it--through digital services and through increased efficiency--to enjoy a similar level of success for years to come.
Initial Steps to Grow Loan Activity at Your Credit Union
Overall, it's safe to say that things are looking positive in terms of credit union loan growth. Yes, it's true that the pace may slow in the fourth quarter, but this isn't necessarily unexpected or a cause for concern. Experts agree that this is mainly due to not only continued inflation but also the rising federal funds rate.
Thankfully, both of these elements are cyclical--meaning that while they may be making an impact in the short term, the long term still looks to be a prosperous one for credit unions everywhere.
At FLEX, we've recently authored a Lending 360 guide that was designed to help give ideas about growth, as well as other important factors that go into the success of a credit union and its members. To find out more information, please click the button below.