As 2012 begins, will the greatest constant continue to be change? During the past year it sometimes seemed as though everything was changing for credit unions:
- The Durbin Amendment, though not a direct hit against most credit unions, fundamentally altered the interchange landscape.
- Regulations made lending a continuing challenge, as credit unions struggled to make the loans that make money.
- A steadily unsteady economy made risk an ongoing issue.
- Consumer anger – and even outright revolt – gave rise to opportunity.
- At the same time, the changes that banks instituted (or attempted to institute) threw old systems into the wind. Free checking? Reward programs? Everything was up for grabs.
- The need for new technology only intensified, as everything from mobile banking to beefed-up security and round-the-clock accessibility became the new normal.
What didn’t change in 2011? The need to conduct business intelligently, ethically, responsibly and profitably. With all the consideration of new opportunity, regulation, market forces and change there is an intensifying need to evaluate profitability.
Where will credit unions find profits in the year to come?
New members, new markets. Shifting ground in the banking industry will continue to send new members in our direction, though perhaps not at the magnitude experienced around Bank Transfer Day. Credit unions will also consider new areas of opportunity, such as member business services.
The key to profitability here is building relationships. Signing up new members is great; creating profitable relationships that generate revenue, capture wallet share and inspire referrals is certainly better. Credit unions that excel at member engagement will turn new members into expanded profits – and not simply increased activity.
A smart mix of products and services. For some credit unions, a wider range of products and services paves the way to member engagement and greater profits. Los Angeles Firemen’s Credit Union, for example, has forayed successfully into investment services, insurance and member business services – all created with the particular needs of firefighters in mind.
Other credit unions stay profitable by focusing on their best products and services – free checking, great credit card rates, the best car loans in the area. In either case, knowing where your sweet spot lies is everything. The more data you can bring to the table, the better your decision-making can be.
Getting engaged. Deepening member relationships is an obvious road to profitability. Creating targeted, strategic marketing initiatives is one of the best ways to reach members where they live. Case in point: American Airlines Credit Union in Fort Worth, Texas, generated $2 million in purchase volume in 60 days by offering new cardholders entry into a sweepstakes for a $750 statement credit for activating and using their cards. Portfolio management with CO-OP Total Revelation made the campaign a snap.
Efficiency, efficiency, efficiency. Most programs aren’t born efficient; they are made that way through diligence. As credit unions consider an ever-expanding array of products, campaigns, services and technology, finding new ways to manage costs is more critical than ever. Outsourcing plays an important role. Credit unions may opt to rely on shared branching instead of expanding their individual branch networks. They may find vendors or CUSOs to provide cutting-edge service or top-flight expertise without the investment required to build in-house. And increasingly, they’re looking to vendors to operate efficiently in their own right, so as to pass savings along to credit unions – and, in turn, the members they serve.
In 2011, credit unions made the case to the world at large that we do business differently. In 2012 – and years to come – the challenge will be showing the world what we’re made of.