Third quarter 2006 data shows credit unions are posting strong loan growth while continuing to be challenged with share and member growth. Loan, share, and member growth have fluctuated over time in relationship to each other based on economic changes and interest rate moves. Credit unions have contested these growth fluctuations through product offerings, incentives, and member services. In our current market transition, it seems that credit unions are embracing different products and services to expand their market share in the financial services industry.
Data indicates that credit unions have expanded their product offerings since the turn of the century; more credit unions are offering more products now than ever before.
The percentage of credit unions offering multiple products has increased in every category except for credit card loans. The largest expansion occurred in money market accounts, growing 7.3% within the credit union industry over the past six years. The second largest growth category was business loans, expanding 6.3%. Credit card loans, by contrast, decreased within the industry by 1.8%.
Market Expansion vs. Market Enhancement
An important point when analyzing these changes is to note the absolute changes versus the relative changes within the industry. Standardized products such as share drafts are offered by a large number of credit unions, decreasing relative growth rates over time. By contrast, business loans are less standard and offered by a fewer number of credit unions, increasing the relative changes from product additions. For example, business loans expanded 6.3% on an absolute basis but increased the relative number of credit unions offering these loans by 40% over six years.
Absolute versus relative changes in product occurrence offer insight into the expansion of standard and atypical products. Expanding standard products such as share accounts and share drafts enhances the industry’s ability to service large numbers of members – market expansion. By contrast, unique products such as business loans and money market shares can help credit unions to target niche groups of underserved markets- market enhancement.
Unique Growth Opportunities
Credit unions are more likely than ever to offer products or services of interest for prospective members, and credit unions are continuing to expand their offerings to entice new members. While members are less likely to initiate their membership with a mortgage loan, they are very likely to join with a standard product and expand their member service usage.
Callahan & Associates has developed an index to calculate your credit unions’ return of the member. This index is very helpful to understanding member service usage, return of the borrower, and return of the lender. To learn your credit union’s score, contact Paul Seizert