With the exception of auto lending, market share in most of the businesses in which credit unions compete remains under ten percent. Part of the reason for this is scale. By assets, the average bank is 16 times the size of the average credit union. Even the largest credit unions are rarely “market movers” that can impact local financial services dynamics with their decisions.
While some see mergers as the solution to the scale issue, others are looking at leveraging the strength of individual credit unions’ member relationships to achieve breakthroughs in market penetration. An example that is particularly relevant today is in mortgage lending. Credit unions’ share of first mortgage originations nationally has hovered near 2 percent throughout this decade. A significant factor in this number is the fact that less than half of all credit unions offer this service to members.
As the largest credit union in Ohio, Wright-Patt Credit Union ($1.2B, Fairborn, OH) has looked to use their capabilities to assist smaller credit unions that would find it difficult to offer the breadth of services that a larger credit union can. In particular the credit union has leveraged its investment in a wholly-owned CUSO, myCUmortgage, to bring a full-service mortgage lending program to 49 credit unions including some as small as $5 million in assets. Through the program, individual credit unions are the lead on their member relationships while myCUmortgage provides the mortgage processing technology. The result is a growing mortgage business in a flat market as well as reinvigorated member relationships at these credit unions.
A Network of Networks
Although not the only such CUSO to provide these services, myCUmortgage also benefits from being a part of the PrimeAlliance network. Rather than partner solely with individual credit unions, PrimeAlliance has partnered with mortgage lending CUSOs to extend mortgage lending capabilities across the industry. Today, the network reaches over 1,400 credit unions nationwide and is a top 15 mortgage lender in aggregate.
Expanding networks such as these could be the key to credit union success in the 21st century. PrimeAlliance is a co-founder of the Credit Union Housing Roundtable along with BECU and Callahan & Associates. One of the goals of the Roundtable is to grow credit unions’ mortgage lending market share from 2 percent to 10 percent by 2016. To realize such a breakthrough, the group understands that greater participation among credit unions of all sizes will be needed.
Credit unions already have significant networked efforts in areas such as ATM and branch networks, as well as indirect auto and credit card lending. By bringing together the strengths of the credit union community as a whole while retaining the local ties to members, credit unions are able to build on their greatest competitive advantage – cooperation.