Share Growth Leads To Deeper Member Relationships

The cooperative business model allows credit unions to explore counter-cyclical strategies in a challenging economic environment.

 
 

Today’s financial landscape has made it more difficult for credit unions to earn a dollar, but they aren’t taking environmental challenges out on their member-owners. Instead, they are developing strategies — such as offering a high-yield deposit product or a patronage dividend — to differentiate themselves from their for-profit competitors.

Credit unions are attracting funds from new and existing members. The average share balance increased 3.8% from $8,595 in June 2010 to $8,923 in June 2011. For the industry, share balances reached $823.2 billion at June 30, 2011. This is an increase of 4.4% over 2010. Regular shares and deposits — the largest component of the share portfolio — grew 10.1%. Money market shares grew 7.6% to reach $186.3 billion. The strength of this component’s growth trend illustrates member preference for liquidity. Share drafts, the final component of core deposits, posted double-digit growth — 10.0% — over June 2010 as members left fee-heavy bank accounts for credit union accounts.

Average Share Balance
Click on graphs for larger image  |  Source: Callahan & Associates' Peer-to-Peer

 Share Portfilio Composition


Click on graphs for larger image  |  Source: Callahan & Associates' Peer-to-Peer

More Than Checking

Because of their cooperative design, credit unions can take the long view in their business plans, a fact that is evident in their share strategies. To demonstrate the value of credit union membership, Affinity Plus Federal Credit Union ($1.4B, St. Paul, MN) offers products that reinforce the benefits of cooperative participation and ownership. Its “Better Than Free” checking account waives one courtesy pay fee and foreign ATM fees for high transactors. The account has helped the credit union grow its checking penetration from 39% five years ago to 55% (and growing) now.

High usage for one product is great, but a credit union must entice members to use a variety of products often in order for the credit union to succeed. Member economic participation is, after all, one of the core cooperative principles. So to encourage members to use its products, Affinity Plus created a rewards program in which members earn points for credit union transactions. Refer a friend? That’s a point. Open an account? That’s a point. Write a check or use the Affinity Plus debit card? That’s a point.

Members can then apply those points to waive a fee, adjust loan or deposit pricing, reduce closing costs, and more.

“Members love that they can adjust pricing,” says. Elizabeth Hayes, executive vice president and chief administrative officer for Affinity. “It’s all based on participation. They have to use the credit union to get the points.”

 

 

 

Oct. 10, 2011


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