Credit unions posted record performance across the board in 2015.
Membership neared 104 million, and the average member relationship approached $17,000. Share balances crossed $1 trillion. The industry originated more than $410 billion in total loans for more than 28 million members, and the national first mortgage market share reached 8.5%. And all of this was achieved by north of 270,000 employees.
The results are outstanding, particularly in an economic environment that continues to be defined by slow growth and historically low interest rates.
With credit unions succeeding by every traditional measure, where does the industry go from here?
As 2016 begins, credit union executive teams are putting greater focus on one fundamental question: What are we doing to ensure our members are as financially healthy as our institution?
Credit unions recognize the sustainability of their own organizations is invariably intertwined with the well-being of the communities they serve. That's why, in the midst of the Great Recession, credit unions in some of the hardest hit areas continued to contribute dollars and volunteer hours to community organizations. It’s also why they’ve worked with members to modify more than $7.2 billion of mortgage loans rather than foreclose.
Although economic growth remains sub-optimal, the country’s unemployment rate of 4.9% and solid job creation suggests the Great Recession is solidly in the past. 2015 was a year of milestones for credit unions, no doubt, but the reality is the credit union industry has posted seven years of steady financial progress since the recession hit.
Credit unions are operating from a position of strength in local markets and on a national level. Credit union leaders want to leverage that strength to have a greater impact on their members and communities in the area of financial health.
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Caution: Challenges Ahead
Why is there such urgency around this topic today? It is increasingly apparent that in the world’s wealthiest country, much of the population is on the brink of financial catastrophe. The numbers are stunning:
76% of Americans are living paycheck-to-paycheck.
47% of consumers cannot cover a $400 emergency without selling something or borrowing money.
27% of Americans have less than $1,000 saved for retirement.
According to research by the Center for Financial Services Innovation, there are 68 million unbanked or underbanked in the United States; however, financial service providers discuss this group at great length. What receives less attention is the fact there are more than double that amount — 138 million — who are struggling financially.
There are financially challenged Americans in both low- and high-income households, and those households might or might not be knowledgeable about personal finance.
It is a complex problem without easy solutions. There are financially challenged Americans in both low- and high-income households, and those households might or might not be knowledgeable about personal finance. Financial health is often driven by behaviors and decision-making that can be difficult to change.
Given the complexity, the industry is starting to address the issue by trying to better understand the financial challenges members are facing. Some credit unions are even surveying their members to gain greater insight into their problems with the hope of developing solutions to address them.
BECU ($14.5B, Tukwila, WA) has launched a pilot to determine whether it can effectively scale a program in which staff engages members in 30-40 minute calls to evaluate their financial health and provide action steps to improve, such as establishing automatic savings and debt payments.
Initial results indicate the program is helping members take steps in the right direction while positioning the credit union as a true financial partner.
A New Purpose For A New Era
Credit unions were the original disruptors in financial services. Providing credit to those who did not previously have access was a radical notion, but the cooperative model provided a solution. Today, credit is widely available though often at a steep price. Consumer need has moved beyond credit access to credit and savings management.
Credit unions are designed to solve the financial challenges of their members. They intentionally move toward, not away from, member problems to find solutions.
Consumer financial health might prove to be the foundation for a new role for credit unions in a new era. The public identifies credit unions with mainstream financial services. Rather than simply conform to or emulate other mainstream players though, credit unions must continue to distinguish their purpose and identity.
Working in the communities they serve to address financial health will provide that distinction, and no institutions are better designed or equipped to address it.
The coming year will be dominated by a presidential campaign in which parties focus on positioning themselves as the only viable option to help the growing number of American citizens who feel like they are being overlooked and left behind by an economic and political system that seems to benefit only those at the top.
Credit unions are built to benefit all of their members; in fact, the industry has been helping members for more than 100 years. At a time when there is much public debate concerning how to best enable Americans to recapture the American dream, credit unions can lead the way and take action, just as they have always done.