Five Key Credit Union Trends to Continue to Watch

According to the latest report released by the National Credit Union Administration, credit unions remain mostly stable in their performance and resilient to the challenges of the current economic environment at the end of the first quarter of 2024. However, this doesn’t mean credit unions should become complacent. NCUA Chairman Todd M. Harper states that despite this success: “Credit union executives, administrators, and boards of directors must remain diligent in managing the safety-and-soundness and consumer financial protection risks within their institutions. Today’s marketplace requires active — not passive — management by all.”

In today’s economic landscape, credit unions must continue to pay attention to the key trends of 2024 to fuel their trajectory of success and prepare for challenges both foreseen and unforeseen.

1. Technology integration

Credit unions are increasingly investing in digital transformation to enhance the member experience, streamline operations, and stay competitive. Mobile banking apps, online account management, and digital lending platforms are now essential offerings to meet members’ evolving expectations. Digital transformation is not just about adopting new technologies; it is about leveraging them to create a seamless and convenient experience for members while maintaining the trust and community connection credit unions are known for.

2. Regulatory changes

From consumer protection laws to data privacy regulations, regulatory changes often entail operational adjustments, technological upgrades, and staff training, adding to the complexity and cost of compliance. The implementation of NCUA’s risk-based capital rule—effective January 1, 2022—is an example of regulatory changes impacting the ability of credit unions to serve their members. The process of continuous screening, monitoring, and reporting can be resource-intensive.

Proactive engagement with regulatory bodies, ongoing education, and investment in compliance management tools allow credit unions to adapt to regulatory changes effectively.

3. Increased competition

Despite a 5% surge in member satisfaction according to the latest report of the American Customer Satisfaction Index (ASCI) Finance Study 2023-2024, credit unions continue to face stiff competition from large financial institutions, Fintech, and online lenders, offering more attractive rates, fees, and digital services. With the resources required for digital transformation, large banks can develop the technology needed to provide more attractive services and products. On the other hand, Fintech startups quickly adapt to changing market conditions and customers’ needs due to lower overhead costs. Online lenders offer loans with fast approval times and competitive rates, attracting consumers who want to avoid the traditional loan application process.

However, a couple of advantages credit unions have over its competitors are the return on profit made to its members through reduced fees, lower loan rates, and the ability to offer commercial loans with no prepayment penalty.

4. Macroeconomic environment

Despite increased loan demands, the liquidity risk of deposit runoff is a concern. The significant decrease in assets allocated to cash and investments last year signals the possible challenge credit unions may face in retaining deposits. This vulnerability to a liquidity shortage is attributed to weak deposit growth and stronger loan growth. Routine assessments and monitoring the economic landscape can head off a possible liquidity crisis.

One of the ways that credit unions can attract and retain new deposits is through expanding their membership base to include business members. These relationships typically bring not only their business loan needs but also their business deposit accounts. I believe this is an underserved segment in most credit union fields of membership.

5. Cybersecurity and data privacy

In an increasingly interconnected digital ecosystem, cybersecurity threats continue to pose a significant risk to credit unions and their members. From data breaches to ransomware attacks, cybercriminals are constantly changing their tactics to exploit vulnerabilities in financial systems. Cybersecurity measures to safeguard sensitive information and protect member assets must be a priority for credit unions. This requires investment in cybersecurity technologies, employee training programs, proactive threat detection, and response mechanisms. Collaboration with industry peers, regulatory agencies, and cybersecurity experts can enhance resilience against cyber threats.

As the second quarter of the year begins, continued success in the credit union industry relies on keeping abreast with these current trends. By proactively adapting to these trends and the challenges they bring, credit unions can thrive in an ever-changing financial landscape, remaining trusted partners for their member’s financial needs.

Courtesy of Craig Page, Member Business Financial Services (MBFS), CUInsight
Craig Page is the Chief Revenue Officer at MBFS CUSO. He is a recognized expert and thought leader throughout the credit union industry and has authored numerous articles for national publications…