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Four Reason to Be Bullish on Credit Unions

Updated: May 5, 2019


This week, the Commerce Department reported that the U.S. economy grew at an annual rate of 3.2% in the first quarter, after a subpar finish to 2018. And, today's private payroll numbers zoomed past the estimates of even the most optimistic analysts. These numbers are impressive. Consider that, just a few weeks ago, analysts were predicting a slump in GDP growth to just 2% or less.

This week, BlackRock Chief Executive Larry Fink and Nuveen Chief Equity Strategist Bob Doll joined the chorus of bulls, suggesting that the economy had still more growth in it. And, even the Democrats and Republicans found common ground – albeit on spending $2 trillion more that we don’t have. 

Economic growth in the United States has accelerated for twelve quarters as we take out new highs on the stock market. Remarkably, with the Federal Reserve continuing to err on the side of easy money, it is likely that sufficient liquidity remains in the financial system to support higher stock prices still.

An economy that chugs along and a market that plods higher can only be good for the nation’s more than 5,000 credit unions and its more than 100 million CU members.

2.      CUs Continue to Attract Assets and Members

Today, credit unions only occupy a small slice of the overall market, accounting for less than 10 percent of household transaction accounts. CUs do, however, provide a reliable source of credit to local communities in good times and bad.

Credit unions are growing. Their 114 million members represent a 4.3 percent increase over last year. Rapid membership growth in recent years has been consistent across most age groups, as CUs continue to offer financial products with superior rates to banks. And, the satisfaction of credit union members consistently outruns that of bank customers.

Today, total assets in federally insured credit unions stand at $1.45 trillion, up $75 billion in just the last year. Total loans outstanding at CUs now top $1.0 trillion, with the average outstanding loan balance at $15,300, up $494, or 3.3 percent, from a year ago.

In fairness, credit union members have lower income than bank customers and tend to be more vulnerable financially. And, while the industry continues to grow and strengthen, it does face some regulatory headwinds.

3.      CUs Are Innovating

Credit unions are embracing technological innovation like never before. No longer content to just keep the ball inbounds, credit union branches have abandoned the days of cheap coffee and donuts. Instead, CU spaces are vibrant, free flowing and open. Members are treated to a more educated and well trained salesforce, a suite of complimentary products and the introduction of technology to enhance the member experience. The distance between most tellers and members is no longer measured by glass or over a counter. It’s a far more intimate environment where ITMs, mobile apps and a slew of other technological tools are routinely made available. 

The trend toward technology will only accelerate in the coming years. As digital interactions continue to grow, members will become more and more comfortable with self-service options for more complex transactions. This trend will reward those who have done the difficult work of investing in a frictionless member experience.

4.      Trust

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The founder of Under Armour once quipped that “trust is built in drops and lost in buckets.” Consumers’ trust wavered with big banks and financial institutions when the crisis and its related mortgage stress hit their pocketbooks. Credit unions have always differentiated themselves by their member ownership and the deeply rooted culture of loyalty and local caring. The emphasis on local markets and personal engagements with members, coupled with the tradition of lower fees and higher interest rates on deposits, has equated to a well-earned level of trust between CUs and their members – a trust that is the envy of many other industries.

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