Credit unions are taking flight - how can banks reach the same heights?

Credit Unions and Memberships Are Flying High: Here’s Why

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Looking for work? You're in luck. No matter the industry, companies seem to be in full-on recruitment mode, hiring people so quickly that workers are practically handed positions on a silver platter. But for a variety of reasons — such as childcare challenges, unemployment benefits and lingering health concerns — open positions aren't filling up as quickly as employers would like. In June, for example, 9 million Americans remained jobless, even though position openings vastly outnumbered those who were unemployed. This has understandably frustrated small business owners, with the Small Business Optimism Index dropping nearly 3 points in July from the previous month, according to the National Federation of Independent Business.

But credit unions are among the entities these days that view their cups as half-full, growing by proverbial leaps and bounds in footprint, employment and membership.

Recent credit union successes
All you have to do is scan industry headlines for the latest examples. Take what happened in Texas. As American Banker reported, Gulf Coast Federal Credit Union recently converted from a community charter to a multiple common bond charter, which is considerably larger.

Jeremy Garza, who serves as CEO at Gulf Coast Federal Credit Union, noted that this shift was only a matter of time.

"We've had larger credit unions coming in within the last three or four years that are multibillion-dollar institutions," Garza explained. "We felt that if we're going to continue to grow … we definitely wanted to look into other areas."

And consider VyStar Credit Union, headquartered in Jacksonville, Florida, which acquired Heritage Southeast Bank, based in Jonesboro, Georgia earlier this year. At $1.6 billion, it's believed to be the largest purchase of a bank by a credit union on record. 

"The acquisition of HSB will bring together two strong financial institutions that share a common goal of supporting our communities and members," VyStar Executive Vice President and COO Chad Meadows said in a press release issued in March.

"VyStar is the 13th largest credit union in the United States in terms of assets."

VyStar has done this before, partnering with Perry, Florida-based Citizens State Bank in 2019. Indeed, its growth and acquisition strategy has established the institution as the 13th largest credit union in the United States in terms of assets. VyStar says its recent expansion will enable it to offer more comprehensive services for credit union members and play more of an integral role in supporting area communities.

Increasing membership and overall growth
While only some are benefiting from growth by acquisition, credit unions are universally gaining more members. As CNBC reported earlier this year, credit union memberships nationwide reached 125.1 million as of September 2020. That's a 3.3 million, or +2.8%, increase in membership.

According to industry insiders, the success of credit unions is attributable to their prioritization of a superior member experience. After all, their strategic direction is dictated by the members themselves. Credit unions are universally community focused and go the extra mile to assist both business owners and individuals through lower loan rates and other services. Like their banking counterparts, they recognize the need to amp up digital resources given consumer demands, however they also prioritize brick and mortar as a way to draw in new members.

"Because we're a cooperative and a not-for-profit cooperative, we don't have the same motivation to make money off your misery," said Jim Nussle, president and CEO of the industry trade group Credit Union National Association, in an interview with CNBC. "If people think that you have their best interests at heart … even in the middle of a crisis, people recognize that."

Nussle further stated that this fact breeds loyalty and causes others to join, especially when economic challenges present themselves.

A comparison with banks
The credit union branch count ticked up slowly between 2015 and 2019, in contrast with US bank branches that took a -5% hit in the same period according to the FDIC. European banks fared worse. In 2019, for example, there were 163,000 branches in Europe, according to a report from the European Banking Federation. That's down 6% from the previous year. Some of the biggest drop-offs in branch distribution have occurred in Germany, Austria and Poland, respectively.

Viswewara Maiya, vice president and global head of business consulting for Finacle, told ATM Marketplace that branch closures have largely been a symptom of high operational expenses and executives' desire to reduce how much they spend on each transaction. This also explains why ITMs are becoming more common sights; they can lead to substantial cost-per-transaction savings, especially when compared to ATMs. Pandemic conditions and subsequent shifts in consumer behavior have accelerated this trend for both banks and credit unions.

Credit unions and bank branches can learn from one another in a variety of respects. Whichever you operate and whether you're in contraction or expansion, BranchServ Convergint can fuel your success through physical security, electronic security, ATM and ITM solutions and more. Contact us today to schedule a free demonstration.