A credit union’s world is always changing. Not only is the economy a dynamic landscape, but technological advancements make the financial services industry ever-changing as well. It can be a challenge for credit unions to keep pace with these changes to stay competitive, let alone grow their portfolios. Yet despite the current economic uncertainty, credit unions can still succeed and grow.
The Economic Outlook
While the Consumer Price Index (CPI) has dropped since hitting its four-decade high in June, with a slight increase of 0.4% for the month of September, inflation remains elevated. The September unemployment rate, on the other hand, was 3.5% – the same as its lowest rate since July 1969. Interest rates are on the rise, and the Fed presently appears poised to make additional increases in the coming weeks. Though public fears of an impending recession continue to mount, the data does not predict a future recession in any certain terms, and credit unions continue to see increased member spending on cards. Growth on credit cards continues to outpace growth on debit cards, with credit purchases up 13% year over year from September 2021 and debit purchases up 6%.
The Industry Landscape
A decade ago, consumers visited their bank or credit union branch to cash their paychecks, open a new credit card account and conduct all other financial business. Today, technological advancements have made it possible to cash checks through an app, manage finances completely online and more, with newer offerings like person-to-person (P2P) payments, digital issuance, Apple’s Tap to Pay and more innovations on the horizon. Big banks possess the resources to quickly deploy new technology, which means credit unions must step up their game to compete. Many of these advancements are in part thanks to fintechs, which are uniquely positioned to introduce new technology to the market quickly due to their specialization in one area. By forming strategic partnerships with fintechs, credit unions can leverage the fintechs’ technology to keep up with competitors and evolving member expectations.
Tips to Grow Your Card Portfolio
Despite the challenges posed, there are several ways in which credit unions can lean into economic and industry changes to expand their portfolios, including:
- Offer competitive products aligned with member needs. Your offerings should include rewards such as introductory bonuses and APRs, as well as competitive core earn rates, for which the market’s baseline currently is around 1.5%. Be sure to also offer an attractive, low interest rate offering.
- Enhance and perfect your digital capabilities. Consumers’ expectations are rising daily amid a digital-first world, so ensure your digital capabilities are competitive. This should include contactless, mobile card management, digital issuance and reissuance and installment capabilities.
- Build awareness through targeted marketing utilizing multiple acquisition channels. No matter how strong your product is, it still needs to be promoted. A good rule of thumb is that approximately two-thirds of your total credit card marketing dollars should be spent educating potential new members on your offerings.
- Maintain a strong in-branch cross-selling strategy. This is key as most accounts still originate in the branch, even with the increased interest in online and digital channels.
- Stimulate inactive and underperforming members. While focusing on new account origination, do not neglect existing account stimulation. It is vital to maintaining your member base and building a solid foundation for new accounts.
- Highlight product features and benefits that encourage adoption and usage. Maintain top-of-wallet status with current members by employing strategic tactics, such as targeting the pre-holiday season or focusing on categories consumers frequent, like gas, groceries and dining.
- Measure portfolio product and member performance. Create measurable and achievable goals. Monitor performance. Adjust your approach as needed, and repeat.
Credit unions should expect that maintaining growth through the end of the year and beyond may take more effort than in the past. As an example, in 2020, the combination of the low baseline, resulting from dismal growth, plus the pandemic-era government stimulus checks that encouraged higher spending on debit, set the stage for easy growth in 2021. While it will take a more concerted effort to continue building their portfolios moving forward, credit unions can use these tips to arm themselves with the tools to not only keep up with the competition, but to drive future portfolio growth.