The Fed is feeling confident about the economy and has indicated that we have “emerged safely¹” from the financial crisis. As a result, they are poised to raise interest rates in December. The opportunity for additional margin is welcome news for credit unions. It’s been a tough decade starting with the worst financial crisis since the Great Depression, followed by numerous regulatory changes, administration changes, and many destructive weather events that seriously impacted the already battered economy. These factors in combination have contributed to increased pressure on margins.
Relief is in sight!
Margins have been squeezed for years and relief is in sight. Leverage the upcoming rate increase by growing demand deposit accounts. In addition to low-cost funds, DDAs also provide a great source of non-interest income. Now is the time to focus on growth in this area.
How can you maximize your revenue potential?
Growing your quantity of accounts with quality accounts is the first step. Attract the right consumer and ensure status as the primary financial institution by onboarding them with an effective new account process to ensure the account transacts regularly and that you’ve built a long-term relationship.
One way to ensure quality accounts is using word of mouth advertising to attract consumers seeking a new credit union. An Ernst & Young Global Banking Survey concluded that 71% of people will consult a friend, family or colleague before selecting their next primary financial institution.
Using a growth strategy that includes referrals and digital technology increases opportunities for quality accounts. A study done by the Journal of Marketing² shows that referred accounts maintain higher balances, stay longer, and have a higher lifetime value. Referred accounts also help to attract younger consumers to your credit union. A recent case study by Velocity Solutions indicates that 58% of referred account holders were between 18 and 38 years of age.
2018 can be your year!
The next 12 months is the perfect time to expand your checking account base to capture low cost funds, increase non-interest income and gain new financial relationships. Putting initiatives in place to grow deposits with existing members and gaining new members should be a priority.
¹The New York Times, “Confident Fed Sets Stage for December Rate Increase,” September 2017.
²American Marketing Association’s Journal of Marketing “Referral Programs and Customer Value” by Philipp Schmitt, Bernd Skiera, & Christophe Van den Bulte and American Marketing Association’s Journals of Marketing “Growing Existing Customer’s Revenue Stream Through Customer Referral Programs.”