Most credit unions accept that they need to innovate—and that they need to be both strategic and tactical about it. But in practice, many CU leaders are asking themselves these kinds of questions: “Where on earth are we going to start? What are our priorities? Where should we apply technology? Which issues need capital? And which depend on organizational change?”
For most people, “innovation” means technology. So let’s focus on the top five themes I hear over and over from community financial institutions. They’ll give us clues about where innovation is needed.
- Net interest margins are continuing to narrow. The cost of funds can’t go any lower, but competition is squeezing yields on every kind of loan. So although loans and interest income are growing, net income isn’t keeping pace. Interest rate increases would help, but this is outside our control. If we’re to maintain or grow net income, we have to reduce expense (again!) or profitably grow non-interest revenues—or, preferably, both.