New Pressure on Non-Interest Income Requires New Strategies

By Ray Birch

Non-interest income at credit unions may have reached a recent-year high, but multiple threats to what has been a growing revenue stream have analysts recommending it’s time for improved and new income approaches.

 

A number of economists who spoke with Credit Union Journal shared that outlook, painting a picture of a challenging future in which several non-interest income sources in place today will be put to the test and likely deliver less revenue. According to CUNA Mutual Group statistics, credit unions’ dependence on non-interest income as a percentage of total income has steadily climbed to 27.3% through Q3 2012, up from 19.7 % in 2005.

There are a number of solutions being recommended, from doing better with non-spread revenue today, urging credit unions to develop even more transaction-driving strategies for debit cards and finding new ways to get the card top of wallet-such as fraud protection services-to re-energizing the credit card portfolio, which many cited credit unions are doing.

Longer term, though, economists agree the answer is greater usage of CUSOs and getting into new businesses, such as insurance, that leverage credit unions’ reputation as well as stay out of the way of the Consumer Financial Protection Bureau.

Many emphasized it’s just time to grow more loans to offset an impending non-interest income downturn, providing unique solutions to get more out of indirect auto lending or simply more out of the existing membership. “Look at short-term, high equity mortgage refinances your members need,” said CUNA Mutual Group chief economist Dave Colby, noting those loans can be kept on the books to increase spread income.

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