As we move into 2025, credit union leaders must navigate a complex economic landscape while positioning their organizations for sustainable growth and resilience. This year presents unique challenges and opportunities, shaped by evolving member expectations, regulatory changes, technological advancements, and macroeconomic trends.
Economic issues to consider
Economic issues are always a factor. Top of mind for people in the financial sectors are the three interest rate drops by the Fed in 2024 indicate that inflation is stable and low, and member borrowing will likely increase as rates fall.
- Inflation and interest rates: The Federal Reserve's monetary policy will continue to influence credit unions' lending and savings rates. Inflation rates will stabilize around 3% and will still impact consumer purchasing power and loan demand. Credit unions should assess their interest rate risk exposure, ensuring their asset-liability management strategies are robust.
- Employment trends: The labor market remains tight, with unemployment forecasted to stay around 4%. Wage pressures affect credit unions directly (via staff costs) and indirectly (via member financial health). Many credit unions are saving labor costs through increased automation and technology.
- Economic growth: GDP growth is expected to moderate to around 2%, reflecting steady but slower expansion. This impacts consumer confidence and spending patterns, influencing demand for loans and financial products.
- Consumer debt: Total consumer debt reached $17.6 trillion in late 2024, with delinquency rates rising modestly. Credit unions must monitor their portfolios for potential increases in credit risk.
Risk management and mitigation
Cybersecurity remains a huge concern for the financial sector. Cybersecurity protocols at financial organizations have improved to the point that hackers are now targeting manufacturing more than financial groups, but credit unions still need to stay vigilant.
- Cybersecurity risks: Cyber threats continue to escalate. In 2024, financial institutions experienced a 25% increase in ransomware attacks. Implementing advanced cybersecurity measures and regular staff training is non-negotiable.
- Regulatory compliance: Regulatory scrutiny is increasing, particularly around data privacy and environmental, social, and governance (ESG) practices. CEOs must ensure compliance while aligning operations with these emerging priorities.
- Liquidity risks: Fluctuations in deposit levels, partly due to competition from fintech and larger banks, require proactive liquidity management strategies.
- Succession planning: With 40% of credit union CEOs expected to retire within the next decade, ensuring a robust and up-to-date succession plan is critical. A strategic plan should include a succession plan that identifies high-potential leaders and provide them with growth opportunities. For free resources on succession, visit www.BeyondSuccessionPlanning.com.
Growth opportunities
My dad used to say that he liked going to the credit union because he liked talking with the associates. Those days, for good or bad, are statistically fading. More members now want efficiency, transparency, and community focus.
- Digital transformation: Digital-first financial solutions are no longer optional. In 2024, 65% of members preferred online or mobile banking. Enhancing digital experiences, such as personalized financial advice through AI, can drive member loyalty and acquisition.
- Member-centric services: Expanding financial wellness programs, offering competitive rates, and introducing innovative products can attract younger members, particularly Gen Z and Millennials. Members like that they can compare rates online versus in-person or via phone calls.
- Community engagement: Emphasizing credit unions' community-driven missions resonates with members of all demographics, but particularly younger members. Make sure you show your community involvement on your website or through featured articles. Initiatives like affordable housing loans and small business support programs can also strengthen relationships and drive growth.
Strategic planning essentials
Leaders have to both plan strategically and act tactically to remain competitive. That means being crystal clear on their vision, mission, and goals, and communicating their ideas to their teams.
- Vision and mission alignment: Regularly revisit and refine the credit union's vision and mission to ensure alignment with current member needs and market conditions.
- Data-driven decision making: Harnessing member data insights can guide strategic initiatives and product development. Investments in data analytics capabilities should be a priority.
- Scenario planning: Given economic uncertainties, developing multiple strategic scenarios will allow the organization to pivot effectively when conditions change.
- Succession planning: A great succession plan considers more than just the top positions. Every job in the credit union is important. Make sure roles and responsibilities are updated and make sure HR is being proactive about having a succession plan.
Ask:- Is the current succession plan aligned with the strategic direction of the credit union?
- Have potential successors been identified and given opportunities to lead?
- Are training programs in place to address leadership development gaps?
- How does the succession plan account for diversity and inclusion goals?
2025 demands proactive leadership from credit union leaders at all levels. By addressing economic challenges, managing risks effectively, and capitalizing on growth opportunities, leaders position their organizations for success. Strategic planning ensures that credit unions remain resilient and member-focused in a rapidly evolving financial landscape.
