MADISON, Wis. (8/22/14)--There are two sides to every balance sheet, and credit unions that want to remain financially sound now and into the future must start focusing on the revenue side, rather than only cutting back expenditures, according to a recent white paper from Filene Research Institute.
In "Addressing the Revenue Growth Challenge," Ron Shevlin, senior analyst for Aite Group, argues that focusing on efficiency only solves short-term profitability, but does nothing for future long-term growth.
Surveying 137 credit union leaders from institutions of all sizes to ferret out insight about how to find new revenue types, Shevlin examines existing sources of revenue and compiles ideas on where else credit unions can turn.
"It will take actual innovation and credit unions that build and strengthen their own product design competencies to drive more than marginal revenue growth in the future," Shevlin said.
From the survey, Shevlin found that many credit unions aren't being innovative enough in the products they offer.
His findings included:
Despite an increase in revenue growth in debit card interchange and fees in 2013, Shevlin wonders whether counting on similar gains year after year is sustainable, especially as U.S. debit card penetration has declined the past two years.
Further, Shevlin says credit unions place their hopes for revenue growth on a narrow set of products and services, but this can be overcome by taking several steps, including:
About 15% of credit unions offer debit cards that feature a rewards program, which is an increase from 10% in 2010, according to the Credit Union National Association's 2013-14 Fees Report.
Offering these programs is important, Shevlin says, because studies have found that "rewards programs can significantly affect the preferences for cards relative to cash payments," and that, "the impact of rewards on card usage is higher for debit cardholders than for credit cardholders."