Richard Holtzman

Optimizing noninterest income

Begin by conducting a market study of competitors.

November 19, 2020

When looking for ways to increase revenue, credit union leaders know they must look beyond interest income.

Richard Holtzman, senior vice president of the consulting service group at Ceto and Associates, explained how credit unions can use competitive intelligence to optimize noninterest income during the CUNA Finance Council Virtual Conference Collection.

Holtzman cites three challenges credit unions face when trying to boost noninterest income:

  1. Visibility, or getting accurate information about competitors. “We like to think of this as a puzzle,” Holtzman says. “Having all of the pieces of the puzzle is important.”
  2. Time and resources. Multiple ongoing commitments compete for credit unions’ limited resources and time, including meeting employee and customer needs, regulations and compliance, and  projects that were rolled out before the coronavirus (COVID-19) pandemic began.
  3. Perspectives and priorities, or the “great dilemma.” Credit unions aim to serve members with reasonable fees. But those fees are also a substantial portion of the credit unions’ revenue, Holtzman says.

“How do we continue to grow, generate revenue, and remain profitable while always keeping in mind our business model, culture, and brand?” Holtzman says. “It’s possible to charge fees and keep your culture and brand. It’s about finding the right balance.”

To address these challenges and optimize noninterest income, Holtzman suggests looking at the 360 line items his firm has identified that make up noninterest income, and then comparing your credit union to its competitors.

“The solution to these challenges is competitive intelligence,” Holtzman says. “It’s a review of your market, focusing on your competitors, and always keeping in mind your strategy and culture to increase noninterest income.”

Conduct a market study that compares your credit union to its competitors. Looks at products and lines of business—deposit products, overdraft programs, loans, and ancillary products—as well as fee amounts, product alignment and optimization, unpriced services, and product design, Holtzman says.

Once you’ve assessed the findings of the market study, mystery shopping, and other data your credit union has collected, identify opportunities to increase noninterest income and create recommendations.

Then, create a game plan for changes, develop monitoring reports, and train personnel to monitor the changes you’ve put in place. Continue to monitor the results to ensure they match the desired results.

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