Is CU PFI Growth Sustainable?

August 1, 2011

Despite an arguably once-in-generation chance for credit unions to grow membership during the disarray in the banking industry, history may show that while some credit unions excelled in attracting new members during this period, as a group they missed out on the opportunity.

As a result, at least some of credit unions’ future financial success will need to come from within—stealing the loan and savings business existing members are currently, or may in the future, consider taking to banks.

Credit unions clearly have challenges in the marketplace, suggesting it will take diligence and hard work to make headway in the battle for members’ business.

Consider that from 2009 to 2011, the gap between the credit union Net Promoter Score® (NPS), an indicator of member loyalty, and that for members’ banks shrunk significantly, according to CUNA’s 2011-2012 National Member Survey.

Net Promoter ScoreThe NPS for the banks members use rose more than twice as much as the credit union NPS from 2009 to 2011.

But there’s also reason for optimism:

• Young adult memberships are up. Members ages 18 to 24 now account for 9% of credit unions’ adult membership, up from 6% in 2006;

• Credit unions’ NPS increased nine percentage points from 2009, indicating members are more likely to say they’d recommend their credit union to others; and

Despite a shrinking gap between members’ credit union and bank NPS, credit unions’ 2011 score still stands a whopping 37 percentage points above banks’ score.

Accompanying these positive findings is another encouraging piece of news: the percentage of members choosing a credit union as their primary financial institution (PFI) rose noticeably in 2011—to 57%, after hovering in the 45% range for much of the past decade.

Plus, use of credit union checking accounts is on the rise, accounting for a sizeable proportion of the PFI increase.

Yet several questions still emerge: Is this PFI rise more an indicator of members’ emotional transfer or “flight to safety” to their safer, more trusted credit unions due to the banking industry’s troubles?

Or is it bringing with it stronger use of credit union loan and savings programs?

PFIWill this rise prove to be simply a one-time “blip on the screen?” Or is it the first sign of more good things to come? Is it sustainable? And for how long?

Initial indications suggest the phenomenon may at this point be more emotional than a creator of credit union gains in their share of members’ loans and savings.

That is, with the sole exception of checking accounts, members generally are no more likely than in past years to bring their vehicle loans, money market accounts, or other business to the credit union instead of the bank.

It may take another couple of years before we know the answer for sure, as it’s quite possible any significant impacts won’t become clear until members look to obtain their next car loan, home equity loan, money market account, etc.

All points made though, credit unions have an encouraging point to start from as they position themselves to meet members’ financial services needs.

JON HALLER is CUNA’s director of corporate and market research. To learn more about CUNA’s 2011 National Member Survey, the 2011-2012 Survey of Potential Members, or how we can address your member survey needs, send us an e-mail, visit us online, or call us at 800-356-9655, ext. 4172.