2011 in Review: What the Changing Environment Means for Credit Unions

The past year has provided more than a few hurdles for credit unions to overcome in their efforts to bounce back from the dev­astating effects of an unprecedented meltdown of the financial services industry. In addition to caps on interchange fees, which led to substantial revenue loss, increased NCUA assessments, flat interest rates and weak loan demand have made maintaining revenue and quality services challenging.

Consumer reaction to the recent efforts by big banks to recoup some of their lost revenue by charging new and/or increased service fees sent a resounding message to the industry. As consumers switched institutions for the sake of fewer, less-expense fees and better service, credit unions saw an uptick in new accounts. And while the country’s biggest banks have subsequently retreated from their plans to charge account holders for using their debit cards, consumer watchdogs caution that account holders should beware of institutions incorporating new fees in other services.

Continued uncertainty over the final outcome of consumer financial legislation and the Federal Deposit Insurance Corporation’s (FDIC) plans to hold interest rates low into 2013 are expected to cause continued stress on revenue as we move ahead. But there are steps you can take to strengthen your credit union’s foundation, increase revenue and provide the financial services that your members value.

Take a look at your processes

When was the last time you did a process improvement study? By spending the time to evaluate your organization from top to bottom, you can find ways to streamline processes, improve employee performance, build stronger member relationships and increase the value of your credit union.

Review service contracts to make sure you are getting the best value

Whether your credit union has one location with an ATM or multiple branches in different states, negotiating through stacks of service contracts can be extremely time-consuming and confusing. However, you may find substantial savings and improved service from your vendors if you take the time to re-negotiate your contract terms and conditions.

Areas where cost-savings and service efficiencies can be experienced include:

  • ATM/debit card processing
  • credit reporting
  • credit card processing
  • payroll
  • telecommunications
  • internet banking
  • check orders
  • core data processing
  • EFT processing

Pass that value along to your members

Take a look at the fees you charge and make sure there is value added into each one. While consumers nationwide demonstrated their opinion of the arbitrary addition or increase of service fees by moving their accounts on or around October’s Bank Transfer Day, some studies suggest that account holders don’t mind paying reasonable fees on services that provide value and help them maintain financial stability.

A study released last spring by J. D. Power and Associates suggested that charging fees and delivering high levels of satisfaction are not mutually exclusive. It appears that when consumers are provided with value-added products, such as automatic overdraft protection, and are given a clear explanation of the costs involved, they have a high level of overall satisfaction, despite paying fees.

But they don’t want any surprises. By maintaining a 100-percent transparent overdraft program, you can provide a valuable service to informed members, should they face a financial emergency or make a mistake in their checkbook. At the same time, you can increase your bottom line 50 to 300 percent.

While many of the challenges of 2011 will continue in 2012—and likely be joined by new, unexpected hurdles—your credit union will be in a stronger position by following these simple steps.

About JMFA

JMFA is a leading provider of profitability and performance-improvement consulting. For more than 30 years, JMFA has been recognized as one of the most trusted names in the industry, helping financial institutions enhance their bottom line with programs like JMFA Overdraft Privilege®. JMFA is also recognized for earnings enhancement and expense control programs, training, executive placement, account acquisition programs as well as product, service, pricing and technology-improvement consulting. Simply stated, JMFA’s programs and services are designed to increase income or reduce expenses. JMFA is proud to be a preferred provider among many industry groups. To learn more about JMFA, please call 800-809-2307, or visit our website at www.JMFA.com.

 

Questions? Contact Sales & Marketing Associate Craig Reed: 206.340.4789, creed@nwcua.org.

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