Credit Union Times - Centennial Edition - (Page I4) CeLeBrAtiNg 100 YeArS , SPeCiAL CeNteNNiAL editioN Financially Shunned Help Build Membership; CUs’ Challenge is to remain relevant By MicHelle a. saMaaD CU Times Senior Staff Reporter WASHINGTON — Looking back in time, the credit union industry has certainly seen its share of membership ebbs and flows often pushed along by the debut of innovative products. The movement’s humble beginnings sprang partly from helping people who were shunned by high society. Cooperatives more than likely came at the right time around the world as these new entities helped poor communities pool their savings and issue small loans among each other. At its peak, membership grew 10.6% annually during the 1950s, according to data from CUNA and NCUA. During that decade, many were returning from the war and the first wave of baby boomers was born. Membership growth rode the tide as a result of wider access to and Mike Schenk acceptance of credit, the creation of the industry’s regulator and the implementation of federal insurance program and government guarantees. There was some drop-off in the 1960s and 1970s to roughly 6.7% annual average growth. Credit unions continued to build mainstream appeal in the 1980s as more gravitated to newly introduced share draft accounts. A shift also was certainly seen after the massive collapse of savings and loans banks and the failure of several private insurance funds, said Mike Schenk, vice president of economics and statistics at CUNA. “The one thing that is obvious is probably credit unions were sort of used to going along and having fairly decent growth and because of that, we didn’t spend a lot of time thinking about it,” Schenk said. “Almost everywhere I go when I talk about this issue, people will say the most loyal members came during the S&L crisis in the 1980s. In all of that uncertainty, people came to us.” By the 1980s, however, growth had dropped significantly to 3.9%. As bank deregulation reached a crescendo in 1990s, credit unions reaped more of the benefits from that fallout even as expansion continued to slide. Savings streamed in and the passage of the Credit Union Membership Access Act (H.R. 1151) put the industry in the spotlight for many who had never heard of the financial institutions. “The marketing efforts of credit unions, especially those with community charters, occurred post-H.R. 1151. That kept credit unions in the headlines,” said Dave Colby, chief economist at CUNA Mutual Group. After the 9/11 terrorist attacks, Schenk said, there was a flight to safety helped along by the stock market’s bubble burst. Nervous investors sought out alternatives like credit unions to park their savings. Known for their low-cost, high-yield accounts, the industry touted their options as they commoditized other products and services. Dave Colby Still, the industry may have caught the brunt of distrust of the marketplace’s instability. Membership growth stalled in the 21st Century, hovering under 2%. The reasons for the slowdown run the gamut: from competitive pressures from nontraditional financial service providers to more regulations to comply with to loss of sponsors, Schenk said. In that mix, too, were the challenges of succession planning, particularly for smaller credit unions, and members demanding more sophisticated offerings. “As we’ve seen the same margins compress with competition, every basis point became a lot more valuable,” Colby said. “Credit unions are trying to manage expenses. There are some credit unions that are still run by people who would rather pay dividends and lower rates than pay for advertising.” Getting the word out about what credit unions have to offer will continue to be an industry challenge toward growing membership, Schenk and Colby agreed. Boards and senior staff have done a better job of recognizing that the movement cannot wait for people to come, Schenk said. “The media folks say if you want to be heard, then you have to repeat, repeat and when you get sick of it, repeat it some more,” the CUNA vice president said. “We’re not used to that because growth came naturally [to credit unions].” As the financial marketplace continues to find its footing, Schenk is convinced that now is a prime time for credit unions to make their move. Colby agreed that what happens now will define the industry going forward. “There should be extremely prudent underwriting of the member and collateral,” the CUNA Mutual economist suggested. “If you spend more time managing that risk and helping those members out, those are going to be the loyal ones.” —msamaad@cutimes.com Past indicators May Be Predictors For Future growth of Credit Unions MADISON, Wis. — Over the past 50 years, the number of members joining credit unions has been on the decline. The good news is that the numbers appear to be going back up and certain historical events may serve as guide points on keeping the momentum strong. Membership is starting to rebound, with the movement’s latest counts at roughly 90 million, according to data from CUNA and the NCUA. The potential is certainly there with 79 million eligible nonmembers ready to court. A CUNA membership growth task force survey found that only 36% of nonmembers were “somewhat” familiar with credit unions and 17% “not at all.” Strong growth came about prior to the 1980s with the baby boom and from those returning from war, according to CUNA. Access to credit grew as share draft accounts took off. The failure of the savings and loans brought in more members. Looking ahead, some keys to membership growth may hinge on a continued push for collaborative effort within the industry, a national credit union image and awareness campaign and reaching out to new markets, CUNA and the NCUA said. —msamaad@cutimes.com 4 Credit Union Times, December 2008 www.cutimes.com http://www.cutimes.com
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