By Nathan Bitgood
Credit unions today face a wide array of challenges: aggressive competition from banks and fintech companies, rising tech costs, growing regulatory burdens, and the complexities of member acquisition and retention. All threaten a credit union’s survival. There are many problems, but the primary solution remains the same: growth. This observation—that growth solves problems, or more precisely, that credit unions can better serve their members by reducing costs and increasing available resources—is easily made. Yet, the mechanisms by which such growth occurs are often unexpected. Let’s explore a few examples.
1. Competition from Big Banks
The Challenge:
Major banks dominate the financial landscape, leveraging vast resources to maintain power. The top five U.S. banks hold assets in excess of $10 trillion, enabling them to invest aggressively in technology, advertising, and infrastructure. This creates a growing barrier to entry for smaller institutions trying to compete. If that were not enough, banks wield substantial political influence. According to the Center for Responsive Politics, the top banks’ combined 2022 federal lobbying budget exceeded $70 million, while credit unions spent just $2 million.
Growth as the Solution:
Credit unions, by leveraging growth, can better compete. As non-profit institutions, they are not beholden to investors and can allocate more surplus toward growth initiatives. They also benefit from a spirit of cooperation that banks often lack, banding together to enhance political advocacy. For example, the Credit Union National Association (CUNA) successfully lobbied for the passage of the Economic Growth, Regulatory Relief, and Consumer Protection Act in 2018. This demonstrated how collective growth amplifies political influence.
2. The Cost of Technology
The Challenge:
The rise of fintech companies like PayPal, Robinhood, and Square has redefined consumer expectations—especially after the COVID-19 pandemic reduced the emphasis on in-person banking. Modern consumers demand intuitive, cutting-edge digital user experiences, the development and maintenance of which can be expensive. For smaller institutions, these costs can be prohibitive, contributing to the declining number of credit unions.
Growth as the Solution:
As credit unions grow, tech costs are easier to absorb by spreading them across a larger membership base. Larger institutions can invest in proprietary fintech or form strategic partnerships to share development expenses. Credit Union Service Organizations (CUSOs) enable multiple credit unions to pool resources and collaboratively develop cost-effective tech solutions. A prime example is CO-OP Financial Services, a CUSO that offers technological solutions to thousands of credit unions, providing access to over 5,700 in-network branches and 30,000 ATMs nationwide.
For instance, when Founders Credit Union merged with ArrowPointe Federal Credit Union, the resulting larger entity could more effectively absorb compliance costs and invest in cutting-edge account creation and loan generation software.
3. Challenges in Member Acquisition and Retention
The Challenge: In a crowded financial market, attracting and retaining members is increasingly difficult. Credit unions often rely on word-of-mouth and community presence, which may no longer suffice against the aggressive marketing strategies of large banks and fintechs. Additionally, outdated account opening workflows and slow loan approvals deter potential members—particularly Millennials and Gen Z, who expect seamless, digital-first experiences.
Growth as the Solution:
Credit unions that prioritize growth often adopt more sophisticated marketing strategies. These may include:
● Member rewards programs that incentivize engagement and loyalty.
● Data analytics to refine marketing campaigns.
● Community events that boost visibility and credibility.
Another effective growth strategy is to broaden membership criteria. Navy Federal, the largest credit union in the U.S., did just that by extending membership eligibility to all branches of the armed forces—not just the Navy and their families. This expansion fueled significant growth, enabling heavy investment in technology, resulting in mobile banking apps and online services on par with, or superior to, larger banks. This is an exception rather than the rule, as explosive growth typically occurs once a credit union has acquired the tools necessary to compete for new members.
ORIGINS® and Growth
ORIGINS® by eCU Technology is one such tool. Designed to simplify membership origination and streamline loan applications, ORIGINS offers end-to-end automation for credit unions. With ORIGINS, members can start an application on one channel and finish it on another—whether online, in-app, or in-branch—enabling a seamless omnichannel experience. This intuitive platform, coupled with advanced customization options, ensures that the workflow aligns with each credit union’s unique brand and values.
Conclusion
The challenges facing credit unions are significant but not insurmountable. By proactively addressing each obstacle through strategic growth initiatives, credit unions can enhance their competitiveness, meet evolving member expectations, and continue serving their communities effectively. In short, the future belongs to those who find new, innovative ways to do more with more.
