Interesting Reflection on FinTech Challenges

The Wall Street Journal published an article focused on the challenges of FinTech firms after they become public. Investors ask, per the article, is this “fin” or “tech” when analyzing a given FinTech’s business model. Interesting that those that are more “fin” seem to have the rockier road to sustaining their initial valuations. At a time when many credit unions are trying to understand how to compete with FinTech firms, it might be helpful to identify what side of the Fin/Tech scale a particular competitor sits – and then devise proper responsive strategies.

Here’s the article (paywall):

Credit Unions Continue Steady Improvement

Glatt Consulting’s Q3 2019 HealthScore data has been released and, once again, the industry continued its steady climb of year-over-year improvement by posting a score of 5.964. While this quarter’s score is a mere 0.51% increase versus Q3 2018, the latest industry score extends the streak of 23 straight quarters of year-over-year performance improvement when comparing like periods. However, this quarter’s growth of 0.51% is the smallest year-over-year increase during that time period. Despite the continued relative strength of the overall HealthScore, the accelerating weakness in both Loan Growth and Membership Growth is concerning and will present challenges in other categories going forward if this trend continues.

HealtScore year-over-year trend chart.
Year-Over-Year %Change in the Credit Union HealthScore

Credit unions performed better in 13 of the 17 HealthScore categories. Some notable positive score drivers include Asset Growth, and Cash & Short-Term Investments, which grew at their fastest rates in over two years. Return on Assets and Efficiency were both able to post year-over-year increases but their rate of growth slowed significantly versus Q2. Asset growth is not keeping pace with the growth in Operating Expenses, which is causing the slowdown in Efficiency.

Loan growth year-over-year trend chart.
Loan Growth Scores Continue to Drop

Across the industry, Loan Growth and Membership Growth once again experienced year-over-year weakness with scores down 22.57% and 7.52% respectively versus Q3 2018. The continued weakness in these two components is likely to result in the eventual decline of other components such as Income and Efficiency. The continued increases in Loans Per Member and Borrowings Per Member is helping insulate credit unions from the effects of declines in Loan and Membership Growth in the short-term. However, current trends show that the rate of decline in these two ‘Membership’ components is outpacing the growth in the ‘Per Member’ components of Loans and Borrowings. This dynamic will present operational challenges for the industry going forward if it continues. We will continue to monitor this situation closely.

Visit for year-over-year score trends for all of our HealthScore components.

Get Your Report

If you are a credit union leader or employee, sign up to receive your own complementary HealthScore report.

We’ve added four new components to our complementary quarterly HealthScore report, offering additional valuable data for credit union subscribers. New additions include:

  • Industry score history
  • Industry year-over-year data
  • Asset peer section
  • Current quarter comparisons in the industry, peer, state, and local sections, which compares the CU’s current scores to the averages for the cohort in question.

We think you’ll enjoy the report!

Image by Mudassar Iqbal from Pixabay

Will Automation Negatively Impact Member Income?

Throughout this fall’s planning cycle we’ve engaged in a number of conversations about the possible impact of automation and artificial intelligence on credit union operations. The working assumption is that there is a strategic advantage to automate certain tasks and functions in order to make better use of personnel for higher purposes.

Automation and AI, in other words, are fast becoming important operational initiatives for credit unions of all shapes and sizes.

But there is another area of interest when it comes to the impact of automation on credit unions – member income.

We share a number of articles and research papers with planning clients to prep for strategy dialogue, and we have a new one to add to the mix. It is a paper recently published by the Federal Reserve Bank of San Francisco. We’ll let the abstract speak to the paper’s focus…

The portion of national income that goes to workers, known as the labor share, has fallen substantially over the past 20 years. Even with strong employment growth in recent years, the labor share has remained at historically low levels. Automation has been an important driving factor. While it has increased labor productivity, the threat of automation has also weakened workers’ bargaining power in wage negotiations and led to stagnant wage growth. Analysis suggests that automation contributed substantially to the decline in the labor share.

What is the credit union strategy dialogue here? Member qualification for credit union loans in an era of stagnant member wages – especially if loan costs and terms continue to increase (take a look at this recent WSJ article for an interesting view on automobile prices and financing costs & terms from the consumer perspective – subscription required).

You’ll find the Fed’s paper here:

Note that I’m not drawing conclusions of a bleak future. I’m simply suggesting that the topic of discussion should be of interest to credit union planners – with the question being, “How do we find success in serving members in the event labor shares continue to decline and/or wages stay stagnant?”

Seems like an important question to consider.

Glatt Consulting Planning

Looking for support for your credit union’s strategic planning efforts? Complete our proposal request form to let us know what you have in mind, or schedule a phone call to discuss.

Image by kalhh from Pixabay

Should We Be Concerned About Membership Growth?

The flexibility to add to fields of membership comes at an opportune time for credit unions – provided court opinions continue to fall in favor of the industry, and credit union’s change their perspective on marketing and business development investment.

Membership Growth Rate Slowing?

Glatt Consulting’s HealthScore includes membership growth as a component of the overall HealthScore calculation, and the industry has seen notable year-over-year membership growth score declines in each of the first two quarters of 2019. Q2 saw a score decline of 7.36% on the heels of a 3.2% decline in Q1. Prior to 2019, credit unions showed a decline only once in 18 quarters.

What is the cause?

We think there are two. First, slower growth in indirect auto loans (both total dollar volume and total indirect loans). Indirect is a channel that fuels membership growth for many credit unions, so the drop in indirect has a definite impact on membership growth.

Second, credit unions are coming up against limits to field of membership – in two different ways. First, credit unions do turn away those that are not qualified to join. Second, and relatedly, credit unions have come close to exhausting the “low hanging fruit” of membership growth – namely those that are already familiar with credit unions and/or that already belong to one or more. Attracting the “unfamiliar” is slow going.

The Challenge, and Competition Ahead

Credit unions, already experiencing slight declines in operating expense scores, may need to pump up spending even more to garner the attention of the next generation of credit union members – those that can belong as result of expanded memberships but that have no idea what a credit union is. These folks will be hard to reach using more traditional approaches – especially if indirect is a channel of concern (meaning credit unions continue to experience slower indirect channel growth).

Consider that SoFi, a non-credit union entity that nonetheless touts their service to “members,” outspends the average credit union to acquire/serve members by about $400/member. And they don’t spend in the same areas as credit unions.

To compete, credit unions will need to spend more, and spend better.

See: SoFi Is Paying Top Dollar To Acquire Its Prime Customers

Credit Union Community Continues Streak Of Year-Over-Year HealthScore Gains

Wilmington, NC (September 17, 2019) – Credit union strategy consulting firm Glatt Consulting Group, Inc. announced today that the Credit Union Industry HealthScore, a composite score measuring the health and performance of US-based credit unions, extended its streak of posting year-over-year increases for the 22nd consecutive quarter with a score of 6.006. The current HealthScore, calculated using 2nd quarter 2019 data, represents a 1.25% year-over-year score improvement. Credit unions performed better in 13 of 17 HealthScore categories. Despite the strength of the overall HealthScore, the continuing decline in scores for both Loan Growth and Membership Growth present challenges that may extend to other categories in the future.  

The Credit Union Industry HealthScore measures overall credit union health, which is calculated by scoring/grading credit union performance across 17 different key ratios. Grading is based on a 10-point scale, with 0 reflecting poor performance and 10 reflecting exceptional performance. The Credit Union Industry HealthScore has been calculated and published by Glatt Consulting since 2009.

Driving Score Growth

Credit unions continued their unprecedented run of year-over-year performance improvement. Industry HealthScores have now improved year-over-year for 22 straight quarters, with 13 of 17 of the score components showing positive gains. Some notable score drivers include Return on Assets, Efficiency, Asset Growth, and Cash & Short-Term Investments, which posted year-over-year growth for the first time in two years. It will be interesting to see how the Cash & Short-Term Investments component performs in the coming quarters with the flattening yield-curve environment that currently exists.

Q2 Observations

Loan Growth and Membership Growth once again experienced year-over-year weakness with scores down 20.95% and 7.36% respectively versus Q2 2018. Continued weakness in these two components would likely result in the eventual declines of other components such as Income and Efficiency. The continued strength in Loans Per Member and Borrowings Per Member could help insulate credit unions from the effects of declines in Loan and Membership Growth in the short-term. However, any prolonged weaknesses in these two membership components would eventually present a myriad of operational challenges.  

Top Performers

The industry’s highest scoring credit union in the 2nd quarter, with a score of 9.12, was Churchill County Federal Credit Union based in Fallon, Nevada ( The credit union holds assets of $51M and serves approximately 2,800 members. The credit union regains the top spot in the 2nd quarter after having the highest HealthScore for both the 3rd and 4th quarters of 2018. Keep up the great work!

Once again, Eastman Credit Union based in Kingsport, Tennessee ( is the top-scoring credit union with assets over $1B with a Q2 score of 8.53, followed closely by Redwood Credit Union based in Santa Rosa, California with a score of 8.5. These two credit unions are perennial top performers who serve 232,747 and 265,237 members respectively.

Summary HealthScore Data

With regard to score trends, 13 of the 17 HealthScore components saw year-over-year score gains. They are:

(1) Net Worth: Up 1.88%
(2) Solvency Evaluation: Up 2.67%
(3) Return on Average Assets: Up 13.54%
(4) Efficiency: Up 7.12%
(5) Delinquent Loans to Total Loans: Up 1.51%
(6) Net Charge-Offs to Average Loans: Up 1.74%
(7) Texas: Up 0.20%
(8) Cash and Short-Term Investments to Assets: Up 1.92%
(9) Loans to Assets: Up 4.74%
(10) Deposits Per Member: Up 1.64%
(11) Loans Per Member: Up 4.25%
(12) Borrowers Per Members: Up 2.28%
(13) Asset Growth: Up 2.21%

Components that saw a year-over-year decline in score include:

(1) Operating Expenses to Average Assets: Down 3.95%
(2) Regular Shares to Total Shares and Borrowings: Down 1.46%
(3) Loan Growth: Down 20.95%
(4) Membership Growth: Down 7.36%

A HealthScore data report, including the top 20 credit unions by HealthScore, is attached to this release. We’re happy to serve as a resource on articles related to overarching industry performance, and we welcome your use of the trend material, properly credited to Glatt Consulting. If you have questions about this quarter’s report or CU industry trends overall, contact me at or (888) 217-5988, ext. 802.

About Glatt Consulting Group

Glatt Consulting Group, Inc. is a credit union consulting company based in Wilmington, NC. Founded in 2006, Glatt Consulting specializes in aiding credit unions in areas including strategy, organizational structure, governance, and leadership development.


Image by Gerd Altmann from Pixabay