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