2022 Trends in Credit Unions

Dec  21 
Bill Handel  General Manager and Chief Economist, Raddon 

Finding success and optimism in an evolving economic environment

No one can claim 2021 was without challenges for credit unions. Significant margin compression and an extended low interest-rate environment adversely affected earnings, while changing demographics and shifting member preferences added further pressures.     

But there are reasons for optimism in the coming year.

A forecasted rise in interest rates will likely slow the churn in credit unions' portfolios. For many organizations, 2021 was a record year for loan production, yet net growth lagged due to refinancing, payoffs and more – a never-ending hamster wheel for organizations struggling to simply stay in place. If credit unions can maintain strong loan production, net growth numbers should move in a more positive direction.

And as interest rates rise, expect a dramatic shift from refinancing to purchase mortgages – a market typically teeming with younger borrowers. Providing a faster, more frictionless mortgage experience in line with new, nonbank players will help attract and retain younger members.

The more high-tech banking becomes, the more important personal, high-touch interactions are. 

As 2022 unfolds, pivoting to new strategies will help organizations succeed in an evolving economic environment. We're watching several trends for credit unions.

1. The Challenges of Attracting and Retaining Staff

The existential nature of the pandemic has caused people to think differently about many areas of their lives, including the work they do. Some 55 percent of workers said they're likely to look for a new job in the next year, according to an August 2021 survey from Bankrate.

Many people, especially those from younger generations, now place a greater emphasis on work that is consistent with their personal values and is meaningful to them. Credit unions' help people improve their financial lives. Build a culture that focuses on that purpose and rewards employees not only monetarily, but also with the flexibility to help members reach their financial goals.  

Shifting staff from transactional tasks to advisory roles is key. Using automation to make processes simpler, easier and faster frees staff for relationship-building, purpose-driven activities. If I were running a credit union, I'd leverage automation with a long-term objective of employing half as many people but paying them twice as much.

2. Evolving Branch Services

According to recent research from Raddon, a Fiserv company, the banking industry has been shedding branches since 2008. But brick-and-mortar locations aren't going away. Instead, they're evolving to meet changing member needs and preferences. The same research found younger generations are more likely to visit the branch to seek advice and open accounts. Face-to-face interactions still matter, even as use of self-service capabilities increases.

During the pandemic, older generations turned to online and mobile banking, narrowing the usage gap between them and their younger counterparts. Once they realized how easy it is to deposit a check with their phone or transfer funds online, they were comfortable using additional self-service capabilities, including those in the branch.

But the more high-tech banking becomes, the more important personal, high-touch interactions are. When a member has trouble completing a digital transaction, they want immediate help, usually through live chat or video on a mobile device. The most effective organizations are those able to flip on a dime into high-touch mode to deliver outstanding service.

Establishing a reputation for innovative financial experiences and exemplary customer service will be critical for credit unions as we move forward.

3. Changing Generational Needs

Younger generations are moving their business toward the largest banks, according to Raddon research. Just 9 percent of millennials claim a credit union as their primary financial institution, compared with 74 percent of millennials who are primary customers of major banks.

Perception accounts for much of this trend. Younger people may especially believe they can only access next-generation mobile banking and payments experiences at major banks, due in large part to targeted marketing efforts around those capabilities. Establishing a reputation for innovative financial experiences and exemplary customer service will be critical for credit unions as we move forward.

Younger people want more from their primary financial institutions. While credit unions have traditionally competed on convenience, price and service quality, financial health is emerging as an important differentiator. For example, Raddon found that 61 percent of millennials would like to their bank or credit union to provide tools that monitor spending behaviors, budgeting and other financial wellness metrics, compared to just 50 percent of Gen X and 36 percent of boomers.

Providing strategies and guidance for younger members as they move through their financial lives – buying homes, saving and investing – fits squarely with credit unions' mission and outlook. Organizations may want to take a fresh look at their wealth management programs to enable participation from small-fund investors. That will help lifetime relationships with accountholders, including when wealth is transferred from older generations.

A Message to Credit Union Leaders

Expected economic shifts may ease some of the pressure for credit unions in 2022. But other trends, from evolving consumer preferences to an aging membership, will continue to challenge the industry.

Financial services are evolving quickly. Find ways to maintain relationships and relevancy with your members, whether by shifting staff to advisory roles, prioritizing high-touch interactions in every channel or meeting the changing generational needs of your members. In 2022, organizations that succeed will continue to find ways to fortify their positions with their members and the communities they serve.