Sustainable Growth: Perspectives From Credit Union Leaders

Credit union member visiting a branch.

A prosperous future requires adapting to change while retaining core values

Today’s volatile economy presents challenges for all financial institutions, but especially for credit unions, which historically have had a unique ethos and business model. Rising interest rates, ever-more diverse competitive forces and generational change are all having an impact.

What can credit unions do in the current environment to sustain growth and serve their members more effectively?

At Forum 2023, I talked with three credit union leaders about how the industry can grow for the future:

  • Jill Peterson, CEO of ABCO Federal Credit Union in New Jersey
  • Carrie Birkhofer, President and CEO of Bay Federal Credit Union in northern California
  • Matt McCombs, President and CEO of Vibrant Credit Union, serving the Quad Cities in Illinois and Iowa

This panel session was edited for length and clarity.


In today’s economy, what do you see as the challenges for your organizations in your individual markets?

Peterson: First, our members have apparently spent the money they set aside during COVID, and now they have higher debt and things are tightening up for them. Another challenge is meeting the demand for speed and convenience. A young system developer recently said to me, “If I can’t open an account on my phone in two minutes while I’m standing on line in the grocery store, it’s taking too long.” So, we have to manage to that expectation.

Birkhofer: One of the biggest challenges is the sudden rate shift we’ve gone through. During COVID, we had low loan rates, so we were doing mortgages and refinances, and bringing in a record number of auto loans. Then the spigot was turned off overnight; deposit rates increased and loan rates went up as well, drying up that segment of the market.

Meanwhile, a few bank failures caused some consumers to question the strength of their own financial institution, and they started shopping online for interest rates and seeing how quickly they could move their money. We’ve responded by doing CD specials again and looking at how we can still lend money to people. 

McCombs: If you had asked me five years ago, I thought CDs were done. Now it’s the fastest growing product at our institution. But I think liquidity is the biggest concern going forward. Over the next 12 to 18 months, it won’t be a rate issue anymore; we’ll be facing a money availability issue.


Who do you view as your principal competition? The major banks? Community banks? Fintechs? And how do you compete effectively?

Birkhofer: I think most of us are probably chasing the younger demographic for new members and more lending and deposit opportunities. If that’s my target, I’m competing with fintechs and the big banks, not the credit union or regional bank across town. 

Consumers, particularly younger generations, are turning to big banks – a trend credit unions need to address to thrive.

We have to meet the needs of that 23-year-old who says, “I just need it fast and easy.” We’re working on our technology to streamline the account opening process, and also working on our messaging. Our message has to resonate with our target audience, and be delivered through a medium they prefer at the right time. And we have to leverage data to tailor our message and product offerings to the individual member.

McCombs: Today, I don’t think I compete against other credit unions at all. Our competition isn’t who’s across the street; it’s who’s on your phone. And that’s not going to change. We have so many competitors trying to take one part of our business. We’re looking at death by a thousand paper cuts. From Rocket Mortgage to online deposit accounts and Venmo on the payment side, we’re competing in a street fight against everyone for just slivers of our business.

Birkhofer: I agree that fintech apps are slicing into our business, whether it’s for budgeting, transferring allowances to your kids or for investing. The question is, how do we offer those services ourselves in a compelling way?

We’re fortunate in that our fastest growing segment is the Gen Zs and millennials, primarily because we have large market share in our community. We have a strong children’s program, so parents come in and open their kids’ accounts. What we’re trying to get across is that we’re full service, so they can keep us when they leave to go to college.


In the last 10 years, banks have closed 10,000 branches in the U.S., while credit unions have added branches. What’s happening with your branch networks, and what role does technology play?

Birkhofer: We serve a tri-county area, and there are two counties we haven’t penetrated as much. So, we’re looking at opening more branches. In order to capture a full market share, I think you need to have a physical presence.

Technologically, we need to improve our online opening of accounts and lending so that they require less back-office support. We’re also looking at anti-fraud technology to make sure the applications coming in are from legitimate people who fit in our field of membership.

McCombs: The question is, do we have a strategy for what our business needs to look like? Who’s our member base going to be? What’s our business model? We asked those questions and applied the answers to our branch network. We’ve gone from 18 branches to six over the last two-and-a-half years. We’ll probably see that further reduced over the next couple of years.

But we’re still extending our reach. The cost to operate a branch today has never been more expensive. We had to find a different way to engage the community than what everyone else was doing. So, we looked at retail outlets or businesses we could get into that would give us a tangible presence, and we started on the restaurant side. We opened one full-service coffee house/restaurant location in Moline in 2022, and a Bettendorf location in late 2023. More are in the works. Every one of them has an interactive teller machine in it, so it’s technically a branch. We see about 300 customers a day at each location, two-thirds of whom are not existing members of our business. We can drive 10 new accounts a week out of one affordable location.


What about the servicing side of the business? Are you all finding a way to be more personal with members, even while using more technology?

Birkhofer: We’re continuing to update our back-office solutions to offer better servicing. We intend to pull more AI tools into our private database, using ChatGPT questioning with some of our knowledge-based systems. That will instantly give us much better usability of information.

Peterson: Our goal is to migrate our branches from being a transactional location to a relationship location. I don’t want people coming to my branches just to deposit a check, but to apply for a loan, talk about opening an account for their kids, to expand the relationship. I want it to be a more conversational place. Even the Gen Zs and the millennials want to speak face-to-face with somebody when they’re applying for a mortgage or doing something else big with their life.


Credit union branch staff are becoming financial consultants to better engage and help members.

How can credit unions as an industry project their brand more effectively?

McCombs: As an industry, we’re the nice guys and gals out there, but I don’t think that is what’s going to make it for us. Our model as an average product aggregator won’t survive, because consumers no longer need to aggregate financial products in one place. We have to find a way to actually add value.

Birkhofer: Well, I still think being the nice guys is a competitive advantage. We make a difference in our community by being the largest locally owned financial institution. Gen Zs say they open accounts with us because we care about the community, we care about the environment and we’re focusing on making our community stronger. We’re here for them. I don’t think we tell that story enough.

Peterson: Many of us started by serving affiliated members – schoolteachers, iron workers, nurses. Now we have to serve affiliated families, and teach those families how to work together to reach their goals. As part of that family concept, we’re looking to attract members from the time they’re young. I agree that the core values of the credit union system need to be communicated because, especially among the younger demographics, it’s important to them to do good things with their time, their money and their voice.

McCombs: Credit unions are who we are, not what we do. That’s the differentiator. One of our core values is the collective good. Our message has to be about how we are still doing this because of that collective good mindset, instead of a shareholder mindset.