By David Adams
One of the most interesting things I get to do as CEO of the MCUL and CU Solutions Group is to watch how industry technology trends evolve and to work with my staff to be innovative in our response to these trends, especially in the area of mobile banking. The last few years have been dynamic in this regard – not only is the credit union industry changing and growing, but the technology consumers are using to access their accounts and manage their money is changing too. Both of these trends are important for CUSG and the credit unions we serve.
But before I address that, let me share a few highlights from the most recent third-quarter industry call report data.
In Michigan, credit union membership finally began growing again starting two years ago – and that trend is not slowing down yet. Of course, aggregate membership growth has been a challenge in Michigan due to the shrinking population in our state due largely to job downsizing in the auto manufacturing and supplier sectors. The third quarter saw the largest quarterly increase so far – of 44,000 new members, a one percent increase. Total Michigan membership penetration, which was already above the national average, is now at 46 percent, the highest level of any of the 10 most populous states. The fact that consumers continue to move their business to credit unions in such large numbers makes a clear statement that credit unions are winning in the battle for consumer confidence.
As membership grows, so does credit union business. Third quarter results showed increases across the board: in new and used auto loans, deposits, mortgages, student loans, member business loans, loan quality and the aggregate net worth ratio. We have been watching these numbers improve all year, and in many categories for several consecutive quarters.
For instance, the third quarter results show good growth in indirect auto lending with credit unions' new indirect auto loan market share at 18.4 percent, up from 15.8 percent in 2012, which was up from 10.4 percent in 2011. Credit unions' share of deposits is at 19 percent, a percentage that has increased steadily since 2006.
On the mortgage lending side, more than $3.3 billion in new mortgages were financed so far in 2013, surpassing the total for all of 2012. Student loan growth rates are up 20 percent year-over-year and business loans are up 17.3 percent. Several other metrics round out the story about how well credit unions are doing. Earnings, as measured by ROA, are strong and on par with the previous four quarters and employment in Michigan continues to improve slightly, although it still does not meet the high employment levels of 2006.
Finally, delinquency rates are down to .98 percent from 1.08 percent a year ago, which has led to a decrease in loan charge-off rates to .58 from .77 just a year ago.
These positive metrics are evidence that credit unions are growing membership, increasing market share and improving their loan quality, all good signs for serving members in the future.
As consumers make the switch from banks, credit unions need to maintain their focus on their signature high level of member service in a technology world by providing online and mobile services via cell phones and tablets to enhance remote banking.
To that end, CU Solutions Group is working on mobile banking solutions partnerships which would include remote deposit capture, loan decision engines, home banking, digital wallet services and an integrated platform for payment services tied to credit union programs and accounts.
For consumer marketing, we are looking at making mobile and micro site solutions more turnkey, leveraging new responsive design methods, using mobile-enhanced code and other new technologies to add to our robust product and content delivery services. All of these services require best-in-class reliability and security, which CUSG Technology Solutions already provides through a cutting-edge system introduced earlier this year.
CUSG's focus on remote service delivery support and digital wallet services is timely and important. We are learning, most recently from a CUNA survey in October of smartphone users, how consumers use their phones for financial services. More than half use their phones to make mobile payments, and more than 90 percent of them do it because it is easy. As credit unions continue to seek younger members, smartphone services help there too – most of the users are ages 18 to 44.
To enhance the digital discussion and learning within the industry, MCUL is also working on speakers and breakout sessions for the 2014 Annual Convention and Exposition that will focus on emerging payment and service trends. Right now, we are working on securing a keynote speaker from Money 2020, a conference billed as “covering the evolution of commerce” that was held in Las Vegas earlier this year. The conference was a real wake-up call regarding what is coming in our industry and what we need to do to prepare and compete among such players as Google Payments, American Express, VISA, and PayPal. We are still working on the agenda and will announce developments through Contact magazine in the second quarter and in the Monitor weekly newsletter as details are finalized. The AC&E will be in Grand Rapids this year at the Amway Grand and DeVos Place on June 5-7. This is an important event for credit unions leaders to attend.
So, to recap, it is clear from our quarterly industry call report results that consumers are choosing credit unions in larger numbers than before, and driving credit union loan and deposit business up as well. But especially when it comes to technology, our industry needs to stay aggressive in order to keep up with large bank competitors as well as non-traditional banking providers including PayPal, Google and others. Credit unions have to continue to innovate and serve their members with more and better services to continue to meet their remote banking needs. MCUL and CU Solutions Group are working hard to provide credit unions with technology solutions that help meet these challenges and opportunities.
I hope you've found this month's Priority Report helpful. On behalf of MCUL & Affiliates, I wish you all a Happy Holiday season and safe and prosperous New Year.
View the Michigan Priority Report on CUBE TV for a video summary of MCUL & Affiliates CEO David Adams’ December Priority Report introduction.