Face the camera. When Filene asked credit unions a year ago how they were planning to increase revenue in 2014, the list we got contained all the usual suspects: lending, checking accounts, mortgages. Does this sound like you?
These are important products, but also the easiest for members to overlook in a competitive crowd. Only a handful of credit union respondents expected to make more than $100,000 in new revenue beyond basic banking products.
And even those that did were still trying familiar things like investment advisory, business services, and a tax service. Credit unions are placing their hopes for revenue growth on a narrow set of products and services. Apparently, they see little potential from new products, as revenue from new products as a percentage of total revenue, is expected to barely rise. One in four of the new product ideas submitted by survey respondents isn't even expected to generate revenue.
So, if we're stuck with the usual suspects, let's really do something about them. To accelerate revenue growth, Filene's report, Addressing the Revenue Growth Challenge, suggests four steps, chief among them that credit unions should deploy or strengthen debit card rewards programs.
Debit is a mature product with widespread adoption and familiarity among consumers. But the traditional credit union benefits of competitive interest rates and good service don't extend very well to the debit product and it's easy to lose market share to aggressive providers.
To whit: 25% of banks were planning on introducing debit rewards in 2014, while only 12% of credit unions were. Of those credit unions in our survey that have offered debit rewards since at least 2013, most feel like there's room for improvement.
Why the focus on rewards? The market for credit card rewards is saturated, and research has shown that rewards programs are more effective in debit programs than credit programs anyway.
A focus on debit rewards encourages members to use the credit union as their primary financial institution. Incremental debit use provides nearly pure profit because the mechanisms are already in place. So, if you're going to use a usual suspect to drive revenue this year, make sure it's a good one.
For more suggestions for growing revenue in 2015, download a complimentary copy of the full Filene report, Addressing the Revenue Growth Challenge.
The report is the latest in a series of exclusive content from Filene available to CU Times readers. Check out these other reports:
- Filene's Digital Strategies
- Credit Union 2.0: An Opportunity to Build Collaborative Partnerships
- Only Up: Regulatory Burden and Its Effects on Credit Unions
- Credit Union Implications of Living Trusts
- Gen Y Personal Finances: A Crisis of Confidence and Capability
- Impacts of Mergers on Credit Union Costs: 1984 – 2009
- Channel Delivery for Tomorrow
- From Presence to Purpose: Developing Social Media Strategies and Metrics for Credit Unions
- Improving Social and Environmental Sustainability: A Credit Union Assessment and Comparison
- Mortgages and Credit Union Performance: 1980-2011
- Future of Payments: Credit Union Implications – A Colloquium in Salt Lake City
- Asset-Liability Management: Theory, Practice, Implementation, and the Role of Judgment
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