Make a Big, Not Biggity, Revenue Growth Difference

In the words of Roy Bergengren, one of the pioneers of the credit union movement in the U.S., “We must grow big, without growing “biggety.” We must constantly increase in size and potential power without ever losing sight of the individual borrower and his very personal problems …” A credit union can be seen as that type of organization – one that can grow big without growing biggety and keep the consumer top of mind.

Profit Is Not a Bad Word

Credit unions are cooperatives that are here to serve consumers and although they’re not-for-profit, they need to be profitable. Revenue growth is not a bad thing in the credit union world. Any organization needs to look at revenue growth in order to keep moving forward by, for example, offering different products and services to match changing consumer needs or keeping up with increasing regulatory and operational costs. These costs rise unfailingly, and without revenue growth, resources drain quickly.

At Filene, we’ve done many studies on growing revenue and the different options or opinions on how this can be achieved. Our research on open book management looks at how driving employees to think and act like owners helps the organization improve performance and grow. We see that the ultimate goal is to improve business results and the lives of the employees who drive those results. It is based on the idea that employees who learn to think and act like owners will make better decisions every day on the job, thereby boosting an organization’s performance. The goals that the credit unions set are known to all. Everyone has a stake in achieving those goals and therefore growth can be achieved.

Growth Requires Trying Something New

In Filene’s research, “Addressing the Revenue Growth Challenge,” we found that a credit union’s plan to grow revenue focused mainly on selling existing products to existing members. But only one-fourth felt that creating new products to attract new members was a priority, and only one-third prioritized new products for existing members.

One of the reasons that many credit unions’ plans for revenue growth may not ever come to fruition is that only one in four has employees dedicated to new product design and development. This resource challenge can be overcome with help from credit union-driven organizations looking at products and services that will help credit unions grow. For example, at Filene, our i3 community is constantly working to find solutions for credit unions to better serve members and outperform the competition. The best ideas are then tested for market viability and desirability and the best of those often become available for credit unions to implement without doing all the back-end testing, or taking on the risk and resources of a research and development team in-house.

Keep it Simple and Look Forward

Credit unions also need to keep an eye on the future to make sure they have tactics and foresight in place for revenue growth to be sustained. Noninterest income will continue to be the focal point for financial institutions to grow year-over-year. Even though the volume of credit unions’ lending has grown, interest income has declined. New areas of products and services to members will need to be addressed and implemented. In our research report, “Trending: Credit Unions in 2025” (one of my favorites!), we look ahead to the trends that will affect the direction of consumers’ needs and desires, and how credit unions can adapt.

In the world of lending, consumers are looking for easy and efficient ways to get the loans they want. We’ve witnessed ways credit unions can create an experience for their members that can help retain that member, grow wallet share and even attract new members by looking at their processes through the members eyes. Consumers aren’t afraid to go à la carte and shop around for the easiest experience. Finding ways to keep things stress free for your member will help increase the amount of business they do with you and help increase revenue.

Business lending is another growth possibility found in the research. Our credit union philosophy could come into play here as credit unions can be seen as easier or more willing to work with small businesses to inject capital into their communities. There are already more than 2,000 low income-designated credit unions and the cap for business lending may be a thing of the past.

Listen to What’s Needed; Help Who’s Not Being Helped

Think about what’s going on in the world around you today. Student loans plague younger generations – how are you helping them with that struggle? Do you have a loan program in place that can create a way for them to be less burdened than current student loan options? With the shifts in the auto lending sector, how are you creating loan packages that will support ride sharing, driverless cars or charging station financing? By creating new lending products, not only can you generate new revenue, but with more consumers (especially younger ones) choosing to do business with companies that are community-driven and sustainable, credit unions have the upper hand and should leverage the power of word-of-mouth.

Take a look at the communities you are in and identify underserved populations. Filene has done extensive research on reaching populations that are often left unserved by other mainstream or traditional financial service providers. Emerging markets are often chased only after they are seen as profitable, but here’s some evidence for credit unions to take the lead and start serving underserved minority households now for a growth boost, not only for the credit union, but for these households and their communities. One of the key insights from Filene’s newly-released “Reaching Minority Households Incubator” report stated, “In testing, we discovered that serving financially vulnerable populations starts with having the right mind-set. These programs require patience, determination, and, for many, the need to step outside one’s comfort zone. But our study showed that financial institutions using products geared toward serving minority households and other vulnerable populations can reach the intended consumer while supporting the institution’s bottom line.”

There are numerous ways to create revenue growth in our industry. Do all of them match up with what your strategic plans are? Maybe not, but starting down the path of innovation to build (or revamp) products and services that go hand in hand with what your members need is the best place to start. Have something in place with your employees to report on member needs and questions, look at similar financial institutions and how you stack up against the market, or develop a know-how of innovation within the organization that focuses on solving the members’ biggest challenges. Whichever path(s) you choose should keep the goal of bettering your members’ lives front and center so you can grow big the right way.

Joel Hartzler is Senior Stewardship and Development Director for Filene Research Institute. He can be reached at 515-229-9458 or joelh@filene.org.