Enhancing Member Experience through data-driven strategies for a sustainable growth (2024)

The first quarter of 2024 has been a significant period for Federally Insured Credit Unions (FICUs), as reflected in the New York Credit Union Association’s (NYCUA’s) credit union and corporate call report data. Let us delve into the financial trends that have emerged from the data, providing insights into the performance and health of FICUs during this time.

Asset Growth: FICUs have seen a robust increase in total assets, which rose by $96 billion, marking a 4.4% growth over the year. This brings the total assets to an impressive $2.31 trillion. This growth indicates a robust financial position and an expanding market presence for credit unions, reflecting confidence in their members and the ability to attract new capital.

Loan Performance: The total loans outstanding have also experienced a healthy uptick, increasing by $71 billion or 4.6% over the year, totaling $1.60 trillion. The average outstanding loan balance has grown to $18,062, which is up by $748 or 4.3% from the previous year. This suggests that credit unions are actively lending, and members are taking advantage of the available credit for various purposes.

Delinquency and Charge-Offs: The delinquency rate at FICUs was 78 basis points in the first quarter of 2024, which is up by 25 basis points from the previous year. Similarly, the net charge-off ratio increased to 80 basis points, a rise of 29 basis points compared with the first quarter of 2023. These figures point to a slight increase in credit risk, which credit unions will need to monitor closely.

Shares and Deposits: Insured shares and deposits saw an increase of $40 billion, or 2.3%, over the year, reaching $1.77 trillion. The loan-to-share ratio stood at 82.8%, which is an increase from 81.0% in the previous year. This demonstrates a solid liquidity position for credit unions, with sufficient funds to cover loan demands.

The 2024 Q1 data from the NYCUA presents a mixed picture for FICUs. While there are strong signs of growth in assets, loans, and shares, there are also areas of concern, such as the decrease in net income and the rise in delinquency rates. Credit unions will need to navigate these challenges while capitalizing on the opportunities for growth in the coming quarters.

According to a survey by Jack Henry Associates earlier this year and published in April’s Strategy Benchmark report, credit unions will prioritize investments in Data Analytics, Automation, AI, and Member Relationship Management in 2024. This focus on technology aligns well with the industry’s focus on increasing membership, deposits, and lending.

The survey graph in Figure 1 indicates that credit unions are looking to invest in those areas well ahead of banks. Credit Unions are now waking up to the need for Data Analytics, AI, and Automation to propel their business growth by leveraging insights from their members’ data.

Traditionally, banks have been early adopters of technology and have invested in these areas. However, they are now looking to invest in advanced use cases that can help them develop a competitive advantage. Along similar lines, credit unions must also grab this opportunity to generate growth.

Whether your top priority is – growing deposits, improving efficiency, or managing risks, all roads begin with data. Achieving these priorities requires a coherent data strategy and the modern infrastructure necessary to execute that strategy. Credit Unions must gear up to invest in both hardware and software to implement data-driven solutions to enable their growth.

For a sustainable growth, the credit unions will need to focus on enhancing their member experience. These can be realized by focusing on the following.

1. Scaling Synthetic Identity Creation:

Generative AI empowers criminals to create numerous fake identities more easily, bypassing security measures and scaling fraud attacks. This technology allows scammers to generate and test countless ID combinations rapidly until they find the one that works.

2. AI-Powered Chatbots:

GenAI-based chatbots are an evolving area now, with many organizations adopting AI-powered chatbots for customer support functions. These AI-powered chatbots can answer any questions and provide resolution to issues. The recommendation is to use stand-alone open-source models like Llama from Meta, which gives you control over your proprietary data and protects privacy. You also get better control in terms of security. However, SaaS enterprise models like GPT4o, Claude 3.5, Gemini, etc., could also be explored based on the use case.

3. Predictive Analysis:

It forecasts future behavior and needs based on the member’s life stage. Credit unions can leverage predictive modeling to predict the likelihood of members needing various products, such as loans or new accounts. This approach can move the credit union from reactive to proactive, where offers are aligned with predicted needs. An example case study: A credit union generated $40M in new loan balances through predictive modeling.

4. Data-Driven Insights:

Integrating third-party data is crucial for uncovering more profound layers of member behavior. One could identify unique member segments through custom segmentation based on variables like discretionary spending, risk tolerance, and financial planning habits. This strategy enables CUs to create tailored marketing messages that resonate on a personal level with different segments, thereby increasing the effectiveness of their communications. An example case study: a credit union created 180 new loans and 130 new deposit products within the first six months of implementation.

5. Crafting Compelling CTAs:

Your campaign emailers should have compelling value for your members and irresistible charm to nudge them to act. CTAs (Calls to Action) are like friendly nudges. Crafting them is an art. You want your members to resonate with your message, feel that nudge, and act—whether signing up, applying for a loan, or exploring more.