MADISON, Wis. -
That's what credit union economists would like to know, but it is one possible explanation for the strong May membership growth results reported by CUNA Mutual Group's "Credit Union Trends Report" (which uses data from CUNA) that show total membership estimates are up to 89.4 million and annual growth up to 1.8%. It's an uptick in what has been relatively flat growth.
"It's a nice little recovery," CUNA Mutual Economist Dave Colby told the Credit Union Journal. "The year-to-date number is now above my original 2007 forecast."
But it's not quite time to break out the champagne. "It would be nice to say happy days are here again, but we could still see retrenchment in the second half of the year."
No Clear Answers
And with no clear answers as to what is-or isn't-driving the membership growth numbers, Colby, and at least one other CU economist, isn't ready to say credit unions are out of the woods.
"When we look at the numbers, we don't have quite the boost from indirect members that we typically have because even the indirect channel has softened quite a bit," Colby related. "It's hard to explain. Are we finally tapping community charters? Are we finally seeing the long-awaited trend of membership growth from community charters that everyone kept predicting? We just don't know. We don't have the data."
But with the data that is on hand, economists are turning to the Sherlock Holmesian method of eliminating everything that can't be the answer. Having already eliminated indirect lending as a primary driver, the next thing to look at is deposit rates, and that, too, appears to be a dead end.
"Credit union deposit rates are not significantly above market on deposit, so it's unlikely that is what is driving this," Colby offered. "I don't know if credit unions are just holding off on purging [indirect] members who pave paid off their loans and are simply holding their minimum deposit at the credit union. I don't think people are rushing to join to get credit cards, but we did see some of the strongest growth in credit cards since credit unions began offering the product."
Which brings it back to the "community charter effect."
"This has actually been happening for some time," NAFCU Economist Dr. Tun Wai said. "Some of the community charters and expansions into underserved areas are starting to bear fruit. This takes time. You can't open the door and instantly expect members to come in. You can't wait for members to walk in the door, you have to grab them as they're walking by."
CUNA Economist Mike Schenk agreed. "The more expansive fields of membership could be part of it. It's difficult to say. Where would we have been if those charter expansions hadn't occurred? Is it possible that instead of just flat growth that we would have seen membership numbers shrink? Whatever the case, it is clear that when a credit union expands its field of membership, you can't use an 'if you build it they will come' strategy.'"
Increasing financial literacy efforts has played a role, as well. "A lot of institutions have been recognizing the value of financial education, and what you're seeing is that they are finally recognizing that the younger people can become long-term members," Wai said.
But even if the tide is finally starting to turn on membership growth, and even if that turn is being driven by the community charter effect, that doesn't mean community charters are the way to go for every credit union.
"It's still a lot harder on community charters than single-sponsor charters," Wai observed. "It involves a lot more commitment, a lot more outreach, a lot more marketing and advertising."
Schenk pointed out that regardless of what has-or hasn't-been driving this growth, it's something that's been going on for a lot longer than just the month of May.
"It appeared to me that last year was more of a turning point than today," he said. "Membership growth was at 1.1% in 2005 and then went up to 1.4% in 2006. The latest numbers are at 1.8%. That would suggest 2007 will end up being stronger than 2006. I'd be surprised if it will be above 2%."
Additional Factors
Schenk also pointed to two additional factors that could be helping to pump up the growth numbers. "There has been a concerted push both nationally and in various states to help credit unions recognize that growth has been weak and that they need to think about ways to change that," he explained. "Some credit unions thought the flat growth trend was just an aberration, but it really was a long-term trend that needed to be addressed."
Both Wai and Colby agreed that looking at the raw numbers, however, doesn't tell the full story.
"These numbers mean different things on a credit union by credit union basis," Colby said. "If I were managing a credit union, I'd invest my resources in deepening the relationship with my existing members, rather than chasing after new members. Though there could be credit unions with a particular field of membership where that would make sense."
