While the growth and stability of a credit union is dependent upon many factors, perhaps one of the most pressing concerns currently is the quest to obtain core deposits. As 2019 wrapped up, the credit union industry showed modest growth in membership numbers and loan portfolios but struggled to maintain regular share account balances. CUNA reported regular share accounts decreased by 3.15% in Q3 2019.
Core deposit accounts, generally understood to consist of regular share, draft share and club accounts, directly impact credit unions’ ability to continue making loans and ensuring an appropriate net worth ratio. A higher proportion of core deposits means lower liquidity risk, leaving credit unions less sensitive to market fluctuations. To ensure stability and reduce risk, credit unions must adopt a proactive strategic plan that emphasizes the use of data-driven marketing and technology to drive core deposits within each field of membership.
Data are tools to define and shape strategy, by creating profiles of current members, credit unions can identify the demographics, characteristics and banking habits of their members. Data can be used to define who members are, why they come to the credit union, what services they use, and how much they deposit, withdraw, invest or request in a loan. By creating data driven member profiles or personas, credit union can create highly customized marketing collateral and campaigns targeting key segments of their current and prospective membership.
When devising core deposit growth strategies, incentives and rewards may get a new member in the door, but member retention – and improved profitability – must be achieved by personalizing new products, services, and offers. Personalization drives loyalty, because members feel the credit union understands their wants and needs; they are more likely to open or continue to contribute to core deposit accounts when they use other products or services offered by the credit union. Data-driven user profiles and membership segments can help predict the types of products, services and offers of which consumers are likely to take advantage.
Identifying and creating data-driven marketing collateral are only the pillars of core deposit strategy. Technology is what grounds the pillars. Aggressive use of technology through digital channels includes not only digital marketing, but also digital capabilities that provide ease of access and use for consumers, such as online eligibility determination, virtual tellers and even gamification. Use of technology increases access and reduces response time for members, which could be correlated to member acquisition, satisfaction and retention, and core deposit growth.
While many credit unions lack the capacity to harness all the potential from data, marketing and technology, fintechs, such as CUCollaborate can be a great resource to expand and engage membership.