Growth-Oriented Credit Unions: Preparing for Sustainable Growth

The Emergency Economic Stabilization Act of 2008 was a watershed moment for credit unions. The overreach of banks had been exposed, and the EESA set regulation in place to prevent it from ever happening again. In the wake of this period, credit unions became more attractive to consumers by comparison and began growing at twice the rate of banks from that moment on.

Today, there’s still room for massive growth. Though there are more than 5,000 credit unions in the market, only 20 can boast an annual revenue of over $10 billion. Impressively, half of those credit unions achieved that milestone in a COVID-fueled frenzy of growth. However, many credit unions are wary of ambitious growth goals—and it’s understandable. Once they hit $15 billion in assets (a threshold recently increased by the NCUA board), they face a whole different level of liability and regulatory scrutiny.

For growth-oriented credit unions that are prepared for the challenge, there should be the understanding that this level of growth requires exceptional talent. Both current and future leaders in the credit union must successfully buck the status quo and foster innovation while staying true to the community-centered mission of the credit union. In order to achieve sustainable growth, there are three key areas these leaders need to prepare for: technology, infrastructure, and member experience.

Leveraging Technology for Credit Union Growth

As a credit union approaches that $15 billion mark, the first key objective is strengthening their internal risk and compliance measures. To meet the growing number of regulatory requirements, an upgrade to technology will be critical. According to Vincent Hui at Cornerstone Advisors, the biggest impact of exceeding the $15 billion cap—besides the reduction in the debit interchange income and the increased cost of keeping pace with compliance (which together exponentially increase the need for rapid growth)—is investment in technology.

In particular, credit unions should look at investing in technology upgrades and system implementations in the realm of data warehousing, compliance, and information security. Additional investments in more innovative FinTech solutions must first and foremost be aligned with compliance and security.

As credit unions plan for growth and propose a strategic org chart to manage it, technology roles should be a core consideration. In order to implement and optimize new systems, tools, and upgrades, roles such as chief technology officer, chief data officer, chief of information security officer, head of UI/UX, and others will be of high value.

Some of these roles can be efficiently filled through promotion. Retaining existing talent—the people who helped achieve the current level of growth—is an undervalued strategy for high-growth credit unions. What many won’t realize until it’s too late is that the $15 billion milestone will launch existing leaders and managers into the view of myriad recruiters for smaller credit unions. Retention is key—but creating a suitable succession plan to protect against turnover is equally critical.

When new tech-related roles are created that existing talent can’t fill, talent augmentation takes center stage. Leaders should look for talent who have experience in high-growth business and know what it takes to get there from a technology perspective. Credit union experience is not always required as long as an individual understands the technical ecosystem and can simultaneously fit well with the culture. Critically, a successful technology leader is someone who not only identifies and implements the right technology but also keeps the big picture top-of-mind, connecting the data with compliance and regulatory requirements accordingly.

Preparing the Infrastructure

As credit unions seek and experience larger growth, technology is indispensable but it’s only one piece of the puzzle. The organizational infrastructure—from both a tech and non-tech perspective—will undergo significant transformation over the course of several years in an effort to sustain the growing credit union. Timing of growth and investment is critical—some experts say the cost of evolving and reinforcing this infrastructure could easily exceed $5 million.

As assets under management grow, risks also increase. One of the first areas of concern as a credit union expands and becomes “systematically important” to regulators is compliance risk. Evaluating the company’s environment against the CFPB’s published examination guidelines will enable leaders to gain an inside view of what metrics and data will be subject to regulatory oversight and implement effective compliance management systems and risk management tools accordingly. Every element of the credit union’s current and future-state infrastructure must work cohesively to protect against non-compliance.

Secondly, but just as important, is cyber risk. The larger an organization and the more technology they have in place, the greater the threat for cyberattacks, malware, bad actors, and more. Cybersecurity talent is in high demand across all industries, so credit unions will need to be competitive in what they can offer to attract the right leaders. With that talent in place, a multifaceted approach is necessary, with regular audits and assessments and even third-party penetration testing.

Finally, the risk of simply getting stale and being cemented in the same old way of doing things can pose a real threat. This often happens when retention is high, both within the organization and within the industry itself. Though retention is usually a positive indicator, it can also limit growth mindset. As credit unions grow, recruiting talent from outside the industry may be a strategic way to introduce new perspectives.

To manage the growing infrastructure while protecting against these risks, credit unions need the right talent to lead the way forward. That often means recruiting board members and senior leaders with experience from larger financial institutions. The CHRO is also a critical role to help build the infrastructure in alignment with the culture. The right CHRO will lead talent augmentation efforts that seek to recruit people who, more than just being a culture fit, are additive to the existing culture. That means hiring people who bring innovative perspectives, fresh eyes, and a diversity of thought and experience.

Another area of talent to support a growing credit union is M&A leadership. Many credit unions are tipping the scales on that $15 billion threshold via strategic acquisition. Talent who can help scale the business accordingly and ensure sustainability through the company’s growth initiative will be crucial. Finally, high-performing boards are a must. Recruiting board members who simultaneously understand the revenue pressures, credit union mission, and infrastructure requirements will be instrumental in a credit union’s success.

Modernizing the Member Experience

With growth comes an increased responsibility to deliver on the member experience. Consumers often choose to bank with credit unions in the first place for the personalized and hands-on approach that is harder to find at faceless financial institutions. Credit unions are usually an integral part of their communities, and as they seek more sophisticated growth, it’s important not to sacrifice that member experience and local community orientation.

This starts with monitoring and benchmarking the components of the experience, tracking the customer journey from account opening to closing. Along that journey, several areas stand out as key moments to engage the customer, including initial loan applications, on-site branch visits, and online complaints, among others. These are prime instances where channel optimization, digitalization, and personalization can help a credit union level up in the eyes of their members.

The current consumer landscape is rife with hyper-personalization. Credit unions can follow suit, modernizing the member experience by implementing a better UX on websites and mobile apps. Equally important is an effort towards leveraging CRMs, data analytics, and surveys to align their services more closely with each member’s unique goals, preferences, and motivations. Underlying the digital member experience should be a hyper focus on security, privacy, and convenience.

Acquiring talent for leadership roles in member services and experience may include recruiting from the retail industry or customer service industry, where a focus on the customer experience is foundational. Chief Experience Officers and similar roles will be integral to the growing credit union.

Preparing for Sustainable Credit Union Growth

Realistically, planning for growth that pushes a credit union over that $15 billion mark will take years of preparation. Taking a cohesive and strategic approach that combines technology, infrastructure, and member experience will set the stage for success. Having the right talent to spearhead these efforts is crucial.

JM Search is strategically positioned to recruit top-tier talent in the financial space. If your credit union is preparing for high-level growth, we can partner with you to get the right team in place. Reach out today to learn more.