Small Market Credit Unions May Have Greater Impact on Field of Membership
By Michael Cochrum
In the world of credit unions, as with banks, the larger
shops tend to garner more attention from industry insiders. However, it may be that smaller, small-market
credit unions are garnering more attention from the members they serve. CUBI.Pro recently used its national CU
Peer Data Application to research how
credit union assets were distributed by state and by individuals in each state. The research demonstrates that credit unions
in the most populous states garner the largest concentrations of assets but do
not necessarily impact individuals in those states as much as credit unions in states
where the population is less dense.
Obviously, large credit unions are often able to offer more
services and access points to their members than smaller credit unions, due to
scale, but the question that arises is whether these services are what members
and potential members are seeking in every area the credit union serves? Another question is whether the presence of
in-market competition has a greater impact on credit unions in metropolitan
areas than in smaller markets where competitors are fewer. While the research findings below do not
fully answer these questions, they do expose, perhaps, an untold story of the
credit union movement; small, member-centric financial cooperatives still play
an important roll in the lives of many small-market consumers.
The heat map below illustrates the concentration of almost
$1.5 Trillion in U.S. credit union assets by state, with lighter-colored states
having lower concentrations and darker-colored states having higher
concentrations. As one can see,
California in blue, holds more credit union assets than any other state, by far,
with $199 Billion in assets at the end of 2018.
Virginia is second with just over $155 Billion. Then Texas with $104
Billion and New York with around $80 Billion.
This should be no surprise as these are states with relatively high
population concentrations. The least
populated states, often referred to as the “fly-over” states, represent the
smallest share of asset distribution.
However, as illustrated in the map below, when one compares
total credit union assets in a state with that state’s adult population
reported by the Census Bureau, a much different picture emerges. Virginia credit unions have the highest
assets per capita with over $18,000 in assets per person, but this includes
Pentagon Federal Credit Union which is disproportionately large. Alaska credit
unions, with a total population under one million, hold over $15,000 per
capita. The average U.S. credit union
per capita assets are around $4,500 per adult for comparison.
We find states like Maine($5.98), New Hampshire($6.21),
Vermont($7.00) and Massachusetts($5.79), all well above the national average,
edging out New York($4.37) on per capita assets. Idaho($5.69), Wyoming($5.85), New Mexico($5.36)
and Utah($9.16) all give California($5.06) a run for its money, literally. Texas, with a high concentration of credit
union assets overall, falls short of the per capita average at only $3600 per
adult.
While this research does not go so far as to say that the
size of an individual credit union does not matter, it seems quite clear that
credit unions thrive, individually, in markets with less dense populations and
perhaps a lower concentration of financial service providers representing fewer
choices for consumers. It also seems to
indicate that credit unions would do better to expand in under-served areas of
the country rather than into areas that are already served by other credit
unions and banks.
There are two potential take-aways from this analysis. The first thing to understand is that as
credit unions consolidate for efficiency, it is important to not dismiss the
value of touch points in smaller communities where there are fewer competitors
and that services provided may need to be tailored for the needs of people
living in disparate geographic locations.
In other words, one cannot assume that members acquired through a merger
with another credit union will easily adopt the surviving credit union’s
service delivery methods, nor should we assume that a touch point that works for
urban members will appeal to rural members.
The second thing to consider is, for credit unions seeking
organic growth, smaller, more rural, communities may present opportunities that
may not have been considered. Often,
when looking at locations for expansion, we look where our competitors are successfully
doing business and stake a claim nearby, lest they steal our existing members. However, an equally important strategy may be
to pioneer new, underserved, service areas where your competitors have yet to stake
a claim.
CUBI.Pro works with credit unions across the country to support
a data-driven decision culture and provide meaningful business intelligence
that allows CU leaders to make better and more timely business decisions. If your credit union is looking to enhance
its business intelligence for decision making, visit www.cubi.pro for more information or email michael.cochrum@cubi.pro.
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