NAFCU Services Blog

By Jack Imes, Chief Client Lending Consultant - Allied Solutions

Interest rates are up, banking brand trust is down, and credit unions need to concentrate on making 2024 a year of innovation and growth. To get there, prioritizing loan growth and digital optimization will play a crucial role in setting credit unions apart from — and ahead of — their banking counterparts. 2022 was all about the pending liquidity crisis and 2023 has had financial institutions knee-deep in how to turn the crisis around. It’s no longer a question of “how do we prepare for this” but instead “how do we grow from this.”

Inflation and interest rates have soared this year, hitting some of the highest numbers we’ve seen in over 20 years. While the Federal Reserve has slowed rate increases for 2023, all financial institutions have a long road ahead of them. Actively preparing for what’s next should be at the top of every credit union’s Q3 and Q4 list, as next year’s strategy will look dramatically different from years past.  But one thing remains the same, everyone needs liquidity. 

If you are a credit union preparing for your 2024 strategic plan, here are three key drivers to consider during the process.  

#1: Develop Core Deposit Strategies

Thanks to low rates on home sales and refinancing, loan growth had been exponentially strong in prior years. Now, credit unions need to prepare differently for the road ahead as growth may be closer to single digits instead of double. The spread between interest income and interest expense continues to narrow and credit unions should keep a keen focus on the pricing of loans and deposits. Participation loans can provide excellent opportunities to diversify portfolios, boost your bottom line, and help mitigate the effects a recession has on the institution. By chipping in on these pools of loans, your credit union can benefit from flexible loan growth and grow loans with low credit risk and above-average yields.

Also, now is the time to start using your collected data to assist in pricing loans and deposits. With the competition being fierce when it comes to loans and deposits, your data can help drive these pricing decisions.

#2:  (Re)Tell the Credit Union Story

Credit unions are historically known to be conservative when it comes to risk-taking and typically have a strong balance sheet that has put them in a better than most (banks) situation. With members being the number one focus, make 2024 a year to refocus on the member and strengthen the relationship.  Reevaluate existing membership programs to help your members during this moment in time. With credit card balances being at an all-time high nationally, now is the time to give them the help and education they need and expect from their financial partner (YOU!). Consider proactively helping them consolidate their debts and terms. It will be a pleasant reminder that you see them and have their backs.

#3: Leverage Technology

Leveraging technology can take multiple paths, but luckily you don’t have to pick only one. Between expanding customer service options, garnering the attention of new, younger members, and making your branch run more efficiently; tech and digital optimization is a line item must for 2024.

While technology is fast and everchanging, it has given way to a plethora of opportunities to help grow loans, members, and your institution. Your institution can become more efficient as technology can relieve certain duties and free your employees to focus on more important and helpful tasks - which can also help your bottom line to control non-interest expenses.

Take artificial intelligence (AI), for instance, it has quickly become a main character in the world of product enhancements over the last year. Lending even more to the quickness of technological advances. It’s almost instant infiltration into our lives and how we use products makes predicting the future of advancements difficult to pin down.

Quickly accepting and adapting to new concepts, like AI and other tech advances, helps credit unions get to point B faster and more efficiently. Which in turn helps to navigate the map of diversifying portfolios, gaining new members, and reaching the hard-to-target millennials and Generation Zers.

While this time of high-interest rates is not ideal for anyone, credit unions’ risk-adverse reputation helped put them a step ahead of their financial counterparts. Use this momentum to look for new growth opportunities and to connect with your members and community to remind them that you are there no matter what the storm brings in.