The structure and growth of the credit union industry in the United States: meeting challenges in the market

American Journal of Economics and Sociology, The, April, 1994 by Surendra K. Kaushik, Raymond H. Lopez

VI Conclusions

THE STATE OF THE CREDIT UNION INDUSTRY in America has never been as bright as it appears to be in the early 1990s. Some of the trends which drove the industry in the 1980s will still be with us, while other forces and changing patterns will manifest themselves in the remainder of the decade.

The traditions of the credit union industry will make a valuable contribution to its ability to meet the challenge of competition for consumer and member business. The consolidation movement will be a positive force for sustaining credit unions and allowing them to expand their loan, savings, and service offerings to a growing membership base. Even though the industry's goal of attaining Operation Moonshot, i.e. a 100 million membership may be far too optimistic a target, projections in this paper of 89.9 million members by the year 2000 would represent over 32 percent of the population. Furthermore, there is no sign of a slowdown in the growth of market penetration which has been taking place for well over one half a century!

The internal structure of the industry has been changing and will continue to adapt efficiently to changing market forces. Loan rates will stay competitive, as will the rates and savings instruments offered to members. Miscellaneous services such as financial counseling and planning, travellers cheques, savings bonds, etc. will continue to expand as the average size of credit unions grows with attendant increased managerial capabilities.

Federal insurance will continue to be an important component of credit union industry's competitiveness. The analysis here indicates that although most credit unions and most members will be in the Federal Charter/Federally Insured category, the greatest relative growth will be found in the State Charter/Federally Insured group. Operating flexibility plus federal insurance is a combination that will be hard to beat, for credit unions seeking to switch their status and also for the credit unions which will be started in the future.

As competition in the financial services continues to increase from both banks and non-bank institutions, credit unions will have to be alert to rapidly changing market conditions.

How will credit unions survive and prosper in this marketplace as all institutions become more and more alike? How will they be successful at achieving the status of primary financial institution(14) for the membership? One of the most important elements is the proven ability of credit unions to service their members. Time and again, they have ranked, in annual surveys done by the American Bankers' Association, as the number one financial institution in terms of member satisfaction. Achieving this status, and building upon it will be a major factor in attracting and holding members in the credit union. All of the intangibles that contribute to member satisfaction are imbedded in credit union philosophy. It is their not-so-secret weapon that has proven so successful in the past and will be even more critical in their future successful competition in the financial marketplace of the 1990s!