How Credit Unions Can Better Manage Liquidity and Increase Deposits

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Help members identify and enroll in federal savings plans and cancel unused monthly subscriptions.

Originally posted in the Credit Union Times.

In the wake of continued inflation and rate hikes, core deposits at credit unions hit record lows last year despite record gains in membership. While some experienced growth in the last quarter of the year, liquidity still remains tight.

According to a 2024 study from Wipfli, credit unions are heavily leaning on technology to maintain their market lead. Even then, more than half (63%) only expect growth of between 1% to 5%. Additionally, 64% say core deposit growth is a major barrier to other goals.

Another reality credit unions are facing is that tougher economic conditions are impacting members. Stifling core deposit growth, many consumers are dealing with increased payments on variable rate loans and more than 43 million Americans had to begin paying on their student loans in September.

Overall, Americans are saving less. The personal savings rate hovered on or below 4% in the last four months of last year, which is well below a nearly 20-year average of 9%, according to data from the U.S. Bureau of Economic Analysis.

This year, credit unions must strike a delicate balance of meeting the financial needs of their members and ensuring the stability of their operations. The inherent structure of credit unions, which emphasizes member ownership and a cooperative model, can sometimes limit their ability to attract deposits on a large scale compared to national banks.

Additionally, the pursuit of competitive interest rates to entice deposits can put pressure on their liquidity positions. Economic fluctuations and uncertainties can further exacerbate these issues, as credit unions navigate the fine line between offering attractive savings products and maintaining sufficient liquid assets.

To overcome these challenges, credit unions are increasingly focused on diversifying their service offerings, embracing digital transformation, and implementing strategic marketing initiatives to enhance their visibility and appeal to a broader member base. But one area they should seriously consider is financial wellness.

A Meaningful Approach to Deposit Growth

Financial wellness has certainly become a buzz word over the last couple of years – and for good reason. Consumers are looking for tools to help them better manage their finances and debt. In fact, look no further than the recent news from Intuit to end its popular budgeting tool, Mint. Users were furious with this news and quickly took to social media to find a replacement. Meanwhile, nearly three-quarters of Americans say their personal finances is the biggest stress in their lives, according to research from Capital One.

However, most credit unions are leveraging financial wellness as a strategy to grow deposits by way of attracting new members. It’s certainly a great way to boost membership, but credit unions should also lean into their long-standing reputation for being member-centric and focus on supporting existing members by offering services and tools that help them spend less money and save on bills.

Here are two ways of doing that and the math to prove it.

Help Members Identify and Apply for Federal Savings Plans on Student Loans

One of the biggest headlines of 2023 was the end of the student loan payment pause. In December, the Department of Education said that nearly nine million borrowers missed their first payment, which comes out to roughly 40% of borrowers. It’s unclear whether it was due to a lack of awareness, but more than half of borrowers say they don’t earn enough to make the minimum payment.

Credit unions are well positioned to help. For example, if a credit union offers members with student loans the ability to find and enroll in a federal savings plan, for every 1,000 applicable members, the credit union could increase deposits by as much as $406,000 per year.

Here’s how it works. According to the Federal Reserve, 30% of all U.S. adults have incurred some educational debt. Of that 30%, 47% qualify for a federal savings plan, which typically yields an average monthly savings of $240. For a credit union with 1,000 members, approximately 300 would therefore have student loans. About 141 of those members will qualify for a federal savings plan, which equals $406,080 in retained deposits per year.

Of course, this assumes that the money saved would remain on the credit union’s deposits versus being spent elsewhere. But with approximately 135 million members nationwide, this comes out to over $54 billion in additional assets for U.S. credit unions by doing nothing more than helping members save on their student loans. Clearly, it’s a win-win for both the members and the credit union.

Help Members Cancel Unwanted or Unused Subscriptions

Another way credit unions can add liquidity is to help members locate and cancel unwanted subscriptions. According to survey data from Self, the average household has 4.4 active paid subscriptions with most spending $52.97 a month on average. Over half (54.6%) of respondents say they have at least one paid subscription going unused, with a monthly average value of $25.34. Considering that the average American has less than $100 in their savings account, according to GOBankingRates, this extra money could go a long way toward a better financial future.

From a credit union’s perspective, this could also go a long way. Not only does the extra savings help members free up money, which could help them avoid delinquencies, it also adds to their liquidity. For example, the average number of members per credit union is just under 26,000. If 54.6% of members have an average of $25.34 in unused subscriptions, that would equal just under $360,000 in monthly savings, or $4.3 million per year.

Financial Wellness Isn’t Just for Growing Membership

In the face of inflation and record-high interest rates, credit unions are contending with record lows in core deposits despite substantial gains in membership. As liquidity remains tight, credit unions should consider a different approach to financial wellness and explore how it can help existing members who may be struggling.

Two strategies, both with the math to back it up, are helping members identify and enroll in federal savings plans and canceling unused monthly subscriptions. This may seem simple, but the value in these approaches extends far beyond the credit union, and helps members work toward a more sustainable financial future.

Brian Gunn

About the Author

Brian Gunn is Chief Revenue Officer for EarnUp, a San Francisco-based provider of a financial wellness-focused payments platform.


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