The credit union value proposition is under fire from multiple directions. As has been widely reported, credit union member satisfaction, as measured by the American Customer Satisfaction Index (ACSI), has been declining since 2017. Credit unions’ ACSI score now sits at 77, far below its zenith of 87 in 2011, and has trailed banks for two years in a row. Banks now enjoy higher satisfaction levels, on average, than credit unions.
Loss of PFI Relationships
The declines in ACSI scores have been matched by an even more disturbing decline in credit unions’ share of PFI relationships. Recent research from Raddon shows major national banks’ share of PFI relationships started taking off in 2018. These gains came at the expense of other financial institutions, including credit unions, community banks and multi-state banks.
While the major national banks are really benefiting by capturing more and more of these PFI relationships, credit unions’ share, which stood at 21% in 2018, declined to just 12% in 2020 (see Figure 1).
Younger consumers are redefining what it means to be a consumer’s PFI (see Figure 2). Being the financial institution that provides a consumer’s most used checking account or where their paycheck is direct deposited may no longer be sufficient to be considered the PFI of many younger consumers.
Declining Market Share for Certain Loan Classes
Credit unions’ decline in member satisfaction and loyalty is being compounded by the loss of market share in several key lending categories. According to Experian, share of total vehicle financing has slipped from 23% in Q2 2018 to 18% in Q2 2021 (see Figure 3). Credit unions’ share of both new and used vehicle loans declined by approximately 4 percentage points during this timeframe.
Credit unions’ share of the unsecured personal loan market has also declined. In 2013, credit unions captured nearly one-third (30%) of this market. Fast forward to 2019 and credit unions’ market share had dropped to roughly 20% (see Figure 4). By contrast, fintech lenders’ market share grew from 7% in 2013 to 39% in 2019.
Mortgage lending seems to be a bright spot for the industry, with federally insured credit unions granting $289.0 billion in first mortgages in 2020, up 63% from 2019, according to NCUA. Despite this impressive performance, credit unions do not appear to be capturing market share from their competitors.
Prior to the pandemic, credit union’s share of mortgage originations began slipping from 6.9% in 2018 down to 6.7% in 2019, according to S&P Global Market Intelligence’s analysis of Home Mortgage Disclosure Act (HMDA) data. Unfortunately, S&P has yet to update their analysis with 2020 HMDA data. However, a recent Credit Union Times article reports credit unions’ share of first mortgage originations declined year-over-year from 8.9% in Q1 2020 to 6.8% in Q1 2021. These results suggest that while credit unions grew first-mortgage originations in dollar terms, their growth rate was not sufficient to maintain or grow their market share since the beginning of 2020.
2021 CUNA Mutual Group internal data and Experian, “Auto Finance Insights: State of the Automotive Finance Market Q1 2021,” Q1, 2021
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