Marketing Must Know These Key Ratios

The basic Business Model for credit unions is very simple. It is Money in Money out. Credit unions buy Money ( deposits) from members (Cost of Funds) and then loans out those deposits to Members (Interest Income) at a higher interest rate (Margin). Of course there are multitudes of nuance to this model, that’s why credit unions have CFOs, but as Marketers this is how a credit union makes money.

Also, a Marketer needs to know the how a credit union delivers on this money in, money out model. The variables center primarily around four things: fee, service, sales and product strategies.

Is your credit union fee sensitive, fee neutral or fee aggressive? Fee sensitive defines a credit union that historically has a a low non-interest income ratio (most of this ratio is made up from various fees) and has lively debate when a new fee or a fee increase is suggested. Fee neutral is a credit union that understands how important fees are to the income statement and tries to stay competitive with their fee structure. A fee aggressive is defined by a credit union that needs/wants fees to drive their income statement or actively uses fees to drive member behaviors,

What is your credit union’s service model? Are you high touch, E-delivery focused, branch centric? A high touch branch focus is the most expensive model for a financial institution because this model requires a lot of head count and brick and mortar to compete. Typically SEG-based credit unions that are staying true to the bank-at-work model are more cost effective. Hybrid models that are SEG-based but look and feel like a community field of membership have expenses similar to branch centric credit unions. E-delivery is likely the most cost effective model if they avoid branches and the staff to run them.

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