Seattle, November 7, 2023 — In today’s ever-changing financial landscape, credit unions and community banks are increasingly turning to FinTech partners to bolster their competitive stance against regional and large-scale banks. The pursuit of growth and competitiveness prompts a vital question: “Which FinTech partners should you consider?” Furthermore, it underscores the importance of evaluating the effectiveness of your credit union’s FinTech strategy. When it comes to assessing success or failure, what performance metrics should you be striving to meet?
The cornerstone of a successful FinTech partnership lies in establishing measurable impacts and a return on investment (ROI) early in the process, even before engaging with a FinTech provider. It is crucial to define the criteria that signify success or failure. This necessitates a well-defined set of benchmarks.
To assist credit unions, Cascadia FinTech Coalition offers valuable insights into how to measure the impact of FinTech tools and their contribution to the financial well-being of credit unions.
Four key performance indicators, derived from call report data, offer a comprehensive perspective on credit union financial stability and growth potential:
1. % Loans to Shares: Ideally, this ratio should be as close to 100% as possible. A ratio significantly under 100% suggests underutilization of member benefits, while a ratio considerably above 100% can pose financial risks that may attract regulatory scrutiny.
2. Net Earnings per Member: To ensure financial stability and foster growth, this figure should significantly exceed $0.
3. Average Balance per Account: While this metric may vary, strong financial performance demands an average balance per account that surpasses the national average.
4. Average # Accounts per Member: A pivotal driver of growth, this number should exceed 2.5. Marketing to existing members with multiple products is more cost-efficient than acquiring new members, making it a crucial factor for long-term success.
As affirmed by renowned retired credit union researcher and consultant, Tony Ward-Smith, the average # accounts per member serves as a primary gauge for credit union growth. The maxim “It’s wallet share, not market share” underscores the importance of serving members effectively, irrespective of the credit union’s size.
Cascadia FinTech Coalition is dedicated to conducting original research into the drivers of organic credit union growth. This includes a particular focus on understanding the impact of increasing the average # accounts per member. In addition to research, the coalition will host events and discussions delving into the advantages of collaborating with early-stage FinTech startups. It will also showcase emerging FinTech startups keen to partner with credit unions in the Pacific Northwest that are poised for growth.
For further information and to stay informed about the latest developments in credit union growth and FinTech partnerships, please visit casfintech.org.