Revolutionizing Revenue: Strategies for Elevating Income Streams in Credit Unions

By Ken Lowy, NewtekOne
February 8, 2024

Historically, members have flocked to credit unions for a more tailored and member-focused experience than banks. However, superior service may no longer be enough to attract new members and foster growth. The many changes in the finance industry in recent years, including the emergence of fintech startups and neobanks, have reduced both credit unions’ market share and ability to attract PFI (primary financial institution) relationships.

Here’s why that’s problematic. With fewer PFI relationships, your credit union’s current income streams can grow stagnant, limiting your ability to invest in infrastructure, member services, and technology. In short, it can reduce your ability to grow. As a result, it’s more important than ever for credit unions to establish and cultivate new and sustainable income opportunities.

Keep reading for five actionable ideas for how to increase income opportunities for credit unions.

1. Diversify Your Lending Services

Many credit unions rely heavily on traditional banking products, like mortgages and auto loans. The problem? If you’re too reliant on these products, you’re vulnerable to economic downturns or shifts in consumer preferences. This became starkly evident in 2023, when mortgage demand hit all-time lows due to rising interest rates, contributing to an overall reduction in credit union net income due to fewer new originations.

Instead of doubling down on one or two products, consider diversifying.

For example, you could begin offering a shorter-term cash advance program.

Additionally, offering (or expanding your offerings in) commercial lending could be a natural progression of your existing services while increasing potential income streams.

Traditionally, credit loans have only scratched the surface of commercial lending. But that’s changing. In 2022, commercial loans surged by over 24% at credit unions – more than double the rate reported by banks. Here are some of the reasons businesses might seek out loans:

• To purchase or refinance commercial real estate
• To open, expand, or acquire a business
• To purchase equipment
• To make leasehold improvements
• To refinance existing business debt

Of course, it’s worth noting that the barriers to offering commercial loans are very real. They’re tedious, require a lot of due diligence, and the risk of commercial loan default is very real.

This is where a strategic partnership can help. For example, NewtekOne Lending was designed specifically for and offered exclusively to credit unions. It offers SBA-guaranteed small business loans, accounts receivable financing, and commercial real estate financing – and allows your credit union to offer these services to members with no credit risk, no new expenses, and no additional staff.

2. Offer Business Services

Building on the last point, another way to diversify your offerings is by offering business services. It’s a win-win situation: Your business members get more solutions in one place, making your credit union more valuable. At the same time, you create new potential income streams.

Best of all, there’s no need to do all the setup work yourself. It’s easy to set up strategic partnerships to begin offering business services like the following:

• Merchant services: Offering a robust suite of merchant processing tools such as point of sale (POS) Solutions, mobile processing, e-commerce solutions, ACH payments, and electronic check services can help your customers stay efficient and potentially even cut their business costs.
• Payroll services: Payroll can be one of a business owner’s biggest headaches – especially if they’re doing it manually. The right payroll software can help your members deal with everyday tasks like managing payments, benefits, and time off requests. It can make life easier for your members – and make your credit union even more valuable to them.
• Insurance: Offering insurance can help businesses stay competitive and attract the best talent. However, building the infrastructure to offer insurance can be costly and requires navigating regulatory challenges. For this reason, a strategic partnership is the easiest and fastest way to expand into this type of offering.

3. Uplevel Your Website

Did you know that 71% of consumers prefer to manage their finances through a mobile app or computer? If your credit union hasn’t caught up with the digital revolution, it could hamper your growth.

But it’s not simply about having a website. It’s about having a good one. Here’s some food for thought – according to a Stanford University study, 94% of people have reported leaving a website due to poor design. 75% of the same users admit to making judgments on a company's credibility based on the company's website design alone. So, as a credit union, a great website is crucial.

Content matters, too. A great website can offer resources such as financial education tools or money management tools that can help add value to your members and increase engagement and retention.

The only catch? Developing an online presence can be costly. If you’re not tech-savvy, it can be challenging to know where to get started.

Here’s the good news: You don’t have to do it alone. Using a strategic partner, like NewtekOne, you can access comprehensive digital solutions specifically designed for credit unions, including web design, development, and hosting. It offers one-on-one brainstorming sessions with a design and marketing specialist to custom implementation and development and personal management. In short, you’ll receive the tools and resources to meet your specialized needs, with a focus on growth.

4. Get Smart About Compliance and Risk Management

True, adhering to regulatory compliance and risk management practices might not increase your income directly. However, it can help you avoid potentially costly legal issues and keep you safe from reputational damage, which can help create a strong foundation for sustained growth.

In short, proper data management is crucial to your credit union’s long-term success.

But let’s be real: Staying up to date on the latest compliance guidelines and proper data management can be tough. The landscape is ever-changing, and it can be challenging to keep up.

For that reason, it’s well worth seeking out a high-quality data storage solution. Not only can the right data storage service help keep your data safe, but it can also ensure that you’re maintaining the most current and stringently compliant standards.

The Bottom Line

Increasing income opportunities for credit unions requires a multifaceted approach that combines innovation, technology adoption, engagement, and strategic partnerships. By embracing the strategies discussed in this article, credit unions can not only enhance their financial standing but also strengthen their position as trusted financial institutions in the communities they serve.

About NewtekOne

From lending and payments to payroll, insurance, and technology, NewtekOne provides leading business solutions to credit unions and their members.