Analysis conducted on the Top 100 US Credit Unions revealed an $820 Million cost improvement opportunity for more than 40 institutions. The study was based on 2014 annual credit union call reporting data across the Top 100 Credit Unions based on asset size. Total Non-Interest Expenses for these institutions were over $11 billion dollars and represent the normal operating costs to serve Credit Union members excluding interest expense and provisions for loan losses.
The average Non Interest Expense incurred per member for these institutions was $375 per member, with over 40% of the Credit Unions exceeding that average. If each of these institutions reduced their respective cost per member to the average it would save over $820 million in Non-Interest Expenses. Scott Wise, CEO of Armada Consulting commented, “What the analysis demonstrates is the fact that Credit Unions can yield a significant return on investment on cost management programs”.
The disparity of cost per member data across diverse organization sizes in terms of Assets and Employee base indicates a need for improved cost analytics in the industry. Commercial banks have invested heavily in cost and profitability analytics programs to uncover improvement opportunities for several years, while Credit Unions have lagged other Financials Service institutions in deployment. But, as this segment of Financial Services grows, so does the demand for deeper analytics to identify cost takeout opportunities. These savings are much needed to meet growing competitive and regulatory threats facing Credit Unions today.