A new study issued this week by Celent, the Boston financial research and consulting firm, is finding small credit unions “overwhelmed” by the complexity of technology and competition.
The study, “Tipping Scale: Credit Union Consolidation”, is based on NCUA data from 2010 and found CUs under $50 million “are disappearing”, though the industry as a whole appears to be adjusting to the new environment.
“What is driving this change?” asked the report co-author, Bart Narter, senior vice president. “Competition driven by demand for mobile banking, consumer and business remote deposit capture and branch capture.”
The study found that smaller CUs “don’t have the scale to create these offerings and even the larger credit unions dwarfed by the size of their bank competitors are finding it difficult to keep up.”
In the past, “credit unions simply required a branch or two, a core banking system and ATM but in the past 10 years “Internet banking, bill pay, know your customers and office of foreign assets control compliance” have all become “table stakes,” Narter said.
In reporting on the CU diminishment, the study noted that the number of CUs in the U.S. “is declining rapidly from 10,316 at the end of 2,000 to 7,330 at the end of 2010.”
The vast majority of this consolidation “is taking place in the smaller credit union with assets under $50 million. However, CUs over $500 million “are vastly outgrowing any other category relative to their tier,” the Celent report said.
Celent, which has done most of its work on the banking sector, said this is the third recent report on credit unions, with the previous two covering core data processing at both large and small CUs.