Credit unions are an important part of the financial services industry. As such, it is important to measure their performance and progress in order to maintain a high level of service and meet customer needs.
In the highly competitive world of credit unions, it is essential to measure performance using Key Performance Indicators (KPIs). Every organization should have KPIs specific to its organizational objectives, but there are certain KPIs that are important for all credit unions.
We recently discussed the essential network performance metrics for the financial industry. In this article, we will discuss the top KPIs for credit unions in order to provide guidance on how to measure success. We will examine how these KPIs can be used to assess operational efficiency and financial performance.
Why Are KPIs Important to Credit Unions?
KPIs, especially those that monitor sales performance and financial performance, can be great data to use and apply to your credit union’s current growth and opportunity initiatives.
But they offer more than just options for CU growth, KPIs are commonly used to:
- Create a Culture of Learning – These metrics can help your departments and staff members collaborate and learn as they dive into KPI analysis.
- Measure Goals – Business goals are complex. Familiarity with a KPI report that tracks your sales, marketing, or digital banking initiatives offers great insight into how you are measuring up against the goals you’ve set for your CU this year.
- Improve Operations – Business goals and initiatives evolve over time. But your KPIs can help you with consistent measurements throughout every ebb and flow. Seeing financial systems and their cycles over time can create true operational efficiency. This is more powerful for the success of your credit union than reactionary measures or growth campaigns will ever be.
- Provides Quantifiable Feedback – Credit union leaders know all to well the struggle of finding out “why” a certain product, service, or initiative was so successful (or so underwhelming). KPIs create data that tracks the state of your operations as you grow and change, and this can offer important feedback when you study the trends shown within your KPI reports. Now that you’re familiar with the importance of KPIs for credit unions, let’s look at some of the big ones your CU should be tracking.
Overall KPIs for Credit Unions
Your credit union has likely experienced some big changes in the last few years. And with those changes come other opportunities and obstacles you must address in order to continue growing as a business. Here are some of the top overall KPIs for credit unions.
Loan growth is the percentage change from period to period of your loans outstanding. While you can certainly drill down into the different types of loans and other lending products and services your credit union offers, keeping track of the overall trajectory of your lending programs is important.
Member growth is the percentage change of total credit union members from period to period. As big banks continue to try and use technology to wow their customers, your membership growth opportunities are going to come mostly from digital banking and customer service differentiation.
Return on assets is the annual net income divided by your average total assets. ROA is a top indicator of profitability in any business. This should, for credit unions, be more of a guide rather than an absolute indicator of success. Many credit unions are not working solely towards profitability – there are other factors and goals that may lead to less profitability but more community outreach and recognition within the geographical areas you serve.
The average member relationship is the average value of assets (loans, deposits, etc.) that an individual member has with your credit union. This KPI can be determined by analyzing your pricing strategy, underwriting policies, product mix, and more. This can also be affected by environmental factors, including the current job market and the economic environment of the areas you serve.
Digital KPIs for Credit Unions
62% of all consumers consider mobile banking apps an essential service, and nearly 3 out of 4 consumers use them as their primary form of money management. Digital banking becomes more important every year, and your credit union serves a very loyal member base (if you’ve done things right for them). That means digital banking KPIs are just as important as the traditional ones we mentioned above. Here are some of the top KPIs to watch.
Return on investment of your online platform should likely be at the top of your digital KPI monitoring. This shows you the relationship between the total amount of resources used for the platform and the total returns you’ve made from it. Upselling and cross-selling will be the drivers of most of your gains here. You can also use the reduction in cost you’ve realized since moving from paper or in-person products and services to digital solutions. It’s a great way to see the overall value of your digital programs, for your credit union and for your members.
Active clients is another strong KPI to track – this one shows you how many members are downloading and regularly using your digital applications and online banking services.
There are also several conversion-based KPIs that can help you monitor the effectiveness of your online programs.
Number of conversions is just the total number of users who have begun the process of onboarding to digital banking apps and solutions.
Conversion ratio is the number of members who complete the sign-up and onboarding process, and conversion time is how long the whole process takes per member.
Abandonment rate is the number of members who have chosen not to complete the process.
These conversion KPIs can tell you a lot about which areas in your digital banking platform are performing well and helping your members the most, and which areas need to be improved upon to decrease the number of members who abandon the process altogether.
Your Data Is a Gold Mine – Keep Things Organized and Safe with IMS
The more you can use your data and the top KPIs for credit unions to glean insights on what your members, staff, and community need, the more opportunities you’ll find for growing your credit union services and membership base.
IMS offers a host of virtual private cloud services created specifically for credit unions like yours. From backups and data discovery to compliance, anomaly detection, and IaaS, we’re working hard to keep your data safe, secure, and organized. Reach out to us today or check out our website to learn more about our services.