$820M Cost Improvement Opportunity for Credit Unions

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 wereTop 100 CU CPM 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”.


Top 100 CU by CPM SegmentThe 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.

3 ways improved Cost Analytics can accelerate cost reductions

  1. Channel Cost Rationalization
    • Branch costs represent a significant portion of Non-Interest Expenses incurred to service members, with declining volumes due to expanding delivery channels.  Understanding specific unit costs for transactions conducted in the branch compared to alternative channel offerings enables management to make strategic decisions regarding channel rationalization and accelerate customer migration to more cost efficient delivery channels.
  2. Cost of Excess Capacity
    • Few can argue that despite continued draconian reductions in staff there is still a substantial savings to be gained from identifying and eliminating costs of excess labor capacity.  However, a more creative solution would be to identify the costs of excess labor capacity in a very targeted manner, and then redeploying those resources for more strategic member acquisition functions thus reducing an organizations Cost Per Member rate from both sides of the equation.
  3. Back Office Efficiency
    • Non-customer value added activities in the back office related to regulatory requirements, fraud, and exception processing, continue to stress back office expense budgets.  Improved cost analytics can provide deeper insights into activity and process costs to serve members and help eliminate unnecessary costs relation to exception processing.  Integrating a Strategic Cost Management program can provide the necessary cost analytics to improve even the best continuous process improvement initiatives.