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TransUnion Survey: Credit Unions Focus on Auto Loans for Growth Opportunities in 2015

Apple Pay(TM) Is Also on Their Radar

TransUnion 2014 Credit Union Survey Infographic

CHICAGO, IL--(Marketwired - Nov 12, 2014) - Continued low auto loan delinquency rates and high demand for both new and used autos are likely reasons why credit union executives surveyed by TransUnion believe auto loans will afford them with the most loan growth opportunities in 2015.

Results from the October 2014 survey of 142 credit union executives are being released today in conjunction with TransUnion's financial services seminar, "Elements of Sustainable Growth," which includes participants from several credit unions located throughout the country.

By a 2-to-1 margin, auto loans (46%) were chosen as the top growth opportunity over the next 12 months relative to the next highest rated loan product -- mortgage loans (22%). Nearly 84% of those surveyed ranked auto loans as one of their top three areas for growth.

 
Percent of Survey Respondents Ranking the Following Products as the Top Areas of Growth/Focus/Opportunity for their Credit Unions in the Next 12 Months
Product Type Ranked 1st Ranked in Top 3
Auto Loan 45.8% 83.9%
Mortgage Loan 22.1% 49.6%
Credit Card 6.8% 31.9%
Small Business Loan 6.8% 29.0%
Share Draft Account 5.3% 33.6%
     

"While auto loan performance in the last few years has been strong across the board, it is clear that credit union executives continue to value these loans going forward over other growth areas such as mortgages, credit cards and home equity lines of credit," said Ezra Becker, vice president of research and consulting in TransUnion's financial services business unit. "Overall delinquency levels for auto loans remain low and demand for autos is high, so the reasoning makes sense. In the longer term, we might anticipate greater focus on mortgage and HELOC growth as home values continue their upswing, but for now the auto loan is king."

TransUnion data shows that auto loans for subprime consumers have grown by nearly 7% in the last year, from 8.65 million accounts in Q2 2013 to 9.24 million in Q2 2014. Delinquency rates (60+ days past due) for subprime auto loan borrowers have increased approximately 11% in this same timeframe, from 4.73% to 5.26%.

Despite the increase in subprime accounts, it should be noted that the number of subprime auto loans is still low as compared to what was observed in Q2 2008, when there were 11.78 million subprime auto accounts on the books. Delinquency rates for those loans at that time, though, were slightly lower at 5.06%.

The survey also found that, despite current low delinquency rates, credit union executives remain prudent regarding member credit risk. Just over half (52%) rated credit risk as one of the top three challenges for credit unions to meet loan growth goals over the next 12 months. Additionally, 91% of credit union executives surveyed said competition from large banks, captives and other credit unions was also one of their top three challenges, while 81% of them said regulation could impact their loan growth goals.

And credit union executives are aiming for a big picture perspective. Approximately six in 10 credit union executives are at least slightly concerned about their members' student loan debts and HELOC balances with other financial institutions.

A TransUnion HELOC study from earlier this year found that there could be billions of dollars at risk when consumers face end-of-draw payment shocks from HELOCs they may have opened in the last 10 years, if not managed effectively. "While credit unions face risks in the next few years, proper risk management strategies can help mitigate these potential threats," added Becker.

Though challenges may lie ahead, the survey found that membership volumes for most credit unions has increased over the past 12 months. Most credit unions (61%) have seen up to 5% increases in volume while more than a quarter of credit unions -- 27% -- have experienced increases of more than 5%.

Credit union executives believe they are winning consumer hearts and minds as well. Seven in 10 credit union executives believe they are more capable of competing with traditional banks today than they were five years ago. Nearly 57% of those surveyed believe their capability to compete with traditional banks has improved in just the last year alone.

TransUnion's survey also broached the relatively new Apple Pay™ payment platform. More than 13% of credit union executives said they are participating in Apple Pay, while 32% said they have already inquired about participating. Another 19% of respondents said they plan to inquire about participating. More than one-quarter of credit union executives (25%) had not yet formulated a strategy -- likely because the announcement of Apple Pay only occurred recently.

"Results from our study and our daily interactions with credit unions from across the country lead us to believe that this industry is in a position to achieve and maintain substantial growth," said David Dodson, vice president of credit unions at TransUnion. "Using new technologies and risk management strategies will be among the catalysts to help credit unions make great strides in building their books of business in 2015."

For more information on the survey, please visit www.transunioninsights.com/cusurvey.

About TransUnion
As a global leader in credit and information management, TransUnion creates advantages for millions of people around the world by gathering, analyzing and delivering information. For businesses, TransUnion helps improve efficiency, manage risk, reduce costs and increase revenue by delivering comprehensive data and advanced analytics and decisioning. For consumers, TransUnion provides the tools, resources and education to help them manage their credit health and achieve their financial goals. Through these and other efforts, TransUnion is working to build stronger economies worldwide. Founded in 1968 and headquartered in Chicago, TransUnion reaches businesses and consumers in 33 countries around the world on five continents. www.transunion.com/business

Apple Pay is a registered trademark of Apple, Inc.

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TransUnion
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