Two years ago, I wrote an opinion piece for the Credit Union Times that concluded:
"So what are you going do? Sit on the sidelines, hunkered down hoping to just survive for the next year or two? Or, are you going to start taking steps to grow and capture market share that will enhance your business. From where I sit, this is the best time to fulfill our mission of serving American families and growing our business while we're at it."
Looking back, I didn't even know the half of it. Since then we've suffered through historically-low interest rates, a mortgage crisis and the CARD Act. Now, with a proposed overhaul to debit interchange and ever-changing and tightening compliance and regulatory rules, we could be throwing our hands up and saying enough.
But we aren't. What I heard from credit union executives and industry peers at GAC is cautious optimism. There are still concerns. Clearly the focus remains on what will happen to interchange, as well it should. The proposed changes represent a 75% reduction from today's standards. For many credit unions that's around 20% of fee income–often as much as half of a credit union's ROA.
But as one executive put it, "It's a little naïve to think something isn't going to happen. We need to adapt our program around our expectations and start planning for what we can do moving forward."
That's a refreshing take on how to move forward because it has been easy to be complacent and hope things will return to what they once were. Although I don't think we'll lose an entire decade like Japan did beginning in the mid-1990s, we are two years into this new normal. We can no longer "wait and see" because while credit unions clearly have the opportunity to gain market share there are others trying to figure out how to marginalize our ability to do so.
The ability to be future-focused is rapidly dividing credit unions into two distinct camps that can be best labeled reactive and proactive. The proactive credit unions are accepting that we are in a new normal. They are making changes to strategies and models that are clearly designed for long-term success. The reactive credit unions are ones that are holding on to what was and operate on a business model that was relevant 10-plus years ago.
Which camp do you fall into? In my day job, I'll ask credit card portfolio managers, "What are you doing to maximize the potential of your credit card program?" Now ask that same question of every product and service you offer. Because if you aren't maximizing the potential, what are you waiting for?
Now is the time to accept we live in a time of change and we must be adaptable. The CARD Act was not intended to punish credit unions, nor are the proposed changes to interchange. But they impact us and we need to figure out how to adapt and move forward doing what we do best – serving our members. Now is the time for credit unions to demonstrate there has been and continues to be a business model that clearly is the answer to what consumers want and need–on multiple levels.
So, again I ask you, are you up for the challenge?
Jeff Russell is the president/CEO of TMG Financial Services, a credit card agent issuing company.
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