Traditionally credit unions have operated as what Colby called “spread businesses,” that is, their prosperity hinged on the difference between the interest rates paid on loans and on savings products sold to members. Easy enough, except, said Colby, “what do you do when baby boomers no longer want to borrow?”

And those same boomers want maximum returns on their savings.

“Credit unions now need multiple business models that reflect the changing realities,” said Colby, and for some coming up with fleshed-out, viable models that can stand up to 21st century changes is proving to be a challenge they just cannot meet.

For those credit unions, the countdown to extinction already has started.

The Lost Generational Battle. Your members may not be as happy as you think they are. And this is a very negative, long-term risk. Maybe credit unions have not lost this battle yet but, right now, all the signs are bad, said Jack Bieda, CEO of MYCUsurvey, a company that provides credit unions with member satisfaction data. The trouble spot, said Bieda, is a gaping generational divide where younger members just do not value much of what many credit unions pride themselves on. They do not want to visit branches, they do not want to know tellers by first name, and, above all, they want to be able to access their financial accounts when they want, using just about any high-tech device they wish.

And many credit unions do not get any of this.

Bieda added: “From our benchmark studies, attitudes are not nearly as positive about credit unions from younger people. This represents a huge challenge for the industry.”

“Young people do not interact with financial institutions the way their parents do,” said Bieda.

Big banks, suggests Bieda, are many steps ahead in recognizing this. Credit unions are in a catch-up mode, but there is no doubt the future lies with the young and if their business is lost, the future of the industry is necessarily gloomy.

Compliance Challenges. Ripple effects from the Dodd-Frank Act, especially involving heightened disclosure and transparency, are certain to have significant impacts on credit unions, especially smaller ones, said CUNA's Colby. “I see this hitting credit unions sized $250 million and smaller.” Colby stressed that the issue is not just the costs of compliance but also the strains on leadership, who suddenly have yet another hat to wear.

New rules from the NCUA add to the compliance challenges, as do a variety of credit-related federal laws (each with its own disclosure and transparency requirements). Compliance, suddenly, has become a major challenge for every credit union but especially smaller ones. “The strain definitely will be on the smaller credit unions,” said Heather Czermak, an executive with Wolters Kluwer Financial & Compliance Services. “They have to do as much as bigger credit unions but with fewer resources.”

Some credit unions will decide to close rather than comply. Or decide to merge, which brings its  own risks.

Mergers. The urge to merge is strengthening among credit unions, as some corporate credit unions recognize that they will face enormous difficulties meeting newly stringent NCUA financial ratios and, with natural person credit unions, the small ones realize that scale is a huge plus in dealing with ever more time-consuming regulations and trying to match the costly technology initiatives that increasingly define financial services. But mergers are not always a cure, they often can be fatal, said Mike Mossel, a managing director at consulting firm McGladrey.

Mossel elaborated: “Credit unions are not picking the right partners. They do not take the time to understand the philosophies and cultures of the possible merger partners and often they clash. Then the merger will be unsuccessful.”

Competition. Call this the real problem faced by all credit unions: suddenly there is competition everywhere. There are big, exceptionally well-financed national banks (sometimes with branches seemingly on every corner). There is the emerging threat of nonbanks (everything from Walmart through PayPal). And then there is the emerging issue of competition between credit unions, as community charters set credit unions up for toe-to-toe fights for customers, loans and checking accounts.

That last is a subject few credit union executives like to contemplate, but it is reality. There is no better credit union prospect than a person who already has demonstrated that he or she gets the credit union system, say the experts.

The question becomes how to maintain the cooperative spirit that is at the essence of the credit union movement but still find the focus to compete against all comers, inside and outside the industry. Answers won't come easily, said the experts. But the credit unions that survive and prosper will be the ones that master the art of 21st century competitiveness.

And then there is a sixth pervasive problem faced by many credit unions.

Exhaustion. “Everybody is so busy putting out brushfires, they are exhausted when it comes to long range strategic thinking,” said Colby. Worries about interchange fees, pressures on sustaining free checking and issues with corporate credit unions alone are plenty to keep credit union leadership awake at night.

And yet there has to be more, said Colby, there has to be a willingness to explore the big challenges and opportunities that will define the future of credit unions.