Credit unions exist solely for the benefit of the members. It is a pure alignment of interest between the owners and users. The only purpose of the credit union is to serve the best interests of the member. For those who are entrusted to govern credit unions, they are charged with making decisions that are focused on that principle.
The credit union model was built upon solving the problem of limited access to quality financial services, a low-cost model that enabled pricing that was very competitive in the marketplace and a service-minded culture. All three competitive positions have eroded substantially. The internet had enabled banks, fintechs and other non-bank competitors to access consumers worldwide and deliver quality, well-priced financial services conveniently with a few clicks from a cell phone. When credit unions take days and a ream of paper to deliver the same services, credit unions become irrelevant to a growing number of consumers. In a world expecting near instant gratification, there is no patience for slow and steady.
Many competitors have lower cost structures: Doing more with fewer people, fewer hard assets and sometimes fewer compliance costs. Many competitors have convenient means to obtain advice and solve issues with service-oriented cultures. You can make the case that the credit union's place in the financial market has been usurped by certain competitors. If a credit union does not become competitive with its use of technology and data, that credit union's days are numbered.
It takes time, money, expertise and revised business models to acquire the technology and processes to meet and maintain the ever increasing member expectations. Credit unions without scale and resources are not going to be able to catch up. There are only three ways to gain scale: Grow organically, merge or collaborate. Growing organically is not a viable option for smaller credit unions. All the statistics demonstrate that the small credit unions are not growing. Merging is an option, especially if the merger is well-planned to benefit the members of both credit unions. Collaboration is an option that can keep the individual identities of the credit unions intact while benefiting from an increase in scale that has proven tangible benefits. Many credit unions are deciding that it is time to get serious about collaboration if they want to remain independent.
If you examine your credit union and compare it against the banks and internet competitors, how does your credit union stack up? Can your members pull out their cell phones and conduct the full range of business with your credit union? Are your prices truly competitive? How does your loan delivery time compare to your competitors? If your credit union ceased to exist, would it be missed? If you are honest, you will most likely conclude that the credit union could be a much better value to your members with more resources, expertise and scale.
Ed Callahan would start a meeting of credit union CEOs discussing a pressing issue by reminding them that if they kept the well-being of the members as their central principle, the path forward will be made clear. The trouble is that we are human and other stuff becomes more important to us. What will advance my career? What disturbs my world the least? How do I annoy the least amount of people? Can I keep this deal going until I retire?
Ask yourself three questions. Does your credit union need more resources and scale to better meet the members' changing expectations and be of better value to them? If yes, can we afford to do it on our own? If not, do we merge or collaborate?
If the credit union does not have a path to creating and maintaining a good value proposition to the members in today's world, the credit union is on a path of a slow motion liquidation ending in a forced merger with a credit union not of its choosing. We can do better. Remember, it's all about the member.
Guy A. Messick is a partner at Messick & Lauer P.C. He can be reached at 610-891-9000 or [email protected].
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