CUs Must Be Both Business-Focused & Socially-Driven

Following an exciting day of celebrating the impact of credit unions around the globe, we were jubilant to recognize how many consumers had “found their platinum lining in credit unions” on the 70th anniversary of International Credit Union Day. Credit unions are growing! They’re improving their service to their communities!

And then we saw the news about a credit union that is being noticed for charging big bank-sized fees. It let a little air out of our celebration, honestly, but it also reminded us of a very important exercise in the Foundation’s Credit Union Development Education Program where we ask participants to determine if a credit union is focused on providing a social good or making a business impact. As you can imagine, there is a lot of debate.

Before we begin settling that debate though, let’s take a quick look at the nine operating principles that set credit unions apart as the best financial partner for more than 110 million members in the U.S.:

• Voluntary and Open Membership
• Democratic Control
• Non-Discrimination
• Service to Members
• Distribution to Members
• Building Financial Stability
• Education and Training
• Cooperation Among Cooperatives
• Concern for Community

You might be wondering, where does that leave credit unions – more business-focused or-socially-driven? Well, the answer is both.

These principles are relevant to today’s credit unions and members, and they set our institutions apart from for-profit banks – this is the social debate for credit unions. However, these principles also allow credit unions to create products and services that deliver a bottom line value to their members and ROI to credit unions – the business side of the debate. There is no clear “winning side” of this debate because credit unions must find a balance between the two, oftentimes swaying one way or the other but always trying to find that sweet spot in the middle. The balancing act between a business focus and providing a social good is key to the credit union difference. Problems for credit unions can arise when they sway too far one way or another, which is what we learn in the example mentioned above.

Despite what we have heard lately, independent market research conducted by a wide variety of firms clearly and consistently shows that credit union pricing is substantially more consumer-friendly than that found at other financial institutions. Overall, for example, nearly two-thirds of credit unions offer free checking accounts whereas only 38% of banks do so. Credit unions are seven times more likely than banks to offer free interest-bearing checking accounts. These benefits would not be possible if credit unions were not organized around their universal operating principles.

Credit unions are also able to place their members’ financial health and wellness at the center of their decision making because the focus is turned from generating profit to improving the financial condition of the membership. Eighty-seven percent of credit union members can access financial education trainings through their credit union. Credit unions can offer lower rates on loans and higher yields on deposits than those available at other financial institutions. In all, these pricing differences produce direct and indirect financial benefits, which totaled approximately $15 billion in 2017 alone and $125.4 billion in since 2007 (data from CUNA).

Credit unions can also use their operating structure to focus on providing products that encourage and enable their members to set themselves up for financial success, building stronger Main Street communities everywhere a credit union operates.

While managing that balance between business and social can be challenging, everyday credit unions find ways to provide products and services that help their members improve their financial lives. THAT is something to be celebrated!

Gigi Hyland

Executive Director

National Credit Union Foundation

Madison, Wis.