Consolidation, Disruption Top the List of CU Industry Concerns

At the onset of the pandemic, credit unions quickly pivoted to digital operations and began creatively helping members through financial difficulties, giving them plenty to be proud of as they reflect on these past 15 months. But as they consider their future, a few distinct challenges loom, according to leaders who spoke Thursday during CUNA Mutual Group’s virtual Discovery2021 conference.

A Discovery2021 session moderated by CUNA Mutual President/CEO Bob Trunzo featured three industry leaders: Diana Dykstra, president/CEO of the California & Nevada Credit Union Leagues and board chair for the American Association of Credit Union Leagues; Brad Green, president/CEO for Listerhill Credit Union ($1.1 billion, Muscle Shoals, Ala.) and CUNA’s board chair; and Larry Sewell, vice president of community outreach for Together Credit Union ($2.2 billion, St. Louis, Mo.) and board chair for the African American Credit Union Coalition.

Leaders emphasized that the increasing rate of industry consolidation is threatening the survivability of the nation’s small credit unions. “I hope we can slow down and minimize the decreasing numbers of small credit unions – we just continue to keep losing so many of them,” Sewell said. “I know some of them are through mergers, but when we lose a small institution, that means it’s likely that a community somewhere is not being served the way it can be or should be. Small credit unions play such a critical role in serving people, particularly in rural communities.”

Green stated, “One thing I sit and worry about sometimes is the fact that we’re a consolidating industry. What could we do that would cause the number of new credit union charters to explode? What changes would we have to make to bring about those kinds of outcomes where the popularity of the model is not in a consolidating mode but in an expansion mode?”

Other notable challenges facing the industry include growing competition from fintech disruptors and the fact that young consumers’ banking preferences do not always favor credit unions, they said. “One of the things that’s most exciting to me about the future is the opportunity to more exactly measure the impact that we’re having on our members’ financial well-being,” Green shared. “That provides a lot of opportunity for us to differentiate our model. The concern I have is being able to undertake that and maintain our relevance when there’s so much disruption going on in financial services around us.”

Dykstra explained that to attract younger members, credit unions should rethink how they develop and present their products and services.

“Young consumers don’t seem to want to have a relationship with an institution – they just search for a product,” Dykstra said. “They don’t think of a financial institution the way we all did, where you go in, open a savings or checking account, get a loan and get a credit card. They’re just looking for the best offer. We’re going to be challenged to think through how we look at membership and how we distribute products.”

She continued, “We have to think through how we operate and what we call our products, and not bundle them all. We need to be a little more nimble and creative. Otherwise, these younger adults are going to find other avenues to do their business.”

Leaders did however express overarching optimism about the future of credit unions and their ability to help members achieve financial wellness – something they all agreed will be a key focus for cooperatives going forward.

“I think the new hot term is financial health, financial well-being,” Sewell said. “At the moment at Together Credit Union, we’re in the process of formulating a strategy so that members can get quick snapshots of how they’re doing financially. It’s an emotional thing, because even though we’re helping people learn how to save and borrow, they have to feel comfortable with what they’re doing and what their financial institution is helping them to do.”

In a specific example of how California credit unions are helping people achieve financial wellness, Dykstra shared that some are working to open branches in the South Los Angeles neighborhood of Watts, which currently contains no credit union branches and one ATM, with the goal of directing the community away from the payday lenders and check cashers that are abundant in the area. “This [pandemic] crisis really helped us think through what more we could do,” she noted.