Credit Unions in 2020 (or Will We Have Flying Cars?)

I read this article on CUNA’s web site a couple of days ago detailing how Dennis Dollar (how cool is that name) thinks the credit union landscape will look in the year 2020 (thanks to Deb Trautman for passing the article along). Now, I’ve never been one to put much faith in forecasts that stretch for a period more than 5 days (even the weatherman can’t get THAT period of time right) because things never look like you think they will. Heck, we were supposed to have flying cars 8 years ago according to many “forecasters”.

Distrust of long term outlooks aside, some of the predictions don’t quite jive with me.

• Credit union service organizations will exceed the number of credit unions;

My understanding of a CUSO (and please correct me if I’m wrong on this) is that they are cooperative organizations of credit unions designed to help them deal with regulatory issues and the like. They are like a credit union’s credit union. From Wikipedia:

A Credit Union Service Organization (CUSO) allows a credit union the ability to conduct business that they would otherwise be restricted from due to regulatory constraints. Most CUSOs are limited liability companies (LLC) which also provide a measure of protection to the credit union from the actions of their CUSO. CUSOs are usually wholly-owned subsidiaries of their corresponding credit union, and most if not all of the profits generated by a CUSO are returned to the credit union. CUSOs can also sell stock, usually to other credit unions, to help fund the creation and operation of the CUSO. In this situation, the profits are then converted to dividends and paid out to shareholders as specified by the CUSO's charter.

CUSO’s, like any other business, operate based on demand. I don’t see the demand for CUSO’s ever warranting more CUSO’s than actual credit unions. In fact; wouldn’t that be bad business?

• Credit unions will face greater regulatory pressures, and this will drive mergers;

Credit Unions may face an increase in regulatory pressures in the coming years. Some of it can be avoided by staying true to the credit union mission, and beyond that, showing people that we stay true to that mission.

Beyond the fact that some of this regulatory pressure might be avoided, the first bullet point about CUSO’s seems to be contrary to this one. If CUSO’s are there to help groups of credit unions stay in compliance with regulations, and there are more CUSO’s than credit unions, shouldn’t all the bases be covered?

It would be a shame to see so many unique, small credit unions disappear due to being unable to stay within regulatory guidelines. There is much to be said for a small credit union, dedicated to staying small, and dedicated to its membership. A prime example is Mt. Lehman Credit Union. They have, with the guidance of their General Manager, Gene Blishen, positioned themselves perfectly to serve their members. They know what those members want, and offer it to them. Things like their TextUs product cater to the people they serve. It isn’t a giant marketing campaign, but a product that connects the credit union with its members in a way many CU’s struggle with. As Morriss Partee would put it, they are a microbrew of a credit union; unique and incredibly awesome.

• Credit unions will market cooperatively nationwide

This is kind of a vague one. By “market cooperatively” does he mean a nationwide brand? If so, I think you already know my opinion. Credit Unions are a diverse animal. To brand something, it takes a common thread, product, or culture. By trying to put all credit unions under a single brand, it smothers so many cool, unique credit unions (like MT. Lehman) that have a brand that works for them and their field of membership.

Not only does it smother uniqueness, but branding credit unions under a single banner would be nearly impossible. There are so many different cultures, each credit union has it own way of doing things, and a brand requires a coherent culture throughout. When you walk into a Starbucks, you can pretty much tell what your experience will be. Credit unions are totally different. Walking into Boston Firefighters’ Credit Union is necessarily different than walking into Maine State Credit Union because the demographic served by each credit union requires a different approach.

In the first part of the article, Dollar is quoted stating that, “The megabanks will lead to a disconnect with local citizens.” If credit unions end up nationally branding/marketing how would we be able to connect with local citizens any better than a megabank? Our strength is in our diversity, not our size.

• Shared branching will be a key credit union differentiator, with nearly all credit unions participating nationwide, thus reinforcing a national branding campaign.

I’m sorry, but shared branching is not a differentiator. Shared branching is a way for credit unions to compete with the nationwide banks, but that’s as far as it goes. With BoA having branches on every street corner, the fact that you can do business at many credit unions nationwide does not make us different, it makes us the same. It is something we certainly need to educate our members about more often, but to say it differentiates credit unions from banks is nearly outrageous.

My take on credit unions in 2020?

Credit Unions, in my opinion, will be the main provider of community banking. Not based on national branding, not based on shared branching, not based on mergers, but based on diversity. Our strength has always been, and will always be, our ability to listen to our members and provide them with the things they want. Credit Unions will collaborate, rather than merge, to deal with regulatory pressures. They will collaborate to form marketing efforts if it applies to a shared demographic. They will collaborate to pass innovative new products and services from one credit union to another, allowing each credit union to tailor the innovation to their members’ needs. What we need is not a national brand, but to work as a team of unique, individual credit unions. That is where the strength, differentiation, and innovation lie.

Where Has All The Creativity Gone? [Open Source CU]

Creativity, despite being one of the things that people cite as the reason they love their job, is one of the hardest things to accomplish in a typical financial institution. So many executives and marketing directors get so caught up in the ROI and the numbers that creativity gets lost in the background.

Now, this isn’t meant to fault those people. Tracking the effectiveness of a marketing campaign is essential to their position. What if you could get some help?

When I say “get some help” you might reply, “We don’t have the budget to hire on a bunch of new marketing people!” Let me offer an idea that might kill several birds with one stone.

Innovate Your Institution

The hierarchal structure of most financial institutions makes it very difficult for lower level employees (Tellers and MSR’s) to bring up ideas. Typically the proper channel of communication ends up smothering the idea as unusable, or it gets lost before it makes it to somebody who might care.

Front line staff, MSR’s, and Loan Reps are the people who have the most contact with your member base. Why shouldn’t their ideas be considered just as highly as anyone else’s…if not more? They may see an opportunity where nobody else does.

There is so much creative power located in your teller, member service, and loan departments that almost never sees the light of day. What might come out of this collective group if given the opportunity to throw out ideas in a community environment, bounce them around, and create something of value?

Give people the opportunity to be creative and you’ll find a fountain of unique, interesting, and valuable ideas for products or processes that might have never come to light.

Retain Your Valued Employees

If you are looking to retain employees (tellers especially) there needs to be a sense that their position offers something of value to the whole, especially when trying to retain younger, GenY employees. Giving people, regardless of position or “silo”, the sense that what they have to say makes a difference can be very powerful.

Create a wiki, or discussion board, anything that gives people the opportunity to discus new ideas or concepts in an environment that is free from the fear of rejection. So often people are afraid to share because they feel that their idea will be shot down from the get-go and the possibility of humiliation makes them shy away from unleashing their creativity.

Create an environment that is open, collaborative, and free from this fear and you might just end up with a great source for creativity within your institution.

Your next question might be, “Well how do we get these people to come up with ideas? Do they really care enough to contribute?”

Create Evangelists

Credit Unions have a built in advantage when it comes to encouraging this kind of participation. There is an underlying cause behind credit unions that goes way beyond gaining profit.

I recently made a trip to BarCampBank New England on April 5th. It was held at America’s Credit Union Museum and it has inspired me beyond words. Seeing how it all started has given me new direction, inspiration, and dedication to my work at Maine State Credit Union.

The best way to get people excited about working at a credit union is to tell them the story. Show them what a credit union really is, what it stands for, and why it started in the first place. People find it much easier to get behind a cause than just a company. Share with them the powerful message behind their job. Show them the meaning of the institution and the movement as a whole and they might just be inspired to help move it along. It happened to me, it can happen to anybody.

Create a place for collaborative brainstorming, get people motivated behind the cause, and allow them to express ideas in an open environment where their say counts and you’ll end up with credit union evangelists…who just so happen to work on your teller line.

I originally wrote this as a guest post on the awesome blog OpenSourceCU, Check 'em out!

The Cause Oriented Credit Union

Ben Rogers from The Filene Research Institute posted a comment on this post asking what XYZ credit union could do to be more cause oriented. It got me thinking, what does it take to be cause oriented?

Consider your cause the way you would your brand. In fact, as a credit union, our cause should be a major part of our brand image. The best way to draw people in is to show how you are different from a bank; rate and fee changes aren't going to do that.

The first step in being cause oriented is to figure out who it is you serve. Do you serve a certain business/industry or do you serve a geographic location? You might not think it makes that big a difference, but different demographics require tailored products, services, and community involvement efforts.

Once you know who exactly you are serving it comes down to knowing what they want to see. After all, we are serving them, not the other way around. Talk to people, ask questions, find out how they are "wired". Do they want to see you offering small business support, beautifying the area, offering loans to people who can't get them at a bank, or taking care of a homeless problem in their community.

Once you have that information, change is required. What use is collecting all this information if you just say you support your field of membership without actually shifting your position to serve those people. It isn't just a numbers game (although in the financial industry it always comes down to that) it is a creative process to create products, programs, and events tailored to your members and potential members.

Be a catalyst for change and people will join you because they support what you believe in. An advocate for a cause will have a much more meaningful, involved and *cough*"profitable"*cough* relationship with your institution than somebody who joined to get a free gift. That isn't to say there isn't a place for free stuff, but it shouldn't be the only reason people come through your credit union's door.

Don't be afraid to be different, that's kind of the point here. If you do something different in a way people can see, it will draw more eyes to your cause and, in turn, to your credit union. There will always be a place for touting high deposit rates or low auto loan rates, but that isn't going to make people say, "ohhh so that's what the credit union movement is, that's awesome! I want to be a part of that!" When people start talking that way, you know you've done your job as a cause oriented institution.

What's in a Name?

"That which we call a rose, by any other word would smell as sweet."

Such is the rationale of Juliet. Maybe it's just that she's outdated, or hopelessly romantic, but I disagree.

What does your credit union's name say about you? To me it should say everything. Your credit union's name is the flag that tells the world what you're purpose is. It should tell people who it is you serve, and the way in which you serve them.

The first piece of information your name should reveal to potential members is who you serve. People should be able to see your credit union's name and know if they are eligible for membership, without ever opening your membership brochure. This is especially important if you are considering expanding your field of membership. For example, before we expanded our membership, we were Maine State Employees' Credit Union. Sure its a mouthful, but I can look at that name and know whether or not I am eligible for membership. When we expanded our field of membership we dropped the "Employees'" from the name...who do we serve now? Looking at the name it would be easy to think we served the whole state, but I'd be wrong. We now serve the Kennebec and Somerset counties, but our name doesn't tell me that. I have to search through the membership brochure to find out what towns are included in our coverage. I don't like that.

The second piece of info your name should tell people is how you serve them. We all have two small words in common, "credit union". Lets take a minute to examine what these two words actually mean. The term "Credit Union" has a very powerful message behind it, but it has been lost behind piles of paperwork and the bank-esque facade that has sprung up around many credit unions. A union is a collective group of people, working for the benefit of every person in the group. So what exactly is a "credit union"? It is a collective group of people who are working to improve the financial standing of everyone in the group by lending to each-other through an intermediary system, and by offering products and services tailored to the people specified in the first part of your name. People should be able to look at your name, see "credit union" and know what it is that you do. Unfortunately a lot of us have lost sight of this powerful term's meaning in the search for larger fields of membership. In the effort to grow the credit union movement, many (including MSCU) have lost touch with why the movement was started in the first place.

Let your name be a reminder of why your institution exists. Embrace it and what it means to the community you serve. Make sure it tells people who you are, what you do, and who you support.

Brand Me, Credit Union!

Yesterday, Morriss Partee of Everythingcu.com and I were Twittering back and forth on the subject of a national credit union ad campaign. I was arguing that if the ads were done in a way similar to www.bankerspank.com that it might be worth it to raise awareness for credit unions. Morriss was arguing that it would only be a giant waste of money. After sleeping on it, I've come to realize the danger of launching such an ad campaign.

This realization springs from a single thought that hadn't really crossed my mind, "where does the money come from for this ad?"

Here's how I see it. CUNA pays for the ad campaign, local credit unions pay CUNA, and members pay local credit unions in the form of rates and fees. We have always prided ourselves in offering free services and better rates than banks. If CUNA starts pushing for a national campaign of some form, more and more of the money coming from members is going to be funneled into the effort. More money spent on a national campaign means less being redistributed to members' accounts as dividends.

Once credit unions are being recognized as a national entity it will be hard not to continue with that image...which means more ads. More ads mean more money. If dividends are already stretched to the breaking point, and the ads don't bring the influx of members they were intended to, where will it come from? Thats right, Higher rates and more fee's. This in itself would defeat the whole purpose of the ad campaign. We would lose our very image to a national cu branding effort.

A national ad campaign has the potential to force credit unions into a position where we blur the line between bank and credit union even more than it already is. If we lose our image, we lose the battle, and I don't want to see that.