The Credit Union Conundrum

SAN DIEGO ― Stiff competition in the financial services sector has put credit unions at a crossroads ― they must adapt or risk extinction.

“One thing is clear: Simply staying with the old model of branch dynamics will eat you alive,” said John Lass, SVP of strategy for CUNA Mutual Group, during a session at America’s Credit Union Conference held here yesterday.

Lass talked about the uphill battle credit unions face these days to keep up with technology changes and to remain relevant to members. For starters, credit unions must work to digitize offerings. “Here’s something to think about: What does your credit union do that cannot be digitized?” he asked a room full of CU execs. “If there’s a lot, you need to be cautious.”

He cited examples of consortiums created to define mobile standards in the U.S. “Credit unions don’t have anyone at that table,” he said.

On some level, credit unions have fallen behind in educating consumers about their value proposition. For one thing, CUs are cooperatives, which means that members are also owners. Adherence to the Cooperative Principles ― the “one member, one vote” theory ― is what separates credit unions from banks, he said.

“How many of your members appreciate these principles?” he asked. “Most members don’t even know about these principles. It’s our fault. We haven’t educated them.”

Even with their cooperative structures, credit unions must evolve on one of three strategic fronts to succeed. Specifically, they must become leaders in product innovation, operational efficiency, or customer solutions. The latter is the most obvious fit, but many CUs have yet to reach that goal, he said.

Speaker Josh Allison, relationship development manager at Horizon Credit Union, offered a similar sentiment in a presentation about attracting Gen Y members.

“We’re in this market with banks, Walmart, , payday lenders, credit card companies, rental centers, and dealerships,” Allison said. “In reality, we’re just one of the bags of chips in the financial services vending machine.”

Allison urged credit unions to focus more on their relevance to consumers ― and less on their products. “Stop talking about your auto loan rates as if that’s the value proposition that you have,” he said. “Talk about what is relevant to you and why it’s relevant to you. The product is the extension of that.”