By Thomas C. Davis
The credit union industry is an aging industry characterized by slow growth, consolidation, and commodity products and services. But an industry does not age because of slow growth or even its mature position on the growth curve. An industry ages because it quits pursuing an ideal—or, perhaps, fails to pursue its ideal in a new, meaningful way.
To create a new growth trajectory, credit unions must address the critical issues inherent in their operating environment, including:
- a changing financial business model;
- new types of competition; e.g., ING Direct, Zopa and other P2P lenders, H&R Block Financial Services and Wal-Mart;
- low market penetration and consumer awareness of credit unions as a go-to source of financial services;
- no tangible market differentiation;
- increasing industry consolidation;
- slow membership growth and aging membership base;
- bank charter conversions and
- regulatory constraints.
The National Association of Credit Union Service Organizations believes that the way to reinvent and transform the credit union industry is to focus on innovation integrated with the unique qualities and advantages of collaboration and the cooperative business model.
Credit unions have only 5.8% market share of the financial services industry and they need to create scale to 1) develop lower-cost operations, and 2) develop higher-value products and services – the two fundamentals of profitability that ultimately translate into increased value for members.
To help the industry embrace collaboration and innovation, NACUSO has established a unifying structure, the National Center for Collaboration and Innovation, which will help credit unions and CUSOs address the critical issues they are facing and create a sense of urgency to collaborate. CUSOs themselves provide a vehicle for bringing credit unions together to create scale and do things collectively rather than individually.
The primary objectives of The National Center for Collaboration and Innovation are to:
- Provide a unifying source of industry leadership for promoting collaboration and innovation by getting thought leaders together to determine where and how to collaborate.
- Establish a resource and partnerships with colleges and universities for educating stakeholders on critical thinking, innovation, collaboration, and implementation.
- Promote, encourage, and provide a forum for collaboration & cooperation among credit unions, CUSOs, and third-party partners.
- Provide a communication network and mechanism for finding out "who's doing what" and ways to synergistically work with other CUSOs.
- Encourage, track, and monitor implementation of innovative ideas and cooperative efforts.
- Serve as an industry advocate and advisor on CUSO-related issues with regulators and political action activities.
Yes, the credit union industry is an aging industry. And it's time to do something about it. When people look back down the corridor of time 50 years from now, what will they see? An industry where everybody stood alone and said "I can do it better myself?" Or an industry that embraced collaboration and developed collective networks of multi-owned CUSOs to create scale and market power? Ultimately, the choice is yours.
Thomas C. Davis is president/CEO of NACUSO.
