By Louis Hernandez Jr.
Our nation and world have been rattled by seismic events, from the Great Recession to bank failures, high unemployment, economic uncertainty in Europe, a volatile stock market, depressed home prices and falling consumer confidence. We are also seeing accelerated global change, from the rise of Asia to the decline of the West. This represents a great shift in global power.
For credit unions we must also layer on intensifying competition, margin compression, fee erosion, the cost of fighting fraud, and grappling with regulations on the books and those yet to be written. Clearly, along with a changing world, our fundamental business model is under pressure.
The challenges we face today have created a moment of clarity for community-based financial institutions. We are now at a cross roads--we can either recapture the role of trusted financial intermediary and grow our businesses, or fail to take action and risk being left behind. Throughout history, in times of peril and prosperity, credit unions have been lubricants of their local economies--supporting families, lending to small businesses and impacting their markets in positive and powerful ways. This is a time to re-examine who you are, why you exist and how you are different. Make this difference more obvious to your members and community with every interaction. Stop doing things that don’t reinforce why you are unique, and remind your stakeholders of the role you play in the economy and the communities you serve.
This is a time of great opportunity. While consumer distrust of major banking institutions is extreme, your members place great trust in the value and services you offer. They want to do business with you. Now is the time to make your case, emphasizing the critical role you play in your communities and the positive impact you have on your local economy.
Whether you’re combating the negative forces of competition and regulation, or leveraging opportunities, the key to success is collaboration. Community based financial institutions don’t have the economies of scale that exist with the larger banks. Through collaboration, credit unions can create efficiencies, share resources and increase purchasing power. The credit union industry has been one of the most cooperative of any industry. But it is time to look deeper. Many of the resource-intensive functions in an organization can be supported by shared sourcing options, such as outsourcing of call center operations, or creating shared IT centers, using agencies and professional service companies.
Collaboration, however, is more than just working together to drive down operating costs and increase efficiencies. Cooperating to create and share new ideas, enhance technology, diversify revenue streams and fully understand member relationships can also benefit from a shared approach. We have many opportunities to work together to be more flexible and solve common business problems. This is not the time to hide or be risk averse; now is the time to embrace collaboration. By working together we’ll survive and thrive--innovating, sharing our best ideas, and moving forward as a global community of local financial institutions.
Louis Hernandez Jr., is author of Too Small to Fail: How the Financial Crisis Changed the World’s Perceptions, and chairman and CEO of Open Solutions, a leading provider of integrated enabling technologies for financial service providers throughout the United States, Canada and other international markets.
Hernandez will speak at Directors Conference on "A Call to Action in the Wake of Financial Reform." The event is scheduled for Dec. 5-8 in Las Vegas.
