Consolidation and disruption top CPU industry concerns
At the onset of the pandemic, credit unions quickly turned to digital operations and began to creatively help members navigate their financial struggles, giving them something to be proud of as they reflect on the past 15 months. . But as they contemplate their future, a few distinct challenges loom, according to executives who spoke at CUNA Mutual Group’s Discovery2021 virtual conference Thursday.
A Discovery2021 session hosted by CUNA Mutual President / CEO Bob Trunzo brought together three industry leaders: Diana Dykstra, President / CEO of the California and Nevada Credit Union Leagues and Chair of the Board of Directors of the American Association of Credit Union Leagues; Brad Green, president and CEO of Listerhill Credit Union ($ 1.1 billion, Muscle Shoals, Alabama) and chairman of the board of directors of CUNA; and Larry Sewell, vice president of community outreach for Together Credit Union ($ 2.2 billion, St. Louis, Missouri) and chairman of the board of the African American Credit Union Coalition.
Executives pointed out that the increasing rate of industry consolidation threatens the survival capacity of the country’s small credit unions. “Hopefully we can slow down and minimize the dwindling number of small credit unions – we just keep losing so many,” Sewell said. “I know some of them have come out of mergers, but when we lose a small institution, it means it’s likely that a community somewhere is not being served the way it can or should be. Small credit unions play a vital role in serving people, especially in rural communities.
Green said, “One thing that worries me sometimes is the fact that we are a consolidating industry. What could we do that would explode the number of new credit union charters? What changes should we make to get these kinds of results where the popularity of the model is not in consolidation mode but in expansion mode? “
Other notable challenges facing the industry include growing competition from fintech disruptors and the fact that the banking preferences of young consumers do not always favor credit unions, they said. “One of the things that excites me most about the future is the ability to more accurately measure the impact we have on the financial well-being of our members,” said Green. “This gives us many opportunities to differentiate our model. The concern I have is that we can undertake this and maintain our relevance when there is so much disruption in financial services around us.
Dykstra explained that to attract younger members, credit unions would need to rethink the way they develop and present their products and services.
“Young consumers don’t seem to want to have a relationship with an institution – they’re just looking for a product,” Dykstra said. “They don’t think of a financial institution like we all did, where you walk in, open a savings or checking account, get a loan, and get a credit card. They are just looking for the best deal. We’re going to be challenged to think about how we view membership and how we distribute the products.
She continued, “We need to think about how we operate and what we call our products, and not lump them all together. We need to be a little more agile and creative. Otherwise, these young adults will find other ways to do their business.
Leaders, however, expressed general optimism about the future of credit unions and their ability to help members achieve financial well-being – something they all agreed will be a key goal for credit unions. cooperatives in the future.
“I think the hot new term is financial health, financial well-being,” Sewell said. “Right now, at Together Credit Union, we are formulating a strategy so that members can get a quick overview of their financial situation. It’s an emotional thing, because even though we help people learn to save and borrow, they need to feel comfortable with what they’re doing and what their financial institution is helping them do.
In a specific example of how California credit unions help people achieve financial well-being, Dykstra explained that some are working to open branches in the South Los Angeles neighborhood of Watts, which does not contain currently no credit union branch and ATM, with the aim of directing the community away from the payday lenders and check tellers who are plentiful in the area. “This [pandemic] the crisis really helped us think about what more we could do, ”she noted.