I’m a credit union nerd, and I’m worried about our future.
I’d like to take this opportunity to share some concerns, assessments and insights to help inform the discussion of the ownership structure of the second tier in response to the Future State paper circulated by Central 1. I’ll also share some thoughts on a more engaged and active vision for credit unions in the current political and economic tableau.
As an elected director, I think about governance on behalf of our members. How do we make decisions in our interlocking cooperative financial organizations, and where is the democratic influence? How are our members involved in our organizations in recognition of their ownership of the enterprises? How can we craft strategies that use the principles of cooperation, in our dealings with each other and our members? And from our cooperative roots, how can we participate in the transforming landscape of financial systems in a meaningful way?
I’ll just say it: Credit Unions are in grave danger of becoming irrelevant. Last year at the C1 conference, there were some hopeful presentations that point us in the direction we need to look. I would suggest that at the very least we need to be actively growing our understanding of the transforming legacy banking landscape by inquiring into and engaging with some of the new players in the space.
I very much appreciated reading the Future State Discussion Paper. It was great to see collected details and timelines of the recent sector wide organizational change as well as the regulatory pressures and developments. It’s important to take this opportunity to assess ourselves as institutions, the self initiated internal reorganization, and the broader environment we exist in.
Of course we must keep in mind the wider context that has arisen from the financial crisis that ignited in 2008. This global context is driving the regulatory burdens that credit unions are facing, and I would note that the cooperative difference does not seem to be well represented in the discussions, or understood by regulatory bodies. This is an important opportunity to do two things: look inwardly to assess how well we are operationalizing our cooperative DNA, and inform and educate regulators, our internal leadership and executive bodies as well our members on how we are different. I’d like to see us articulating the natural inoculations that arise from a cooperative financial structure.
I suppose the bottom line, as it were, is for us to authentically express our cooperative difference by actually cooperating. When we speak of the difficult position credit unions face to offer increasingly complex and highly integrated shared services to credit unions, we could also perceive it as an opportunity to operationalize cooperation to attain the efficiencies needed in the macro environment. As we envision the future of credit unions, I would suggest it critical that we revisit the initial purpose of credit unions: for our member-owners to have access to financial services that are cooperatively owned by themselves. It’s important for us to consider the member owner in the context of the second tier: as supplementary organizations in service to the credit unions, are we considering how members of credit unions are served by our second tier structures, strategy and decisionmaking?
Globally, citizens are waking up to the challenges that have arisen from our legacy banking systems. Disintermediation is happening; there is a demonstrated need for citizens all over the world to have access to banking services, payments, remittance and exchange; innovators are hard at work building frameworks outside of regulated financial institutions; regulatory bodies are looking to do their job to mitigate risk; and technology is transforming every sector of the financial services industry, both inside and outside what is regulated. It’s not enough for credit unions to follow trends — for us to be relevant, we need to lead.
Here’s the thing: to the average citizen, there’s no real difference between credit unions and banks as a ‘consumer’ experience. There is a vague sense of ‘living better values’, although it’s not clearly articulated or necessarily that actively meaningful. It’s not enough to say ‘we’re the good guys’, and craft marketing materials that express sunshiny market tested language to try to pull market share from banks. Citizens, and credit union members in particular, are making their decisions based on their values, and they are thoughtful, critical thinkers that can smell a marketed message a mile away.
Our opportunities include operationalizing cooperation by sharing key services; pushing back against the corporatization of coops by negotiating the political and inter-organizational differences to find ways towards greater mutualization; keeping abreast and even ahead of technological change; and quite frankly telling a better story about the credit union movement as a result of truly living our values.
Some challenges are in engaging executive leadership bodies within the sector to take action towards greater sharing of services; thinking through the consequences of larger credit unions acting as ‘near banks’; and to present an inviting and authentic vision of financial cooperatives towards our future state to our member-owners.
I’m a director and co-chair of CCEC Credit Union. Our common bond includes cooperatives, community service organizations, progressive businesses, activist community groups, and by extension, their members. This cohort of members are discerning, progressive, and are in their own ways participating in social change and community economic development.
Credit Unions are uniquely positioned to be an important part of the transformation of legacy banking systems towards a more just and accessible financial services sector. As yet, we have not articulated well the ‘cooperative difference’, and more concerning, we don’t use our cooperative principles to create the efficiencies that would best serve the sector, or the movement.
I think that Credit Unions are missing an important opportunity to be leaders in providing just and equitable financial services. For those who are able to attend the Central 1 conference this year, you may see Village 2.0, a new documentary that shows us a selection of projects that are cooperative community responses to economic and social challenges. Profiled in the doc is Sensorica, among others, which is a peer to peer network that allows innovators to collaborate to produce open source hardware solutions for communities of need. It is an example of initiatives that are using technological tools to work cooperatively for broad, real world benefit.
In closing, I would say that we are in grave danger of the world passing us by. Credit unions have an important role in not only defining our ‘future state’ for ourselves, but also in taking leadership in the broader landscape of the transformation of our economic systems.
Wanna hear a bit more? Check out this discussion between myself and Ross Gentleman, GM of CCEC Credit Union.