No doubt some met this news with a strong pushback fueled by an intense loyalty to the system, by the belief the credit union members are loyal because they receive better rates and better service than they can at other financial services institutions, and by their personal behaviors regarding the way they use the credit union.
But Collins is right. The business model that built the industry is seriously broken, and this reality applies to both credit unions and banks.
Think about it.
The core business model that built the financial services industry was based on building visible presences where people would come to make deposits and withdrawals, and to apply for and receive loans. Over time various products and services were added to the mix, but the core of the business remained structured around the deposit and loan business.
Today that model is not working as well as it did in the past for a number of reasons, but only a few are related to the lingering recession. There are at least four key driving forces that demand a new business model for credit unions as they look to future:
1. Technology. Advances in technology will continue to make the traditional “branch-banking” model somewhat irrelevant to the consumer. Smart phones already allow people to manage their accounts on the go, soon they will serve the same function as debit cards, and they are already being integrated with imaging to handle remote deposits. Online banking continues to expand, as does the use of online bill payment tools. And who knows what lies ahead.
2. Convenience. The demand for convenience has never been stronger. Consumers want what they want when they want it and where they want it, and many are willing to pay for more convenient access. While inherently linked to technology which changes the game by adding access points wherever consumers want them, there are also implications for branch locations, staffing, and equipment. While we continue to hear that people want a branch where they can go to get support when they need it, it is becoming clear that it does not need to be a branch in the traditional sense. It is the access to support that is important, not the bricks and mortar that give a sense of security and soundness.
3. Competition. Times of economic turmoil always lead to innovation, particularly in industries where business models are broken. Though it’s seldom obvious where the innovator will come from, history shows us that the innovations that have the biggest impact often come from outside of the industry. While impossible to predict, leaders in the credit union industry who are willing to break the mold and go beyond traditional thinking, can create alliances, partnerships, and collaborations that will lead the way.
4. Collaboration. The next generation of credit union leaders has grown up in a world where collaboration is integral to their lives. As they select a supplier for their financial services, they expect to be listened to and they expect their ideas to be incorporated to improve the way you serve them. They also expect (and need) a seat at the table when the future is being discussed, since they will be the core of your membership moving forward. Finding effective ways to engage them, build relationships with them, and gain their insights must be a part of your plan for the future.
The Bottom Line: For the credit union industry to succeed moving forward, the business model will have to evolve. The key is acknowledging that as Einstein said: “We cannot solve the problems we face using the same thinking we used to create them.”
Adopting the mindset that change equals survival is step one. From there it will be a matter of leading in new directions and thinking in new ways…about technology, convenience, competition, and collaboration.
ACTION ADVICE: Put this topic high on the agenda of your upcoming planning session. Explore options for improving your business model and push your planning team to really think about options that are outside the usual realm, because that is where the real successes will come from in the future.
It’s Your Turn: What do you think? How would you change the credit union business model? What has to happen to create a sustainable, competitive model that will support long-term success while building upon the rich history and the foundation principles that created past credit union success?