All for one, one for all
At this point the fact that the credit union industry is consolidating at a rapid rate is common knowledge. In recent years the attrition rate has been roughly five to six credit unions a week either closing, or being merged in some shape or form. In April of this year NCUA approved a notable 32 consolidations, almost all of which were credit unions with less than $50 million in assets. This trend, driven by a variety of factors, is likely to continue if not accelerate in the coming months and years. Certainly this is the case as the cost of cyber and information security related fraud grows along with the increased regulatory burden that is sure to follow.
The implications of consolidation vary drastically depending on which side of the coin you are on. Some may look at this as a bit of a non issue, or perhaps even a positive. As small credit unions get absorbed by larger institutions they can benefit from economies of scale, increased information security and (theoretically) reduced cyber threat. Certainly the NCUA may be taking this approach as it continues to approve the deals. As a small or medium credit union working everyday to stay true to its mission and serve its members the idea of being rolled into a larger credit union with a disparate field of membership can be a total downer. A necessary evil perhaps. In some cases it is easier to stomach shutting down then being acquired.
Of the credit union representatives that I have known over the years practically all of them believe not only in the credit union movement but in the value and importance of their particular brand and in the unique ability of their credit union to serve their field of membership. The field of membership aspect of credit union charter and model should not be seen as a restriction, at least not these days. The specific field of membership is a critical component of the credit union difference and is something to be celebrated. As credit unions merge and gain in asset size the banks although misguided, use this blurring of the common bond to argue that credit unions have lost their way and are misusing their charters.
From my perspective, and I know I am not alone, maintaining or even growing the presence of small and medium credit unions in the market is key to a healthy industry. The personalized hands-on service that these credit unions can provide continues to be of great value to consumers and is fundamental to the credit union core values and service-oriented mode. There have been solutions proposed over the years to help small credit unions survive and thrive in the increasingly competitive and regulated market. Everything from marketing plans and strategic plans to technology and communications services have been put on the table yet nothing seems to work well enough to stem the tide of consolidation. There are other solutions out there and I have a few in mind myself which I will put forth in the future. In the meantime I would urge all within the movement to take a moment to reflect on what it means when we say, not for profit but for service and think about how we can help all credit unions maintain their autonomy and independent integrity as they go about their missions.
