Credit Unions Can Be Disruptors Again

CO-OP’s THINK conference underway right now. One of the interesting things going on there this year is the debate Thursday, May 2, between those to prefer measured change and those who lean toward massive change. It is a very interesting question and one that credit unions must consider right now for future vitality. The one sure thing is that no change is no good.

Credit unions were massive disruptors to the U.S. financial markets just over 100 years ago. They changed the way everyday people handled their finances, because prior to them people kept their money in their mattress and borrowed from less-than-savory characters.

Many challenges to adapt have arisen since that time but one of the greatest, if not the greatest one, has been the advent of the payments technology revolution. The average person did not have many choices for their everyday financial needs 100 years ago or even 30 years ago. However, today credit unions are facing a plethora of nontraditional competitors. Max Wolff, GreenCrest Capital’s chief economist and senior analyst, pointed out at a recent industry conference that venture capitalists invested $6.5 billion in 3,698 companies in 2012, much of it related to financial services. The pressure will only become more intense.

Younger generations are rapidly and entirely changing the face of the financial services industry. Scarborough Research found that Gen Y is 41% more likely to be unbanked than the average American consumer. Think Finance, a Forbes article reported, explained that from a representative sample of the Millennial generation surveyed, “someone earning up to $74,999 a year is just as likely to use a prepaid debit card as someone earning less than $25,000 a year.”

And Javelin Research stated has that “in less than five years, Gen Y and Gen X incomes will outpace those of all other generations. By 2025 Gen Y will be responsible for almost half (46%) of total personal income.” That’s a huge group with massive income potential that credit unions could do a better job of attracting with products and services tailored to their needs. Not what credit union executives and directors think they should have, but what the younger generation is actually willing to use.

Credit unions have been lobbying hard to get more involved in business lending. Yet companies like Kickstarter, which is crowdsourcing for small business funding, are growing essentially using an online credit union model. Credit unions must partner with or create organizations like this to remain competitive and become a disruptor again.

Steve Jobs redirected income from the Apple II line of computers, which was the company’s biggest seller at the time, to invest in the McIntosh line, which has become highly successful. Even back in 1984, Jobs was identifying what consumers wanted before they even knew it and starting a revolution with the graphic interface and the mouse. After that he not only changed the way we listen to music with the iPod but also helped save the music industry from piracy while changing the way consumers purchased music. All he did was marry two needs of, at times, rival parties. He would not have been as respected or as successful if he hadn’t been willing to take these types of risks on the future rather than the past and present. Can credit unions follow this model and do the same?

Sarah Snell Cooke

Sarah Snell Cooke

Sarah Snell Cooke is principal at Cooke Consulting Solutions, a business and communications strategy firm serving the community financial institutions market and their business partners. She has more than 20 ... Web: Details