Credit unions you’re in trouble. Not from banks but from innovators.

We got ourselves ready for the war with banks. We continue the little battles as banks encroach on credit union expertise with workplace banking and financial education. We reacted by opening up membership to the community and offering business banking products.

Growth for any financial institution is important. It ensures the institution will be around for decades to come.  While some credit union strengthened their cooperative spirit, other credit unions raised the white flag and began acting like banks by raising fees and chasing profits.

When decisions are made based on profitability, credit unions lose.

Instead of innovating, some began to mimic banks. They’ll copy bank practices, marketing and rates.  Credit unions began to believe that the only way to grow is to offer the same things banks already do quite well. The only difference is that a credit union was going to do it better.

That’s innovative right?

As credit unions fought banks for market share, innovators began introducing traditional products in a completely different fashion. They simply didn’t want to do it better. They offered to do banking differently.

These new banking models don’t act like banks. In fact they have more of a likeness to credit unions. They’re people focused and product oriented.  These innovators are taking old models and innovating.

Smartphone Banks.

Moven and Simple’s growth with the coveted 18-34 year old age group is a peek into the future of banking.  The product offering is simple and convenient. They focused on innovating a specific product. Moven is innovating the debit card experience while Simple focuses on the online banking experience.

The New Brick & Mortar Bank.

Coupled with millions of users, hundreds of retail locations and new technology, T-Mobile hopes to take a chunk of the banking industry by doing it differently. They know smartphones and the apps downloaded. They also understand it’s a mixture of technology and the human touch.

Lending Online

Prosper and Lending Club continues to grow their loan portfolio. These lenders took something that credit unions did well and innovated.

We’ll begin to see more crowd-lending websites taking a piece of the loan portfolios of credit unions.  Payday lending startups will continue to innovate and will most likely grow into other loan types.

What can credit unions do?

  1. Stop acting like a bank. People will treat you as such and you’ll have a disadvantage when competing with the big banks.
  2. Reassess your business model. It may be time to take a look at your strengths and weaknesses. Focus on what the credit union is doing right.
  3. Understand your members and your target members. Know why your members are banking with you but determine what your target members are seeking outside of the credit union.
  4. Innovate on your competitiveness. This means understanding what makes your credit union unique and what products are highly used by members. Now innovate on that strength. Make it stronger. Make it better.

Take the innovators approach and ask yourself, “What can we do to make this product better?” Focus on simplicity and ease.

So who has the advantage?

Credit unions have an advantage. You already have an existing market, a base of customers and an existing infrastructure. You’d think it’d be easier to make things happen instead of a startup that has no customers, limited resources and no brand recognition.

Jason Vitug is the CEO and Founder at Phroogal. Phroogal is access to financial knowledge.  Phroogal’s mission is to solve financial illiteracy by enabling social collaboration to share knowledge, discover new tools and connect with money-savvy peers and experts.


Jason Vitug

Jason Vitug

Jason Vitug is a former credit union executive and founder of the personal finance website He’s a bestselling and New York Times-reviewed author with a second book ... Web: Details