We have seen the concept of “discipline” reinvented around the world by the market every five years since I began working with World Council in 1990.
In 1990, discipline was financial management, meaning:
Capital adequacy, provisioning, delinquency management, collections, management of non-earning assets, liquidity reserve management, internal controls, PEARLS, etc.
These were all the bitter medicines we learned to take. Discipline sounded to us like constraints and the loss of freedom. Yet, the irony was that credit unions that took the medicine and committed to the disciplines enjoyed the greater freedom. They became strong and profitable enough to be able to choose their options. Financial discipline caught on because nothing was as successful as success itself.
In 1995, discipline was quality products.
Financial discipline now supported the freedom to design and add new products. Capital structure meant that credit unions got more returns, better salaries and resources for product development. Savings products were designed to help members meet their goals. Greater liquidity enabled credit unions to expand from simple annual term loans with monthly payments to a variety of credit products responding to member demands: micro credit, agricultural credit, housing loans, vehicle loans and business loans. The movement from share-based lending to repayment capacity and risk-based lending prompted the expansion of commerce, business and housing loans.
In 2000, discipline was growth and community outreach.
We had strong institutions with strong financial management and robust product offerings. The next frontier was growth and expansion. Local markets were often saturated. Credit unions looked to population niches and nearby local communities to grow into. Branch offices—not new credit unions—reached out from strong, established, profitable credit unions to underserved markets and populations.
In 2005, discipline was service.
Credit unions had grown with their original membership and became more profitable as their members became more prosperous. Credit unions looked at ways to give back to their communities and keep true to their social mandate. They could afford to invest more in community service. Outreach was not just about growth; it was about service. Credit unions challenged themselves to reach out and serve the underserved populations and the disadvantaged.
In 2010, discipline was about networking.
Robust institutions were growing and serving their communities, while facing government regulation and competition. Credit unions were challenged with how to compete with larger institutions. We argued that we were better managed and more disciplined; we had better tailored response products for our communities; we weathered economic crises better; and we continued lending to our members when the banks stopped. However, the competition returned with deep pockets, shiny technology and fancy marketing. So, we built networks of nationwide points of service with shared branching and shared platforms for greater efficiency: ATM networks and unified branding. There was strength in “cooperation among cooperatives,” especially to negotiate as a group with vendors. We presented ourselves not as one community credit union, but as part of a national network with hundreds of points of service with an assured quality brand.
Discipline was aggregative. It was the cumulative delivery of financial management, quality products, growth and community outreach, service and networking. Disciplines built upon the previous quinquennial. Financial discipline allowed for quality products, which led to growth, which supported service, which led to networking.
In 2015, discipline is convenience.
Financial management, product quality, network branding and price were all first-order conditions in the market. The consumer rules today. Discipline means giving members the convenience and access that they demand. Consumers expect service when and where they want it.