How small credit unions can become vital

For the past 20+ years, credit unions seeking to grow, have made charter changes to community charters, often from multi-common bond or sole sponsorship charters. The goal was to minimize the perceived barriers to membership. The belief was that if anyone could join my credit union, growth would be unconstrained. In some cases, this was true; these credit unions did grow beyond their original charter constraints. But, in reality, the growth of credit unions with new community charters remained very incremental.

These new community-chartered credit unions quickly learned that they now faced a heightened level of competition. By disconnecting itself from its affinity relationships with key, select employer groups or their original sole-sponsor companies. They have become just another banking option in a sea of banking options. Compounding the increased competition was the increased cost of business. Marketing effectively to a community is much more expensive than marketing to a sole sponsor or a few major employer groups. This marketing cost was compounded by the need to change their branching and access strategies. No longer were branches based on the location of the employer group or sponsoring company; they now had to establish a branch network to serve the community.

Another downside of a community focus was the need to “be all things for all people.” The credit union had to become a player in a retail space where all of its products and services became commodities with little differentiation.


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