Is bigger better?

Given the steady gain in numbers among credit unions in the $500 million-plus range and their superior membership and loan growth, it’s fair to wonder whether survival is all in the numbers. Do economies of scale favor larger financial cooperatives in the face of fierce competition, technological advances and compliance challenges?

Do economies of scale favor larger financial cooperatives in the face of fierce competition, technological advances and compliance challenges?

Success stories of efficient operations aren’t unique to $1 billion-plus credit unions, contends Stephen G. Morrissette, adjunct associate professor of strategic management with University of Chicago’s Booth School of Business. In fact, “the data points show that there are effective credit unions across the spectrum of asset size, especially above $100 million.”

Morrissette identifies three areas that credit unions must manage to compete and serve members effectively: “economies of scope,” which refers to breadth of products, services and delivery channels; “economies of skill,” or range of internal expertise and human capital; and the more familiar economies of scale.

 

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