In looking at the bigger picture, it doesn’t seem possible for a credit union to truly achieve economies of scale that provides the real efficiency needed to compete with the mega banking providers. To compare our scale to banks, if all credit unions consolidated, we would reach about $2.38 trillion in total assets and be the 4th largest financial institution in the United States.
Through 2025, we have witnessed about 80 mergers so far, and this isn’t a surprising figure given recent history. In all actuality, since the pandemic, the pace of mergers has slowed, but we are seeing more volume in mergers of similar sized credit unions and across state lines.
We face economic challenges, regulatory complexity, rising vendor costs, and a growing competitive landscape from each other, FinTechs, retailers, and banks. This all makes running a credit union even more difficult, but it’s worth it.
Before we accept that scale is the solution to every challenge, it’s important to focus on who we serve and explore all avenues for success and growth before submitting to the idea that consolidation is a strategic necessity.
Consolidations make sense for a lot of reasons, but I don’t believe that scale is the one we should be continuing to focus on. We want to expand services for our members, offer more branch locations, increase technology investments, and be able to provide the best products and services to meet their needs. When it comes to M&A activity the conversations should be member-centric, understanding the needs of our members and acting in their best interests.
Growth strategy needs to have a pillar for what the ideal mergers look like. This should define what makes the most sense for our members and the credit unions, so we don’t waste time and effort on ones that won’t get across the finish line. Growth for the sake of growth doesn’t provide a scale solution—these initiatives, like all major projects, need to be executed very well for our members to maintain trust and loyalty to the institution.
Culture and community matter
When mergers are not executed correctly, consolidations can dilute the members’ experience, disrupt community ties, introduce operational complexity, and shift focus from what is most important. The most important thing is ensuring that our members are gaining the best value from their financial institution that they possibly can.
When credit unions are all meeting their mission, we can better tell our story. It also improves recruiting and retaining top talent as we build deeper roots in the communities we serve. The goal is to establish trust and intimacy that can’t be replicated by scale.
Other paths to sustainability
Credit unions do not have to be large to survive. With a member-centric approach, it is possible to differentiate with agility, speed, focus, and find opportunities to thrive regardless of size. Here are some areas to focus on that can help drive success:
Investing in digital tools as technology is improving quickly. Being specific on the resources that can help improve digital experience, enhance efficiency, and support our members is crucial. A focus on streamlining back-office systems and processes can help reduce overhead without sacrificing service.
Finding new revenue streams is important not only for scale metrics but helps protect against future regulatory changes and positioning the organization to invest in future opportunities. One idea is to choose additional fee-based products and services that add value to the members’ financial journey.
Using agility as an advantage should be a niche for smaller organizations. Smaller should provide a structure to move faster and respond quicker to members changing needs. Tailoring products, focusing on personalized service, and continuing to build loyalty that gives you an edge is difficult for larger organizations to duplicate.
Cooperation is essential to standing out in the market. We are not for profit financial cooperatives that need to work closely together to make a meaningful impact on our communities. Uniting to leverage our unique structure and partnering to serve our members helps us to continue to create thrift in banking and increase impact in our communities.
A call for strategic discipline
M&A shouldn’t be the default conversation we are having to determine how we will grow. It should happen when it’s a strategic decision that helps the members gain more value. Credit unions owe it to themselves to evaluate if they are serving their members well and if it’s the right decision for the members and community. We should be exploring metrics that define what success looks like, and the answer does not always need to include a larger asset size.
In exploring mergers, boards and executives should consider:
- Are we executing well for our members and providing personalized value that can’t be matched?
- What operational improvements are we going to pursue for our members?
- Can we continue to improve our products and services and continue to innovate?
Credit unions were founded on the principle of people helping people. That mission doesn’t require scale. It requires heart, creativity, and commitment. The advocacy stories that we tell shouldn’t be diluted by M&A activity. Let’s stay true to our purpose and work in unity to achieve our long-term goals collectively. We need to maintain space for credit unions of all sizes to showcase why we exist in the first place and build competition for financial value to drive our collective future.
