I am often asked by senior DoD leaders why we need credit unions on military installations. It is a good question. Especially since most of these leaders point to their smartphone and announce they can conduct virtually all their banking needs via phone. That is generally a true statement! It is also a good question for our industry as we continue to grapple with the role of “brick and mortar” in the 21st Century.
However, there are nuances to this question that are often overlooked. To fully answer, I must go back to my days as a DoD war planner and as a junior commander working on remote bases—which are always far away from Washington, DC, or any other industrialized city. It is funny how the more we rely on certain things, the more we forget how or why they are produced. Think of electricity on demand or indoor plumbing. You do not appreciate how it is produced until it is no longer there. The same goes for credit unions on base.
Accordingly, since the people asking the question are the ones who make decisions, we need to make sure they understand what is happening on the ground. Similarly, it is necessary that our credit union leaders can explain the situation and provide context in case Congressional leaders ask the same question. Here goes the answer in three parts:
First, it is against the law for DoD to provide financial products and services to military members. Running a financial institution is outside of DoD’s mission. As such, installation commanders select federally- or state- insured financial institutions to provide these products and services to military members. Those selected are further regulated by DoD via the Financial Management Regulation (Vol 12, Chapter 33).
The reason there are both banks and credit unions on base is to provide service members with alternatives and to create competition which keeps interest rates low for military borrowers. In addition, DoD requires approved credit unions to provide FREE “Financial Readiness Education” for military members and families. This is a natural fit since credit unions already provide this education to their communities. It is in our ethos.
So why is “brick and mortar” necessary? Now we get into some of the practical aspects.
The second reason is military credit unions typically provide the deployed/mission commander with large sums of cash ($50K to $1 million depending on the type of mission) at a moment’s notice (typically within 2 hours) to conduct the mission. You cannot do this with a mobile app! You need “brick and mortar” branches on the installation that can quickly collect the required cash and understand the need to maintain operational security.
Here is an example:
Air Force missions are usually initiated by cargo airlift (C-17, C-5, C-130). These aircraft deploy across the world into many austere environments. These are not vacation destinations. It is usually on some dirt strip with the nearest town a few miles away (if you are lucky).
As a result, there are certain landing fees, unloading fees, and storage costs that must be paid or else the plane and cargo can get impounded. The local chieftain, commissar, or other official in charge of the remote airstrip typically do not take credit cards, Apple Pay or Venmo—the aircrew must pay these fees in cash. I have seen several missions fail because deployed commanders and military planners forgot that “no money—no mission” is a more of a warning versus a slick slogan from the comptroller.
The same goes for the Navy. They need to pay docking fees along with unloading fees and storage.
The Army also deploys with cash to pay for living essentials (e.g., food, water, plates, toilet paper, etc.) in addition to lumber, sand, and other construction items to fortify and secure a bare base. The last time I checked, the Air Force does not airlift these items at the beginning of the operation. The Army must procure and pay for the items from the local economy. Again, these vendors do not typically accept credit cards or other forms of mobile payments.
Senior DoD leaders, and occasionally some military planners, forget that military organizations no longer maintain a secure vault on base. DoD must rely on credit unions or other federally insured depository institutions to perform this function. Lost in the discussion is the fact that it also costs money to store large amounts of cash in a vault or to have it delivered so that it is ready to go at moment’s notice.
DoD approved credit unions provide this “expeditionary cash” for FREE and can do so without compromising Operational Security. The advantage in using a defense credit union is that unlike other financial institutions, we understand that when mission details get leaked, bad things happen. A mobile app does not guarantee this level of security.
Third, military credit unions are increasingly taking on management of the Treasury General Account for the installation—a federal government entity. DoD could not accomplish its day-to-day “in-garrison” mission (peacetime) without this service. Here is what this means:
At the end of each business day, the commissary, base exchange, child development center, dining facility, etc., need to make deposits and obtain change funds (for cash registers) to conduct business. These deposits cannot be made at the installation’s Finance Battalion or Comptroller Squadron. Again, by law the military cannot provide financial products and services. Thus, this activity must be entrusted to a federally insured depository institution. More and more credit unions are managing the Treasury General Account on behalf of the installation—for FREE.
Again, a smartphone/mobile app does not work in these cases. Particularly when the installation still accepts cash and checks as a form of payment. Thus, “brick and mortar” branches on the installation are still required to make these deposits and to obtain change funds.
I remember a recent installation commander unilaterally decided to relocate his on-base credit union (kick them off the installation) because he did not see a need. I was called by the credit union leadership for assistance. Not only did the installation commander lack Secretary of the Air Force approval for terminating the credit union’s operating agreement, imagine his surprise the very same week when he needed to deposit a large reimbursement check and was not sure how to do this. SMH!
Installation Commanders and DoD-level officials have a lot on their plates, and it can be easy to forget how the day-to-day mission support actually gets done. It is important to make sure that these details are laid out to them clearly so they know how integral on-base credit unions are to mission success whether in forward operations or back home. The good news is this is the number one reason why DCUC exists!