And Now For Something Completely Different-Or Maybe Not
If you're old enough to remember "Monty Python's Flying Circus," you've probably been around the credit union movement long enough to have seen some pretty dramatic changes. Perhaps Monty Python's segue, "...and now for something completely different" is an appropriate perspective for credit union boards and managers as they look to the future.
Let's recap some recent events to set the stage for what comes next.
The U.S. economy falls apart-in an election year. The economic collapse and subsequent rush by politicians to shore up the economy caused a tectonic shift in the financial services industry.
Interest margins disappear. The Fed raised rates a bit recently, but the margins that once buoyed income statements are a fading memory.
Noninterest income is threatened. Proconsumer legislation and regulation may lower or limit opportunities for noninterest income.
Bankers are vilified. They're not all bad, but the media seems to paint bankers as greedy robber-barons. This impeaches the integrity and trustworthiness that are foundational to the financial services industry.
Flight to safety. As the market sank investors fled for safe havens. Many banks and credit unions saw their deposit portfolios swell as a result.
Failure and consolidation. A Darwinian thinning of the herd is occurring-with a little regulatory help.
Lending ceases. At least that's what we hear. It may be as much an issue of low loan demand from qualified borrowers as it is the institutions' decision not to make loans.
So, what does it all mean? Credit unions find themselves at a unique moment in economic history. Their response at this critical juncture may well shape or reshape the future of the movement. When the economic tide turns, it could take with it the growth that credit unions experienced recently. The imperative for credit unions is to make the gains permanent-a stair step of progress rather than a blip on the graph.
Perhaps the difference is actually a return to how financial activities were handled once upon a time. Think of it as a Norman Rockwell version of financial services.
Elevate the dignity of the member-owner. One of the advantages that credit unions have and should leverage is the trust factor. And with transparency as a cultural mantra right now, perhaps a way to do this is through how credit union performance is reported. Remind members that they own the institution and that their trust in the credit union is both justified and rewarding. Restyle account statements to underscore the financial benefits members receive. Point out favorable pricing and show members how this keeps money in their pockets. Solicit their opinions on how their investment should be managed and respond to their priorities-even if that requires initiatives to be placed on a strategic timeline for future action.
Seize the moment. It still may take awhile, but bankers will manage to polish the tarnish off their reputations. Don't discount the consolidation within the financial services sector, particularly among banks. Currently, the strong are devouring the weak. When the feeding frenzy is over there will be a renewed focus on business development. Banks that have acquired new markets will move to secure and extend their positions. They will move aggressively. Their shareholders will demand returns for the risks and that will require growth, particularly on the loan side. Credit unions have a diminishing window of time to act before this happens.
Invest in outreach through a variety of channels. One truth in the new normal of the financial services industry will be flexibility. This will take shape in how services are delivered and perhaps the terms under which they are delivered. Physical branches will remain important but will morph into truer service or solution centers. The younger generation demands service on their terms: where, when, and how they want it. Credit unions must forge ahead with technological delivery channels or risk being left behind by the generations that represent the future of the movement.
Become premier lenders. You'll have to figure out the new rules and regulations as they emerge, but this is an area where the banks will continue to have a blind spot. Credit unions can make great gains by figuring out how to be stellar consumer lenders as the economy rebounds. Learn to be a true small business lender as well. Caution is due in this arena. Nonetheless, the opportunities for mom-and-pop scale lending offer the benefits of improved margins and stronger credit union entrenchment in their communities.
So, maybe the end result is not as much completely different as it is the way it should be. Either way, the climate is right for credit unions to step into the financial fray and become the solution for the financial ills that seem to frustrate us all.
John W. Hyche is senior vice president/principal at LEVEL5.
He can be reached at 678-784-3614 or