Online-Only Bonus: Mega-Trends Will Remake the Industry
- More technology and more sharing will give credit unions an edge.
- Banks are not the only competitors CUs face.
- Many small credit unions will not survive.
Just when you thought the bleeding had stopped–the corporate credit union blow ups are passed their worst stage; the global economy is on the mend; consumer optimism is ticking up–there is more gut-wrenching news in store for credit union executives.
Mega-trend No. 1: more technology, more sharing. Hernandez is not all doom and gloom about the future of credit unions and, indeed, he cited a mega-trend that, he believes, could be exactly what credit unions needs to prosper: “more cooperation, particularly with technology.” Were credit unions to pool their technology initiatives, sharing tools and solutions, Hernandez said, they could cut those expenses by 30% to 40%.
Core to Hernandez’ argument is that technology will be central to the evolution of financial institutions and the associated costs can only be expected to rise. That will give big banks major advantages, arising from economies of scale, but credit unions, said Hernandez, can level this playing field by joining together, sharing expenses and solutions.
Mega-trend No. 2: Competition will come from all directions. A generation ago, a credit union executive could make a list of his or her prime competitors on a three by five card and have plenty of blank space. Going forward, however, competitors are multiplying, said Becker. He pointed to Wal-Mart, which continues to edge into offering more and more financial services, and also the rise of person-to-person financial transactions (via PayPal, for instance). Another reality is that, with the spread of the community charter for credit unions, more credit unions are competing against each other, like it or no. Competition, suggested Becker, just is going to be inescapable. And, for many credit union executives, accepting this represents an earthshaking paradigm shift.
Mega-trend No. 3: Small credit unions are going away. According to
“The top 200 credit unions have the same assets as the next 7,000. It’s inevitable that there will be consolidation,” said Tim Chen, CEO of NerdWallet.com, a site dedicated to consumer education around credit cards.
Mega-trend No. 4: The need to reach out–more often and smarter–to young consumers. Credit unions have not excelled at attracting this consumer base but they are of course the future. Jack Vonder Heide, president, Technology Briefing Centers Inc., suggested that credit unions will have to deploy the tools and devices preferred by this demographic. For instance, he said more credit unions will offer more and richer mobile banking tools because younger consumers want to do their financial transactions on a cell phone. Those consumers also very much want attractive rewards programs and, said Vonder Heide, credit unions that are not creating programs with that under 35 years of age demographic in mind may not have happy futures.
A last point made by Vonder Heide is what he called “the commoditization of money.” Their parents might have aggregated all their financial transactions at one institution. The younger demographic, said Voder Heide, are using online tools to comparison shop, often across institutions nationally, and they are opting for the best deals. What that means is that credit unions cannot fight just for this customer but for this customer’s every financial decision.
Mega-trend No. 5: Continuing nonmember ignorance about credit unions. “The average nonmember has no idea what credit unions stand for,” said Mark Sievewright, a senior vice president at technology developer Fiserv. That is not good news. “Credit unions are at an inflection point. They need to focus on growth,” said Sievewright.
To Sievewright, communicating the credit union advantage needs to be pursued by just about every credit union. Big banks are deluging America with billions of dollars in advertising and marketing. Contrary messages are easily lost, but, suggested Sievewright, if credit unions concentrate on getting their differences understood, they just may be able to make a dent in the pervasive ignorance that hinders growth. “Getting this message across is a great opportunity,” said Sievewright.
Sidebar: Top 5 Global Credit Union Mega-Trends
We are the only ones identifying mega-trends. Recently the World Council of Credit Unions G-10–the 10 biggest credit union systems including Canada, Australia, and the United States–met to identify what its members believed to be mega-trends. Here is their list.