Our industry is at a crossroads and is facing more challenges than I’ve seen in my 25 years of working with credit unions. I have spent decades advising over 500 of the top credit unions in the nation and speaking with industry leaders, and the confusion and concern I hear now is palpable. The Federal Reserve’s proposal to cap interchange fees looms large and the very survival of many credit unions may be threatened. Although only three credit unions fall directly under the scope of the rule, the fallout is expected to have industrywide impact. In this challenging economy, seized corporates and the $9 billion corporate assessments not only squeeze already tight margins, but also force credit unions to change longstanding practices and relationships and consider alternative vendors to provide wholesale services. Credit union leaders are under pressure to deliver the true value of a credit union to your members. The good news is that our industry is full of great leaders, and in difficult times those great leaders will take decisive action to keep their credit unions strong.
At the same time, the value of the credit union proposition is gaining awareness on the national stage as shown by the recent Senate Banking Committee hearing held to review the role of credit unions. On the legislative front, the bill introduced by Sen. Mark Udall (D-Colo.) is based on the belief that credit unions can provide new avenues of credit to small businesses, where traditional bank lending may be lacking. In addition, as banks react to the Federal Reserve interchange rules and loss of overdraft fees, credit unions may have an opportunity to gain new market share as banks move to drop free checking. Multiple surveys have also shown that as customers lose faith in the banking industry, they are increasingly moving toward credit unions. At its core the one critical factor that has always differentiated credit unions and will continue to do so is that credit unions exist for the benefit of their members not profits.
So even with all the surrounding turmoil there is still opportunity to make choices today to position your credit union for tomorrow. In my opinion, there are three key areas to focus on.
Examine all options. We have recently been presented with a series of options that we may have not considered just a short time ago. Just because we have always made the same choices in the past doesn’t make them right or wrong. An opportunity has been thrust upon us to re-examine all the components of investing, which includes liquidity options, safekeeping, reporting capabilities, even down to fees for all the services we receive. These options should be thoroughly explored while maintaining the traditional investment mantra of safety, liquidity, yield.
Stay current. The landscape is changing quickly, and having timely and accurate information will be critical in positioning your credit union in the future. Make sure you have access to the right resources and industry experts to guide your decision making on the regulatory and investments environments. A financial adviser and his or her firm, with the experience and commitment to the credit union movement, should serve as a trusted and valuable member of your investment team.
Our reason for being. Let’s get back to our roots. Many credit unions seemed to have lost their way in trying to be like profit-oriented banks and chasing rates. In turn, they have at times blindly entered into investment transactions without full knowledge of the security. If we remember why credit unions were formed in the first place–that is, to provide our members with a safe place to save and borrow–we should be able to prudently and successfully realize our goals. While products and technology have changed over time, the fundamental credit union philosophy of “not for profit, not for charity, but for service” has not.
Despite the many challenges, I see a brighter future for this industry that I'm so proud to serve and be a part of. But what the future will look like depends on the choices we make today.