Competition is one the cornerstones of the business and economic world. Merriam-Webster defines competition “as the efforts of two or more parties acting independently to secure the business of a third party by offering the most favorable terms.”
We face competition from many sources both internal to the credit union industry as well as externally including from banks, non-banks and other competing businesses. As with most things, there are two sides to the issue and healthy competition is a benefit to our members and our communities.
Without competition, we may not be as quick to look at investing in new and emerging technologies, operational efficiencies, or products and services. Competition drives innovation and the sharing of ideas, it helps us to maintain our competitive advantage by allowing us to deliver products and services that safeguard our members’ loyalty and trust. All of these things allow us to offer members a choice, convenience and a greater selection of services.
Organizations that embrace a healthy form of competition view it as an opportunity, not a threat. They carefully evaluate their competition and look at the overall strengths and weaknesses of the organization, their branding and pricing strategies and then determine and plan strategically the manner in which they will remain competitive with a focus on their overall business plan.
A great example of unhealthy competition is the meltdown that occurred within the mortgage industry and the poor business decisions that were made by some organizations in order to stay ahead of the competition to drive higher revenues and to create new products in a hyper competitive environment.
Regardless of an organization’s structure as a bank, non-bank or a credit union, all face economic and regulatory challenges. The credit union advantage is our business model which, revolves around the spirit of cooperation and collaboration. Together, we stand to gain more of the market share than by competing against each other. Multi-credit union owned-CUSOs are a good example of collaboration and cooperation. Through these entities, members have access to shared branching services, ATM networks, and lending services that might not otherwise be available. Working together helps lower the costs and eliminates duplication of efforts by sharing ideas, best practices and in some cases resources.
A large credit union sharing employees or equipment that is no longer needed with a smaller credit union is another example of the cooperative spirit. Although credit unions compete against each other, we need to stay focused on maintaining our unique bond and spirit of cooperation.
If the expectation of a credit union is to successfully compete with other financial institutions to be their members’ primary financial institution, a credit union must provide a full array of products and services. By offering more products and services, the credit union and CUSO combination presents many opportunities to cross-sell and to obtain more of the financial business of members.
The larger issue is how to remain relevant and deliver those products and services in the electronic age where face-to-face relationships continue to decrease. The challenge isn’t so much with competition within the industry but how to reach the masses already in our fields of membership who never come into a credit union branch.
This is a challenge that most financial services CUSOs are facing today. Beginning in January 2011, more than 10,000 baby boomers began entering the retirement phase each day. This trend will continue for at least fifteen more years. Statistics tell us that nearly 55% of this group have not planned well for retirement and are faced with working past the age of 65 in order to maintain their standard of living.
Statistics also tell us that between 1% and 12% of this market segment know about and use the services available to them through their credit union or financial services CUSO, which means that 88%, on the high end, either don’t know they exist, don’t use the services, or have an outside relationship. This is an enormous opportunity for the credit union movement as the majority of this generation is still focused on relationship-based interaction with a trusted financial adviser. Another opportunity with this demographic group is providing senior market products such as Medicare supplement coverage, prescription drug coverage and long-term care insurance. While there are many competing organizations, this demographic group remains loyal to their credit union. This is a niche that we need to take advantage of in order to remain relevant.
Technology and the use of social media are the newest entrants into the financial services space – not other financial institutions or products. Although the final statistics aren’t available, Apple sold out their pre-orders of the iPhone 5 within one hour, according to USA Today. At press time, they were expected to sell six to 10 million within the first week, which was up from four million with the iPhone 4S.
What does this mean for the financial services industry? We need to collaborate and find a way to deliver our services using a variety of delivery channels and to leverage the cooperative opportunities available to gain the economies of scale needed to serve our existing market. One thing is certain, if we don’t rise to the challenge and offer a solution, our competitors will.
Becky Nilsen is CEO of Desert Schools Financial Services LLC
Contact 602-336-5540 or firstname.lastname@example.org