With mega banks dominating market share by 70%, it makes nosense for credit unions and community banks to fight amongthemselves to woo potential members and customers.

That was one of the insights expressed during a Credit UnionTimes webinar, “Credit Unions Find That Collaborating EqualsSuccess,” which took place Thursday afternoon.

The session's panelists were Gregg Stockdale, president of the $35.5 million 1st ValleyCredit Union in San Bernardino, Calif.; Beverly Zook, president/CEO of the $105 million Money OneFederal Credit Union in Largo, Md., and Gabriel Krajicek, CEO ofthe Austin, Texas-based BancVue,and the Not for CEOs webinar sponsor.

Sarah Snell Cooke, Credit Union Timespublisher/editor-in-chief, served as moderator.

“When big banks own 70% of the market, that's the competition,”Krajicek said. “Why would I want to steal market share from someonewho has 3% to 4% market share,” he asked referring to credit unionsand community banks.

He added, “The consumer draws a huge distinction between Davidand Goliath. The difference between a community bank and a creditunion is very small but the difference between them and a mega bankis very big.”

To be able to compete on a largerscale, Money One is a member of a group of midsize credit unionsfrom five Eastern states that come together to share bestpractices, success stories and to “sometimes commiserate,” Zooksaid.

The group of 20 to 25 CEOs, which has been meeting for more than20 years, comes together on a semi-annual basis to discuss suchtopics as loan and revenue generation and expense reduction.Outside experts are brought in to offer insights that could impactstrategic plans. Better pricing packages are another advantage ofthe coalition.

In addition to meeting with like-minded credit unions, Zook saidMoney One collaborates with several CUSOs including for member businesslending, disaster recovery and mortgage origination and servicing,the latter alliance in place because the credit union is too smallto have a mortgage division on its own, she noted.

A shared branching partnership takes Money One's two-branchnetwork to 5,000 branches and its three ATMs to 2,100 kiosks. Thecredit union is also a BancVue client.

“Collaborating with CUSOs allows us to get the economies of scale of larger creditunions,” Zook said. “Money One, at $105 million, is stillconsidered small in the banking world. (Collaboration) allows us tocompete with mega banks for consumers who think they can't get(products and services) at smaller credit unions.”

Years ago, 1st Valley CU started networking and sharing whencompetition wasn't as heightened, Stockdale said. That started tochange when the credit union moved to a more open field ofmembership.

“There was a bit of overlap and leeriness of working with othercredit unions,” Stockdale recalled. “It was slight but not toomuch. Some were still holding back and a little standoffish.”

The pull to collaborate becamestronger as operational and competitive pressures increased,Stockdale said. It was once the “cut the expense type” but a shifthas since occurred.

“It was a real eye-opener for me to see that income generationper member would be much more profitable than cutting expenses. Wereally changed our focus based on that relationship.”

For instance, 1st Valley CU went through a period of being witha data processor that turned out to be somewhat limited in helpingto enhance member service, Stockdale said.

The credit union later aligned with CU*Answers, a Grand Rapids,Mich.-based data processing CUSO serving more than 190 creditunions in 18 states. The system in place now at 1st Valley CU is“extremely supportive of collaboration.”

BancVue offers Kasasa,a suite of products and services that includes high-interest,fee-free checking accounts with debit cards, high-interest savingsaccounts and a number of different loyalty programs to help creditunions and community banks compete with regional and nationalbanks.

Krajicek said with consumersreceive an average of 5,000 marketing messages a day, competing formarket share has become very expensive. He referred to a slide toillustrate just how costly it can be.

“You have two credit unions and a community bank all in the samemarket. They overlap a little. The little dots (on the slide)represent the customers they want,” Krajicek explained. “Each isspending $100,000 for their version of their product. But they'reall being drowned out by the mega bank that's spending$200,000.”

Through Kasasa, credit unions and banks can collaborate and comeup with a $300,000 budget to compete with the larger banks,Krajicek offered. Indeed, Kasasa took the collective budgets offour financial institutions to pay for a television ad, headded.

“You're not just competing against banks. Now it's Walmart anddirect banks like Ally Bank,” Krajicek said. “If you look at howthe big guys are winning, they're using a lot of things that costbig money. How will you compete as a credit union? You'll be awhole lot stronger competing as one united force. After all, eventhe mega banks are teaming up to compete against creditunions.”

Stockdale said community banks don't seem to have an issue withcredit unions – “it seems to me it's the trade associations thatare fighting.” Zook said With Money One being a BancVue client, atleast once a year, she interacts with bankers.

“I sit in the room with bankers, I talk to bankers, I eat mealswith bankers” she said. “I realize that smaller community financialinstitutions are going through the same things as credit unions.They're not the enemy.”