Are credit unions facing a do-or-die moment – or to put it inthe language of business strategists, is this a strategiccrossroad? That is the provocative idea tossed out by CUNA MutualGroup executive John Lass in an eye-opening talk Wednesday at theNew Jersey Credit Union League's “Reality Check” conference inAtlantic City.

Lass' thesis: credit unions are facing big challenges to theindustry's vitality and prosperity. He stressed: “I love the creditunion system. I hate the politics and the ego but I love thesystem.” And that system, said Lass, is under real threat.

A starting point is channel change: “Member channel preferenceis changing. Within five years mobile users will outnumber online.We are in a new era of how we consume financial services.”

There are ever more non-bank competitors, from Apple to PayPalto Isis, the consortium of mobile carriers and big banks that islooking for new ways to facilitate mobile payments and, right now,said Lass, credit unions are not at that table and that is not goodnews.

Lass also hypothesized that there are likely to be governmentcaps on the NSF/courtesy pay fees that presently constitute 28% oflarge credit union fee income, by CUNA Mutual's count. He added:“If you are doing non-sequential processing of debit processing,they [the federal government] are coming after you.”

Factor in the probability that the traditional spread incomethat has kept credit unions buoyant will continue to be“compressed”, Lass said, in an atmosphere of reduced loan demandand what gets clear is that credit unions need to rethink businessmodels in an era of mobility coupled with pressures on traditionalincome sources.

“Income comes from fees or spreads, that is pretty much it,”said Lass.

What to do? Lass urged credit unions to be “brutally” frank inassessing where they are and what their strengths are and then toact. “You need to decide what you will invest in to excel at.”

At the same time, said, Lass, credit unions need to decide whatthey won't invest in – what they “will be bad at.”

Such decisions, he acknowledged, won't be easy.

But Lass also made clear that, in his view, the presentstrategic crossroads makes it imperative to make those harddecisions.