The Credit Union Advantage
The credit union advantage, or the cooperative advantage, may not be well understood with most credit union members. I think one of the reasons for this lack of understanding may be attributed to the success of credit unions, over the last 70 years. Credit unions have evolved into established members of the business community, offering financial services to its members. Most credit union members think of their credit union as their bank. This is very distant from the beginning of most credit unions formed to cooperatively help member obtain credit.
The Cooperative Advantage
To understand the credit union advantage, it is helpful to understand the cooperative advantage. The beginning of the cooperative movement is attributed to the Rochdale Society of Equitable Pioneers, founded 1844 in the UK. This may be the first formal legal cooperative society, but I like to think humans have been working together for mutual success for much longer. I believe it is part of our human DNA. A part of us that is quickly demonstrated when a natural disaster hits. Like the flood in Grand Forks in 2018, when people worked tirelessly to help their community.
The Rochdale Society was founded on a set of principals that can be found following this link. These principals have evolved into the current 7 cooperative principals.
- Voluntary and Open membership
- Democratic Member Control
- Member Economic Participation
- Autonomy and Independence
- Education, Training and Information
- Cooperation among Cooperatives
- Concern for Community
A detailed explanation of the 7 cooperative principals can be found at this link.
Credit Unions as Financial Cooperatives
For most credit union members the present day reality of participating in a financial cooperative is very different than that of a member 70 years ago. If I was to ask a member today what the credit union meant to their community and themselves, I think the most I could expect is an example of cooperative principal number 7, concern of community. This could be attributed to credit union donations to community organizations. But the credit union advantage is all of the 7 cooperative principals and the impact they have on each member and the community. What other for profit business has the best interest of the members and the community as its founding principals?
Demonstrating the Credit Union Advantage
As your credit union has developed into your bank and the local bank has understood the need to be more responsive to the community, the difference between the two is less visible than it was in the past. Credit unions and cooperatives traditionally have distributed their excess profit with patronage dividends. Patronage dividends are co-op principal number 4, member economic participation. With increased costs and intense competition credit union patronage dividends are becoming more difficult to achieve for member distribution. There is also the difficulty in distributing the patronage dividend in a fair and equitable way to all members.
In the future demonstrating the credit union advantage may require expanding on the 7 cooperative principals. It may also mean taking a closer look at the credit unions, mission, vision and values.
Mission, Vision and Values
For credit unions to demonstrate the credit union advantage I think credit unions need to carefully re-evaluate their mission, vision and values. Credit unions need to ask the questions, what do our members need? What do our communities need? How can we fulfil all the cooperative principals and make our members lives and communities better? How can we demonstrate the credit union advantage every day with everything we do?
The Future Credit Union
If you have read any of my other posts you will know that I am somewhat obsessed with change and the future. Here are my thoughts on the future credit union. What we are seeing with many credit union mergers is that size matters. Most of todays businesses need scale to grow and improve and this is very true in the financial services industry. The merger of Grand Forks Credit Union with Gulf and Fraser and possibly other B.C. credit unions, is to gain scale and efficiencies. But there is a reluctance and concern among many credit union members that becoming bigger will not necessary mean becoming better. I understand that concern but I feel strongly that the only way a credit union can continue to demonstrate the credit union advantage is to become bigger and more efficient.
And to take that thought a little further, can a credit union survive to improving the lives of its members and community with just financial services? Can a credit union fill other spaces to improve its members lives in a cooperative way? I think these are questions worth exploring for a regionally diversified, efficient and member focused cooperative.
This article was published Dec. 2022 by McKinsey and Company
Page 5 details Kazakhstan’s Kaspi Bank,
“Kazakhstan’s Kaspi Bank is proof that even in a country far from the centers of global finance, it’s possible to transform everyday banking. It launched an e-commerce marketplace in 2014 and home-delivery service in 2015. The bank has captured roughly half of the nation’s online sales in just eight years and has steadily expanded the breadth of its offerings, all tightly integrated. There are three main pillars in its ecosystem: fintech, marketplace, and payments.”
As large tech companies move into the financial services space, why couldn’t a cooperative with embedded cooperative principals move into the tech space?
I would love to receive your comments and ideas on this post and the information that I have shared, Bill