WTH is a Credit Union? (Learning from Australia's experience)
There is an entire generation of people that do not know what a credit union is. But they know what a bank is – if you combine the market awareness of ‘bank’ with the mutual ownership of the ‘credit union’ you can have a truly revolutionary product offering in financial services. Australia did this. Canada did this. And it makes sense for the US to do the same.
I would LOVE to see Credit Unions survive and thrive for the sake of our communities – but I’m concerned that won’t happen if they continue to call themselves ‘credit unions’. I know this will be controversial – but I’m writing this as a concerned fan of the CU movement.
When an entire generation doesn’t know what a credit union is, you’re in trouble
I’ve had the pleasure of working with many credit unions over the past 15 years. One in particular is Community CPS Credit Union in Australia – I first engaged with them around 2012. But if you look for that credit union today, you won’t find it. They rebranded to Beyond Bank Australia in 2013 to take advantage of new laws passed by the Australian government that would allow a credit union to trade as a mutual bank.
WHY? Were they traitors to the credit union movement?
Well, the World Council of Credit Unions held their annual Conference in Denver Colorado in 2015 – at which time I was living in Colorado and working for Avoka Technologies. I learned that the CEO of Beyond Bank (Robert Keogh) would be in attendance alo
ng with some other CEO’s we had a relationship with at Avoka. So we asked them if they would speak at a dinner we were hosting for US credit unions around the event – and share their experience as Credit Unions in the Australian market. They agreed.
Robert delivered a fantastic speech about the journey from Credit Union to Mutual Bank and all that transition entailed. And at the end, took questions.
And the first question was “Why did you abandon the credit union name and become a bank?” (Delivered with a silent undertone of ‘traitor!’)
And Robert’s response was succinct and poignant – “When there’s an entire generation that needs you to explain what a credit union is – you’re in trouble. When you tell them you’re a bank, they get it. When you tell them you’re a bank that’s owned by its customers – they LIKE it. This was a repositioning exercise for us.”
What does it mean to be a Mutual Bank?
Let’s unpack what Robert said:
“when you tell them you’re a bank that’s owned by its customers – they LIKE it.”
If you’re a credit union – then like it or not, the activity people perform with you is called “banking”. That’s the verb. And I don’t see many fighting that. So what Robert says makes sense – millennials, Gen Z, Gen Alpha all understand banking. So you’re already in that category of business or service. You’re providing banking services.
“Owned by its customers” – no one is suggesting that should change. It didn’t in Australia. They are mutual banks – owned by their customers. The charter of the organizations that went from Credit Union to Mutual Bank was fundamentally the same from what I understand. AND they retained their preferential tax status.
Beyond Bank had around 190,000 customers/members in 2014 … and over 270,000 in 2021. And a 94% satisfaction rating with customers. They’re growing and customers are happy. What’s not to like?
But many members are loyal to the CU sector
I was talking with a $4BN credit union CIO recently and he reminded me that the bulk of their members are over 60 years old and passionate about being a CU member. So rebranding the financial institution as a bank would be a negative move for those existing members. They chose to be a CU member, not a bank customer.
This situation and sensitivity is not lost on me - these are passionate loyal customers. However, I can't help but feel if the CU reached out to those members and communicated the challenge of attracting younger members because of the challenges associated with the CU categorization and a lack of awareness...surely this would be understood.
Sure, the CU sector could engage in a marketing blitz on TV and online to raise awareness - but this would be expensive and an expense that ultimately would have to be passed on to the members through higher interest rates or fees.
But banks have a bad reputation! Why be a 'bank'?
Again - I agree. As my friend James Robert Lay (link) pointed out in a recent keynote at Finovate Fall 2022 in NYC, millennials have already experienced 3 major black swan events in their young lives - 9/11, The Financial Crisis of 2008, and the COVID Pandemic. And the middle one of those events had a huge financial impact on families and was caused by greed in retail and commercial BANKS! So why would any business want to be a 'bank'?
The problem is, even CU's will tell you they are in the business of 'banking'. It's the verb that describes what people do with them. I don't see us getting away from that. So is there enough differentiation in 'mutual bank', 'customer-owned bank' or a similar term that would allow it to be instantly understandable ('oh, you do banking') but NOT the same as the banks that are unpopular due to past behavior (albeit the behavior of a few that did a lot of damage)?
Shouldn’t we be talking about this?
The lack of understanding of Credit Unions (among a generation who don’t feel like they’re missing out on anything by not knowing what a CU is) poses an existential threat to this sector of the financial services industry. Sure, a massive marketing investment could help address this - but is that really warranted?
This threat was recognized in other markets like Australia and Canada and changes were made to ensure the future of these wonderful caring financial institutions.
I’d love to be proven wrong – but I don’t hear this debate happening in the US. And I believe it should be an active conversation. If I'm wrong - let me know...point me to examples of where this debate is happening. But until then, as a fan of the CU movement, I remain concerned.