During a recent CEO Strategy Roundtable, CU*Answers presented materials to 50+ credit union CEOs. The materials were designed to facilitate a discussion about strategies related to the future of the credit union industry and the current trend towards consolidation and bank conversions. The theme for the day was “Coordination through Collaboration vs. Coordination through Consolidation.” The discussions were candid, out in the open, and focused on how an existing network of collaborators could offer positive alternatives to credit unions and their members who were facing some tough decisions.
We are posting these materials on www.creditunions.com in the hope of starting an active debate amongst credit unions who wish to add their voice to the search for creative alternatives to mergers, bank conversions, and potentially even purchases of credit unions by non-credit union entities.
Acquiring Credit Unions As A Collaborative
An aggressive statement. Politically unthinkable five years ago. Potentially a mandate five years from now. What do you think?
On the one hand, we’ve been “acquiring credit unions” for years. As a CUSO and a collective of credit unions using the same core technologies, we’ve all been vested in attracting new credit unions to CU*Answers. For the most part, credit unions just act as great references for other credit unions looking for a new vendor. And when it works really well, they end up finding a whole new set of partners and become part of our collaborative.
But the world is changing. Can you sense it? Maybe the tables are about to turn. You see it all around, in almost every industry. Mergers, takeovers, consolidation—whatever the term, almost every business person is wondering how to hold on to their current market share and grow into new markets. So whether they choose a defensive or offensive strategy, credit union leaders cannot sit this debate out. Many are looking to their partners for help.
For some, there are individual and direct motivations to want to grow through partnering with others, especially partnerships that end up in acquisitions or mergers. It is a definite growth strategy. As a strategy, it requires both a business plan as well as tools and resources to carry out the plan. Therefore, there is economic opportunity to service businesses who take this tack.
For others, there is becoming a recognized need to find a model that strengthens our industry, that protects our current membership by growing, and one that will yield an industry made up of healthy competitive options for members. This group is wondering how to bolster both external organizations as well as their own. To do so, they also need a business plan and tools and resources. Therefore, there is economic opportunity to service businesses who take this tack.
Turning the Tables
For those reasons, CU*Answers feels it is time to turn the table. What if CU*Answers could find credit union opportunities for credit unions? What if CU*Answers could deliver partners to join credit unions directly as effectively as credit unions help us find new partners?
We need to get proactive and to prepare an innovative response to the challenges presented by credit union marketplace consolidation. We need to lead the way.
We believe there are two major strategies related to responding to credit union consolidation as a collaborative:
New Age Strategies
Direct support for credit unions whose business plan is to grow and better serve their members through strategic partnerships with other credit union charters - A New Age Consolidation Strategy. These are credit unions who want to lead from the driver’s seat and be proactive acquirers of partners.
Attract credit unions to the CU*Answers collaborative who see the value in partnering and participating in an operational network - A New Age Networked Business Strategy. These are credit unions who recognize the need to extend their model into the future and want to accomplish that through partnerships .
In either case, credit unions are coming together to exchange both opportunity and capabilities in a new way. In some cases, credit unions might outsource services directly to CU*Answers as the provider of capabilities or the driver of opportunities. In an equal number of cases, credit unions will turn directly to their peers to drive opportunities and share capabilities. The network model allows participants to pick and choose how to organize, divide, and complete the work necessary to service members.
Whether it’s credit unions proactively marketing and selling their services to other credit unions, or CU*Answers brokering credit union opportunities to credit unions, in the future we believe credit unions will recognize the need to cooperate far beyond anything we see today.
In other words, some credit unions will want to buy opportunities for their organizations, even if it is from other credit unions. And yes, ultimately, it may lead to even more mergers. Other credit unions will want to sell their opportunities, and hopefully they will want to sell them to other credit unions (as opposed to bank stockholders, etc.).
CU*Answers hopes to help both. CU*Answers hopes to give credit unions an edge in attracting opportunity, uniquely partnering with other credit unions, and even directly acquiring other credit unions. We hope to give credit unions with this mentality both a financial and an operational advantage over non-CU*Answers credit unions in the competition to grow using these strategies.
On the flip side, we hope to help credit unions who are looking for partners to do so with new skills, a new awareness, and a set of best practices, so that they pick the right partners, so that their organizations are enriched through partnerships, and so that they have options more innovative than simple mergers.
We believe both strategies represent a clear bottom-line business opportunity as well as a proactive industry effort. Both are consistent with the ideals that have governed our CUSO to date. We also believe that credit unions will find themselves alternating between both tactics. It is doubtful that credit unions can simply merge their way into a new business strategy that will be effective with today’s members. Sometimes they will be merging, sometimes they’ll be partnering, but they will always be active participants in networks. Ultimately, we believe a new networked business model is the future of the credit union industry.
Bottom line, our marketplace is full of creative people working on innovative solutions to acquire credit unions. Some are internal, some are external. Some are positive for our industry, and some are questionable. Some speak to the concepts of protecting our members’ rights, and some don’t. We believe it’s time for our collaborative, for our partnership, to get into the game.
In 2006, CU*Answers took the first step in giving credit unions a financial edge in moving forward with partnerships and mergers. We offered an incentive to any CU*Answers credit union merging in a non-CU*Answers credit union: we will waive the first year member fees for the merging credit union.
In our 2007 business plan, CU*Answers recognized the need to build standing resources to support credit unions in completing partnerships and mergers. Over the year, CU*Answers plans to increase its staff and formalize merger support procedures so that CU*Answers credit unions will have more flexibility in being aggressive about partnership projects.
To this point, though, we’ve been less than aggressive. From this point forward, CU*Answers needs to work with its partners, clients, and owners to accelerate the advantages that CU*Answers credit unions have in the marketplace when it comes to attracting new partners.
|For the sake of being brief, we have not included two projects our collective will work on in 2007. First, helping credit unions put the marketing and collateral materials together, along with the business processes that allow them to proactively work with others on official partnerships. Second, an outline of a soon-to-be-released Scholarship Program for credit unions wishing to become part of our network. This program would extend financial credits and support for qualified credit unions. To receive a full copy of the materials provided to the CU*Answers CEOs, contact Randy Karnes at email@example.com. We look forward to your comments.
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