Credit unions are defined by the power of one. From the industry’s very inception, the vision was for many people to come together as a single force, to save cooperatively, to lend prudently and to create a means by which the average person would have access to reasonable financial services. This vision gradually expanded beyond the individual credit union. Credit unions of all varieties are increasingly pooling their collective resources to become an industry force.
Our mission, as individual credit unions and as one movement, is to better the lives of our members through access to sound and cost-effective financial services. There is no greater embodiment of this collaborative principle than the day a credit union helps a member realize affordable home ownership. One credit union contributes to the message of the entire industry, declaring that credit unions are the right place to care for and foster family finances.
There is another reason collaboration is important: to achieve the scale economies required to compete. The consolidated assets of the entire credit union industry are dwarfed by the assets of a single bank. Seven of these Goliaths control the vast majority of mortgage lending. It was ever thus, and unlikely to ever change. What more compelling reason for credit unions—i.e. David—to seek credit union alliances in pursuit of our mutual goals? Few credit unions could independently offer the full spectrum of services—both core financial services and ancillary products—that members require. Excellent solutions lie in network and partnership opportunities.
How does the Goliath and David story play out in home financing? Few individual credit unions could manage mortgage origination, real estate purchasing assistance, consulting, documentation, flood insurance, residential valuation and loan servicing all in-house. Further, few individual credit unions have the scale of our banking competitors. There are but few credit unions listed in the annual survey of the nation’s top 200 lenders. Rarer still are those in the top 100. How do we offer comprehensive home financing solutions to our members and better our larger rivals? Collaboration and aggregation. Credit unions working together can achieve the scale equal of a Top 20 bank lender. And they are doing so. David is starting to win again.
Instead of bemoaning the “David and Goliath” aspect of this competition, credit unions are increasingly turning to collaborative solutions. By joining forces via CUSOs, credit unions are instantly capable of providing the same technology, product offerings, and value to its members as a mortgage banking giant, but with one additional benefit: the high service level that the credit union consistently provides to the members with whom they have a close relationship. Every credit union, both large and small, should immediately engage in collaboration.
The concept of credit unions working together through alliances is important for another reason. Banks are not our friends. Operation Credit Union, GSE Reform and other similar strategies are attempts to curb the abilities of credit unions to serve their members. The more credit unions work together, the more difficult the competition becomes for other types of lenders. Collaboration contributes to a more durable credit union system, one that will serve members competitively into the future.
Evaluate your mission and what it is that you really want to do for your members. Could you do it on your own or would you be better served in joining forces with your fellow credit unions? Could you help your members to achieve their financial goals and to realize their dreams of homeownership with just the resources and products that you have within your own credit union? Or could your member benefit from the Prime Alliance Power of One alliance that offers them a whole industry’s influence in the products, pricing and advisory services from which they could choose?
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