Article first appeared in the March 2001 issue of the Callahan
In this issue of the Callahan Report we present a good deal of information
on the Top 100 credit unions. Certainly these large credit unions
have their virtues and they serve a good many people very well.
But in some
areas of the country a good deal of detective work is not needed
to discover credit unions that not only have near-monopoly territorial
operations but also relish that notion and push even more to monopolistic
or near-monopolies are achieved when a very large credit union dominates
an area with branches and does not agree to use them cooperatively
with other credit unions. The effect is not only to retain members
because those members have no choice, but also to draw members away
from rival credit unions because those members cannot find the service
they need from their original credit unions in the territory of
the dominant ones. Thus any quasi-monopolistic operation tends to
become more monopolistic over time.
It may be futile
harping on big uncooperative credit unions to drop their territorial
defenses and open their facilities to others. You may hear lines
of reasoning that sound almost acceptable: ''We have to recover
our capital investments;'' ''If we don't watch out, we'll
be subsidizing the smaller credit unions;'' ''We can't cooperate
with you if it means that we'll be losing money;'' and so forth.
hard for an outfit with a cushy setup to let it slip. Rather, the
instinct is to defend the territory, to do even better the next
year than the last.
So the answer may be to forget persuasion and forge ahead with practicality.
Which means doing what it takes to run with the big guys. And that
means cooperating with other like-sized credit unions to form networks
that can compete with the networks of the larger players.
This kind of
model is not unknown in the economic world. In fact, it is rather
common. Think back to the time of the dominance of A&P grocery
stores. They were very nearly monopolistic. Independent grocers
were threatened with extinction.
Instead they worked to cooperate and to form the Independent Grocers'
Association. The little stores became IGA stores. They cooperated
in their purchasing, shipping and whatever else it took to form
a cooperative organization that could compete with A&P. They
formed a cooperative structure that allowed them to survive and
then thrive. Without doing so, each would have gone out of business.
Yet each retained a good measure of its original independence.
region with branches is only one way a credit union can march toward
monopoly. Another is dominating with ATMs. Smaller credit unions
can get back in the game by cooperating with the branches and their
ATMs to make comparable branching and ATM networks. But they need
not stop there; indeed they should not. They can cooperate in combining
their information technologies, back-office operations, call centers,
accounting and more. The sky's the limit and by exercising imagination
it is not difficult to see a cooperative system that is as big as
or bigger than any regionally dominant credit union. But you have
to have the right attitude; you have to trust that you can join
with others and that as a result all will prosper.
Note that I
am not talking about merging. I'm talking about cooperating. By
cooperating, a bantamweight can deliver the punch of a heavyweight.
By cooperating, competition can enter some markets otherwise deprived
of it. With competition comes increased attention to serving members.
Thus members, no matter to which credit union they belong, will
benefit, and that is all to the good.