Credit union executives have always understood the immense power the cooperative business model offers. By sharing resources and joining together to form leagues, credit unions increase their share of the financial market and amplify their voices to help shape state and federal policies. State credit union leagues, for example, form a united front for their member institutions, operating under the assumptions that a single, strong, organized voice will be heard over many smaller ones.
Pat Jury is the CEO of the Iowa Credit Union League, a traditional trade association that assists its member credit unions with advocacy, regulatory compliance, professional education, and public relations. Jury spoke with Callahan & Associates about how credit unions benefit when they share ideas and resources.
Why is cooperation so important between credit unions?
Pat Jury: We always thought if we have to rely on the banking community for our products and services, we probably are at a disadvantage.
There is a lot more collaborative activity occurring in the credit union movement — between credit unions and between leagues. We have a variety of business units and there is room in the market for more. For us to be successful over time, we need to partner with like-minded organizations to provide products and services within the credit union marketplace. As a movement we need a bigger footprint in the marketplace than we have, and I think that is going to require collaborative initiatives.
Out of the 122 credit unions in the state, 117 are members of the Iowa Credit Union League.
Leagues organize and advocate policy that is beneficial to credit unions and for representatives that are friends to the movement. In the 2012 Iowa elections, nearly 90% of Iowa credit union allies won their race.
I’m pro-cooperative model, it allows us to do good by doing well. If we compare that to for-profit industries, there is so much more pressure on publicly traded companies to operate in the moment, to be concerned about the next quarterly calls, and I think that puts pressure on those organizations to make short-sighted decisions. We avoid that in the cooperative movement. One thing that’s significant, when you have that short-term decision-making, you overlook how much you influence your employees, how much you influence your community, and how much you influence the economy. I think that’s a challenge with for-profit companies.
There is a bright future for the cooperative model as an alternative business strategy even for for-profit institutions. It is consistent with this sense of community consumers have right now where they want a more egalitarian approach to financial services. Consumers don’t want to feel abused by predatory lenders, and they don’t want to feel awkward with leaders of their organizations making tens of millions of dollars.
How has the role of credit union leagues evolved since the 2007 financial crisis?
PJ: Credit union leagues want to help improve the financial lives of consumers. That foundation has remained consistent and solid.
I’m not sure whether the financial crisis is actually a changing point for leagues. Their core services before 2007 were government affairs and regulatory compliance, and that continued through the recession.
But I think leagues were more independent prior to the recession than post-recession. We’re seeing more leagues collaborate, consolidate, and merge together. There has also been a transition to having smaller or more strategic boards in credit unions. I don’t know if that has to do with the recession or the fact that there are fewer credit unions in the marketplace. During the recession, many credit unions merged, and I think we’re going to see fewer and larger credit unions. So if you once had 400 credit unions and a board of 20, do you still need a board of 20 if you have 100 credit unions?
IOWA CREDIT UNION LEAGUE'S CALLAHAN PRODUCTS:
Leagues may be serving fewer and larger credit unions than they did in the past, so they need to understand that they cannot be the same thing to every credit union in the future. There is a value proposition that they need to create with small-size credit unions, mid-size credit unions, and large-size credit unions, and it may not be the same project and service mix over time.
The recession created an environment of greater regulation. There are more expenses related to corporate stabilization, and credit unions have been mindful of this. These pressures create a new type of support that credit unions want from credit union leagues.
How do credit unions benefit from cooperation?
services that ICUL offers member credit unions:
The Members Group (TMG) payment processing company
TMG Financial Services, which purchases and manages credit card portfolios
Cooperative Consulting, which helps credit unions reach immigrant and emerging populations
PJ: Education used to be more of a core component of a dues-based organization historically. But, professional education is getting more competitive in the market place, so credit unions have more options and more places to go for education. With this you see leagues collaborating with CUNA or leagues collaborating with each other to reduce the expenses related to education while still providing a good product for their members.
The Iowa League has a partnership with CUNA in the administration of our education product. This partnership allows us to utilize the expertise of a larger organization while allowing us to deliver the product locally and maintain member value.
How does your league compare to other leagues?
PJ: We all have the same belief that, through our support to the credit union movement, we can help credit unions be vital, healthy, and competitive all in the spirit of improving the financial lives of individuals and the stability of our communities.
Each league, including Iowa, has developed over time within the context of the requirements of their members, the economic conditions of our states, and the competitive landscape.
We are comparable to other leagues in our foundation and commitment to our members.
One deviation from most leagues is we have individually branded companies offering specific product lines, which is somewhat different than traditional league service corporations. Many leagues, however, have also executed unique strategies consistent with their business requirements.
How is the Iowa Credit Union League fostering cooperation among member credit unions?
PJ: We want to understand where credit union’s are in pain and how we can help them. To do this, we want to create systems within our own organization where we can be nimble and we put really good strategic thinkers in place that allow us to be nimble and flexible on how we approach credit unions and the market.
Policy Works, which provides lobbying, government relations, public affairs, and regulatory compliance services to credit unions
What are the benefits to league-owned businesses?
PJ: Owning businesses does create other challenges including capital requirements, diversity of products and services, multiple governance structures, etc. Opportunities also arise including adding value to member and customer relationships, leveraging of resources, and more efficient use of capital.
Every league looks at how it can use its resources to create greater value in today’s environment. We now provide products from Callahan & Associates within the new structure, which has been well-received and beneficial.
Do you look to other leagues as an example for the Iowa League?
There are thriving and successful leagues that have great examples of dues-based and fee-based products and services. We examine both the best practices in the market as well as the contemporary needs of credit unions. Best practices do not have a direct relationship to the size or complexity of a league. To successfully be in business for decades, every league has found a value proposition that is appealing to its members. I have learned something from every league that I have worked with.
How do you see the role of credit union leagues evolving in the future?
PJ: We’re going to need to better understand consumer behavior ourselves. We serve credit unions and credit unions serve consumers, but it’s difficult to ask a consumer what they want in financial services. In the future we’re going to have to work more closely with credit unions to better understand consumer behavior.
Then there are all of these disruptive technologies coming out — person-to-person payment systems, companies like Dwolla or Prospera — and we need to be mindful of the businesses that we’re in so we can continue to effectively serve credit unions. We always have to make sure that we are learning from what’s happening in the marketplace and growing as an organization with respect to what consumers want. Consumers will ultimately dictate what is demanded of financial institutions or credit unions, and then credit unions are going to dictate what these leagues look like in the future. It’s really the credit unions’ needs that are at the heart of the system.
It’s not clear what credit unions will look like 20 years from now, and we need to be mindful how we stay relevant to this future orientation. To that end, we try to be mindful about future directional trends with traditional financials, consumer behavior, shadow banking, technology, and employment trends, among others. It might be a bit much to say we are innovative, yet we do try to be creative in how we approach the future.