Imagining the Future State of the Industry

We have entered an era in which nearly anyone can join a credit union, says Ed Callahan and Bucky Sebastian. This new paradigm is going to affect us in ways we have not yet imagined.


We have entered an era in which just about any American can join a credit union. This is a radical change from the era that stretched from the Depression to the 21 st century, when we were mostly focused on limited fields of membership. We looked inward; now we increasingly look outward.

How is this new paradigm going to affect us and how we build credit unions in the future?

Some Possible Scenarios

Will the trend be towards fewer larger credit unions for all Americans? We don’t think so. The tradition of credit union independence, competition, and local roots would likely prevent such a development.

Moreover, an industry composed of a few multi-billion dollar credit unions would focus the criticism of bankers. In addition, it would be the equivalent of putting all of one’s eggs in one basket; if one big one went down, the movement would go with it.

Another future might look like vast networks of ATM cooperatives or shared branching associations that persons could join and thereby gain access to multiple credit unions.

Another might be a tug toward an all-electronic institution. ING Direct has already plunged into this paradigm and been exceptionally successful. In fact, it has been successful where many observers thought success was not possible. ING grows over $1 billion in deposits a month. This is not, incidentally, a success unattainable by credit unions. If they can do it, we could, too, and do better owing to the fact that they are for-profit (have to pay shareholders) and we are not-for-profit.

The Lure of Companies Outside the System

Another future might show increasing cooperation between credit unions on the one hand and private associations or companies on the other. Here are a couple of examples:

State Farm credit unions are merging into one large State Farm credit union. Where only a couple of years ago there were 23 State Farm credit unions and then 13, now there will be one: a $3 billion credit union headquartered in Bloomington, Illinois which will serve State Farm employees.

Although we have heard no evidence of the following, this very large credit union might work with its sponsor company State Farm to offer membership not just to State Farm employees but also to their agents and clients. State Farm would run its insurance business separately but offer the credit union as a value-added benefit.

We have already seen how AARP attempted to create a credit union with national scope. The notion was a good one. But the opportunity was lost on account of AARP really seeming merely to want an entrée into the credit card market.

We wouldn’t be surprised if other nationally-oriented organizations pick up the ball. Consider an association like AAA. They could offer a low-cost financial services credit union as a value-added incentive, another way to retain members paying their annual fees, buying their maps and so forth.

The reason none of these has happened yet, at least successfully, is that none has understood the credit union philosophy and been willing to leave the credit union alone. Too much interference or distortion – the AARP example – has worked to sink the credit union effort.

Nevertheless developments along these lines may be in our futures.

Seas of New Possibilities

If we are now in an era in which virtually any American has an opportunity to join a credit union, we can be fairly sure that we have not yet come close to envisioning all the possible success formulas for credit union growth and development. We are sailing on new seas of scale and scope, of business models and opportunities, and of possible partners.

We are out of the box. So we had better start thinking that way, too.




April 10, 2006


  • Every day we look more and more like a bank. Soon the majority of our members will be "bank oriented" customers. If you believe in democracy, then we will all convert to that which the the future majority will support and feel comfortable with, a bank. We need regulatory relief but if we get what we want we will look just like a bank. The future is clear. The congress will want one set of regulations for all and with it the congress will increase tax revenues. The congress loves tax revenues.
  • The reason ING is so successful is that they cater to the consumer who believes financial services are a commodity. Credit unions will get killed if they try to compete with banks on that playing field.