The English poet T.S. Eliot may have said it best: “The end
of all our exploring will be to arrive where we started, and to
know the place for the first time.” Members are bringing funds
to credit unions in ever-increasing amounts. For the 10 years from
1992 to 2001, the annual growth of insured credit union savings
was 7.07%. During the past 21 months the rate has been over 15%.
Most of these funds are from existing members — new member
growth during this time has only been 3%.
Why is this occurring? What does this mean for credit union strategy?
Flight to Reality
While the newspapers focus on the excessive expenses and self-dealing
of corporate CEOs, it is well to remember that many on Main Street
America were also enthralled by dreams of easy and ever-increasing
wealth. Recent college graduates working at dotcoms talked about
being millionaires, and working couples in their middle years were
exploring early retirement and living off their 401(K) nest eggs.
Consumers were looking for the latest double-digit growth mutual
fund and financial sales people were happy to oblige this belief
in quick success.
Now, as the stock market continues its third year of negative returns,
balance is returning to people’s expectations about investing.
Consumers are reassessing their risk tolerance and revisiting credit
union options. The result is a continuing unexpected — in most
cases unplanned, and in a few instances, unwanted — inflow
As members bring their savings home to the credit union, is there
a larger opportunity than just more funds?
Seeing Value More Clearly
“Trees don’t grow to the sky” is the phrase often
used to caution consumers that stocks go up and down in value. The
message is not only about a fund or the stock market. It is a broader
realization that value entails risk, reward, fees and reliability
that is a cycle of events, not a straight-line outcome. The cooperative
model may build wealth more slowly than some other corporate entities,
but because credit unions are member-owned, there is only one group
benefiting from success — the user owners.
Can this value be demonstrated more clearly now that members may
be more open to looking at their credit union relationships?
I believe this is a timely opportunity, because in many ways credit
unions — traditionally not in the public eye and owing to their
evolution over the past decade — are a secret waiting to be
Local and Networked Value
The first level of benefits is what members can receive —
in dividends or dollars saved — from their credit union. To
communicate this may mean paying more than a credit union has to
pay for savings to demonstrate that cooperatives meld both market
requirements and member needs. This is the time to take back some
of the $3 trillion in money market mutual funds, which merely pass
through market rates and add very little value for consumers. Now
money market mutual funds average 1.50% or less and most credit
unions can afford to pay 2.0% on similar accounts. Sharing the benefit
The same philosophy could be used for selected loan promotions or
other bundled pricing options to emphasize the cooperative value-creating
But the biggest innovation and level of benefit, and the one most
often overlooked, has been the creation of “networked value,”
primarily in the form of convenient and low-cost access to credit
union products through national cooperatives.
Today any credit union that belongs to Co-op Network offers 12,813
surcharge-free ATMS in 49 states to their cardholders. No other
financial institution can match this network.
Another example of convenience is the CUDL program, which offers
“credit union value and dealer convenience.” This network
of 1,578 dealers and 216 credit unions in nine states gives members
the credit union’s preferred loan rates with the ease of closing
the loan at the point of sale – the dealer. Other networks
offer this value in smaller areas, but the gain is the same, low
credit union rates and time saved in the transaction.
Another emerging network is the shared service centers, which now
offer more than 780 walk-in branches for deposits and withdrawals.
As local credit union networks integrate through technology, there
will soon be a physical credit union presence in every state and
several foreign countries.
More of these CUSOs are in development in areas such as mortgage
lending, loan participations, tax preparation, and broker dealer
For the credit unions today that belong to these networks, their
“points of presence” far exceed that of any other financial
Don’t Overlook the Internet
Credit unions have embraced the Internet as a full customer service
channel. In many instances, credit unions offer more complete self-service
solutions than any other organization—and continue to deploy
This evolution is shown in the concept slide below from DigitalMailer,
a CUSO that helps credit unions manage their messages for members