The Credit Union Alternative to Consolidation

Some see mergers as the way to gain greater scale, reach and efficiency. However, it is not clear that size brings greater efficiencies in credit unions. Credit unions can instead look to gain scale effectiveness through collaboration.


Consolidation is a continuing trend in credit unions. Some see mergers as the way to gain greater scale, reach and efficiency. In most cases consolidation involves smaller credit unions merging into larger credit unions to gain new capabilities and services for their members. However, it is not clear that size brings greater efficiencies in credit unions. Operating expenses per member are actually higher in billion dollar credit unions ($297) than in credit unions less than $10 million in assets ($153). What is more evident is scale effectiveness, or the ability for larger credit unions to develop deeper member relationships. This is seen in revenue per member, which is $777 in billion dollar credit unions versus $252 in credit unions less than $10 million in assets.

These numbers indicate that bringing more opportunities to smaller credit unions could be the key to a credit union market breakthrough. To accomplish this, credit unions will need to continue to build on their greatest competitive advantage – cooperation. Credit unions already have nationwide CUSOs for ATM and branch networks as well as indirect auto, mortgage and credit card lending that leverage the strengths of the credit union community as a whole while retaining local ties to members. Through these cooperative networks, credit unions are able to extend their reach and enhance the benefits of membership regardless of the size of the institution.

Local Networks, National Resources

In recent years, credit unions have realized the benefits of linking multiple networks together. National CUSOs such as CUDL and Prime Alliance have worked with local indirect auto and mortgage lending CUSOs, respectively, to gain scale without limiting the ability of individual credit unions to pursue their own market needs. All participants in these extended networks ultimately benefit from ongoing innovations on both national and local levels.

One example of this is myCUmortgage, a wholly-owned CUSO of Wright-Patt Credit Union ($1.2B, Fairborn, OH). Wright-Patt partnered with Prime Alliance for their mortgage lending platform but looked to extend its investment to other Ohio credit unions. As the largest credit union in the state, Wright-Patt saw an opportunity to benefit credit unions that might not otherwise be able to offer a full service mortgage lending program to their members while lowering their own costs by spreading out their investment across a higher volume of mortgages.

Today, myCUmortgage works with 49 credit unions with an average asset size of $61 million, including some as small as $5 million. These credit unions are now able to help members with the most significant investment they will likely make – their home – and be positioned as a lifelong financial partner. The collaboration among Prime Alliance credit unions benefited Wright-Patt, and in turn the myCUmortgage credit unions, creating a multiplier effect across these investments.




Nov. 12, 2007


  • Excellent article. Smaller credit unions seem to be getting sold on thinking if they are not growing, they are doomed. To the contrary. If they are growing in multiple services and serving their niche, they are demonstrating the true force of credit unions. Membership growth should than be secondary. Asset growth should be the last priority - in my humble opinion :)