The Value of Realism

Credit unions are more innovative than ever, yet 62% saw shares contract in the past 12 months. It’s time for a “Credit Union Study Group.”


One of the top news stories of the past week was the release of the Iraq Study Group’s report.  While its judgments on our effectiveness at stabilizing the country were disheartening, most commentators lauded the report for its honest appraisals of options and the ambitious ideas proffered for regaining a stable footing.  David Ignatius of the Washington Post wrote that the Study Group’s pragmatic search for solutions sends an important message that we’ve turned a page on Iraq. 

Congress’s basic premise in forming the Study Group was that seasoned thinkers with different perspectives have the potential to identify breakthrough ways of approaching challenges.  We’re seeing this premise in action within the credit union system.

Take, for example, mortgage lending.  Credit unions are only about 2% of the home lending market.  And even though about one out of ever four Americans is a credit union member, fewer than 10% of homeowners got their mortgage from their credit union.  Home ownership is a fundamental aspiration and a core means of growing personal financial stability, and credit unions, while effective in many cases individually, have unfulfilled collective potential. 

Prime Alliance, the phenomenally successful mortgage CUSO, initiated the formation of the National Credit Union Housing RoundTable so that credit unions could figure out how to increase their home lending market share from 2% to 10%.  As smart and knowledgeable as Prime Alliance is about home lending, they believed that the answer wouldn’t come from a single organization but from the challenges offered by multiple perspectives in different realms of the credit system.  Today, the RoundTable includes credit unions, CUSOs, corporates, mortgage-related entities like Fannie Mae, and a realty firm (as well as Callahan and Associates).

A Model for Other Initiatives?
Are there other ways to apply the power of multiple perspectives to credit union challenges?  Could the credit union system benefit from a commission created specifically to assess our own future and to lay out a range of options for regaining momentum across the board?

This question doesn’t slight the innovative, exciting and meaningful things happening in the credit union system today.  Chip Filson, the president of Callahan and Associates, recently coined the phrase “43 million points of difference” to communicate the impact and the value that credit unions contribute to the American public in the form of 43 million loans that facilitate home ownership, transportation to a job, education, and other of life’s aspirations.

Yet despite the many successes, too many credit unions are faltering.  Smaller credit unions have typically grown more slowly than larger credit unions, but the trend has expanded and accelerated in the past three years to the point that 62% of all credit unions lost shares in the last 12 months—up from 16% three years ago. 

A “Credit Union Growth Study Group” that incorporates a broad range of perspectives could help get beyond the shorthand slow-growth explanations we’ve grown accustomed to—bank competition, diluted identity, Gen Y, the yield curve and so on.  More important than diagnosis, a study group incorporating perspectives from both inside and outside the industry might generate realistic paths that reignite both growth and individuals’ understanding of the credit union difference.

Successes at the individual credit union level and in certain lines of business should not fully eclipse the growth challenge and the need to make choices about our collective future.  Rather, the system’s many successes make it possible for us to look in a clear-eyed way at the challenges, because we have the capabilities, illustrated by our successes, to affect future outcomes.  What do you think?  Whose perspective would you value?




Dec. 11, 2006


  • Great article. I believe that the credit union industry, particularly the smaller credit unions within the industry are under alot of pressure due to the increasing cost of technology and the cost of offering services. Instead of evolving into banks and relying on feeing members to solve problems (witness the overdraft protection craze), we need to work together to create a cooperative within the industry to keep costs down. The cost of offering bill pay is way out of line with what it should be. The ACH network should be a model that we strive for. How is it that this network can process a transaction and only charge a fraction of a penny? Why aren't the people that run this network looking to make more money, is there something wrong with these people that they are not looking to make huge profits at the expense of their cusomers? I love the way the ACH network operates and thank god that it is not purely motivated by profit. I also think that the only hope for our industry is for the Corporate Credit Unions or some service organization within the industry to try to mimic the ACH network in their pricing structure and philosophy. For instance, they can provide a bill pay service that doesn't overcharge their cusomers. The industry needs to get together and not try to make a profit from each other,while offering superior customer service. Some of the CUSOs that were created were supposedly started with this in mind, however, profit for the majority CUSO owners and big salaries for the guys at the top were the primary goals while customer service seemed to be a distant secondary goal. I think a task force needs to look at the collective future of the industry and the profit driven motive needs to be removed from the solution set as it is not a solution but is really part of the problem as I see it. My opinion only Rich Putrelo Controller Pittsford FCU
    Rich Putrelo