Our team works with a lot of small and medium-sized credit unions. Our focus is usually on growth and revenue-related strategies, and if you’ve checked your CUNA’s U.S. Credit Union Profile Report, you know that small and mid-sized credit unions are having a more difficult time with growth and revenue.
Identifying and evaluating obstacles is part of the strategic-planning process. During the process, it’s easy to get caught up in all that must be done with limited resources, and challenges that have no clear resolution.
No question, it’s hard to turn around negative or flat loan- or membership-growth trends. It’s hard to keep up with compliance, and to recruit younger (and more engaged) board members. It’s hard to identify whom tomorrow’s new member will be, and to anticipate what their needs and challenges might be. It’s hard to keep up with ever-changing technology, fraud, and it’s hard to compete with thousands of fintech companies, large community credit unions, and the banks on every corner.
It’s not uncommon to hear: “we’re too small to do that; we just don’t have the resources,” or “we’ve tried that and it won’t work,” or many other variations of the same “it’s hard” comments. My response when I get these comments is “okay, what’s your alternative?”
What’s your alternative?
The credit union business model only works long-term for successful lenders. I believe credit union relevance is measured by a credit union’s ability to consistently generate loans (organic is preferred). Shrinking loan-to-share ratios and tepid net loan growth are warnings signs that can’t be taken for granted. Credit unions that aren’t successful in consistent loan growth must change something up to get there. Sometimes it requires a complete overhaul of the lending mindset, policies, practices, people, and target market. The only long-term option for credit unions that don’t know how to lend is merger.
Volunteer board members who are democratically elected by the membership are the hallmark of the credit union movement. This model is based on volunteers who closely reflect the needs of the membership (and potential membership). Credit unions cease to be credit unions without board members. Long-term viability depends on credit unions’ ability to attract and retain volunteers. What’s the alternative when all your older volunteers have passed or retired? You must have a board, or you need to merge.
It’s Business 101: the long-term survival of any business depends on its ability to consistently attract new customers. There are far too many credit unions out there with negative or weak membership growth trends. True, overall membership is up, but overall net membership growth is negative for all credit unions with less than $50 million in assets. I don’t have enough space in this article to address all the challenges smaller credit unions have with membership growth. This truly is hard. However, I can usually find new potential target markets for credit unions that need and want member growth. There are lots of opportunities out there, but fewer credit union leaders willing to make the changes and investment needed to do it. Long-term negative (or flat) membership growth does not end well (yep, you guessed it: merger).
For each of the “can’ts” that I hear, I usually know of at least one credit union best practice that figured out how to overcome the obstacle. It wasn’t easy for them either; there may have been many setbacks along the way – but they were committed and they got there. They wanted it badly enough, and now they’re thriving.
Why it matters
For those of you who know me, you know that I’m not pro-merger. I work with too many small and mid-sized credit unions that are high performing and remain very relevant. They have a bright and very long future ahead of them. I believe it’s possible for most of the credit-union leaders out there who are barely treading water to find workable alternatives for their credit unions. It’s not for the faint of heart, but again, if you want it bad enough, it’s possible.
Truth is, we can accomplish most of what we set our mind to. If we want it badly enough, we usually find a way to get there. I believe that credit unions matter, big and small. Our ability to achieve our long-term vision absolutely depends on our ability to overcome obstacles and do hard things.
Because if we don’t, what’s the alternative?