Does size really matter?

We are fortunate to work with credit unions of all shapes and sizes. At YCUP, we collaborate with smaller credit unions that are vibrant, growing, and very relevant. We also interact with smaller credit unions that are not thriving and desperately trying to find a viable way forward. Similarly, we work with larger credit unions in both categories: functional and high performing, and dysfunctional, siloed organizations limited from their fuller potential. When it comes to organizational dysfunction, size doesn’t matter. But leadership and culture do. Regardless of a credit union’s size, great leaders find opportunities and develop and nurture a culture where their teams willingly (passionately) join them in the pursuit of great opportunities that result in vitality and relevance.

We’re all small

As of March 31, 2019, CUNA’s National Profile Reports reflect combined credit union assets totaling $1.5 Trillion. Those are the assets of all 5,500 credit unions combined. Only 318 (6 percent) of credit unions have assets of more than $1 billion, and 3,816 (70 percent) have less than $100 million. Compare that to the size of JPMorgan Chase Bank at $2.1 Trillion, Bank of America’s $1.8 Trillion, and Wells Fargo Bank at $1.7 Trillion. Credit union leaders who are overly confident in the asset size of their credit unions need to consider that when it comes to competing for the consumer’s wallet, these behemoths are the financial institutions setting the pace for delivery channels and technology. In 2018 alone, Chase invested approximately $11 billion in technology. I wonder how any of us can “keep up” with these monoliths. Large credit unions should think less about how large they are in comparison to other credit unions and focus on whether they have the culture that will support the innovation and adaptability required to remain relevant in their markets. Smaller credit unions need to worry less about the large credit union they compete with in their market and focus on how they can find a niche where they can compete and win. Believe me when I say there are niche opportunities in every community.

Having said that…

I do believe all credit unions, regardless of size, should consistently grow at a safe level to ensure they can generate the earnings needed to compete in their niche market, keep up (as quickly as they can) with technology, and recruit and retain the human resources needed for today and tomorrow. When I look ahead five years and longer, I see significant investment coming for credit unions of all sizes, especially for technology and talent. While we’re not-for-profit cooperatives, strong earnings will be needed in the future to differentiate and effectively compete.

There is a race to scale, especially among credit unions in the $500M-$1B asset range – usually among credit unions located in very competitive markets. I know we’re not supposed to talk about credit unions competing, but it’s a reality whenever you have a Field of Membership overlap among large community credit unions. The larger the credit union, the more likely it is to have a mass target market similar to the other credit unions in the area. It’s generally different competing with banks with balance sheets less dominated with consumer loans. When it comes to consumer loans, it’s usually credit union versus credit union. When there is very little differentiation among competitors, size does matter, and mid-sized credit unions want scale to compete (and win).

Why it matters

There are some enormous egos in credit union land. I believe some of these egos are overly inflated by the idea that they are big fish in small ponds. We need to remember that credit unions are all small fish swimming in a very large ocean. Rather than focusing on asset size, let’s focus on how effective we are as leaders in creating the best cultures, regardless of credit union size, and supporting relevance, member impact, community service, growth, revenue, and becoming clearly different and better organizations. Finally, let’s remember the sixth international cooperative principle of “cooperation among cooperatives” and find ways to collaborate and work better together. Now that’s big!