Will Your Credit Union Be Like Netflix?

Numerous companies that did not adjust to the changes in their industries are no longer with us. Kodak, Borders and Blockbuster come to mind. In hindsight, the disruption to their business model was obvious, yet they did not act in time. It is human nature to be in denial when dramatic change is required, but change is often required to survive.

In contrast, Netflix changed from a DVD delivery model to an online streaming model and the company has flourished. Will your credit union be like Netflix, ready to make the key changes needed to flourish going forward?

In the 1930s, consumers had very limited financial services choices. Back then, credit unions were the marketplace disruptors. They were located nearby, service oriented and provided reasonably priced services to common folks through a collaborative model. Today hundreds of financial institutions and other financial service providers are just a click away.

Many competitors are convenient and provide superior customer service at low cost. Credit unions’ Internet-only competitors do not have the costs of brick and mortar and extensive regulations. Through the use of big data, these competitors often know more about members than do the credit unions to which they belong. More and more members demand fintech connections and delivery systems. They want a mortgage approval in 10 minutes and a car loan within one. Can you succeed in this marketplace?

An effective choice that is already in the DNA of credit unions is collaboration. By forming credit union service organizations, many credit unions have fostered collaborations that created new revenue sources from alternative financial products, dramatically reduced costs, increased the expertise available to them and inspired innovative solutions to their problems. Credit unions’ inability to create significant spreads in net interest margins in today’s world is of great concern. CUSOs generate much needed net income for credit unions. Many credit union leaders know this, but are reluctant to change or are delaying change. That is a serious error and will likely lead to pressures to merge that may be hard to resist. The time to change is when a credit union is financially healthy and has options.

How do you begin to explore the benefits of collaboration? First decide what is open to collaboration. At the very least, it is every service that does not interact with the members, but even some of those services can be candidates for collaboration. Then network. Find out who is doing what. Make a list of your challenges and strengths. Talk to credit unions that are collaborating. Talk to the people who know this world, such as the folks at Callahan and Associates and the National Association of Credit Union Service Organizations.

Credit unions themselves must change to leverage the revised business model. For example, credit unions must agree on common forms, procedures and policies to successfully collaborate on operations. They must also adjust internal staff to match their talents to the requirements of a collaboration. I have two final thoughts to guide you. The first is that collaboration is hard work and needs constant adjustments to fulfill the goals of the credit union owners, but it is worth the effort when done well. Second, work with people you trust and align with temperamentally and philosophically. The CEOs of credit unions that collaborate have to connect on a personal level. Then the CEOs have the job of aligning the staff and board to the revised business model. Credit unions jointly face significant challenges. Those who change in time will survive. Will your credit union be like Blockbuster or Netflix?

Guy A. Messick is general counsel of NACUSO and a partner in Messick & Laurer, Media, Pa.