What keeps me up at night is the proliferation of bank and non-bank competitors for the core business of credit unions, especially for payments and loans and the use of big data to source new business. You know the story. Apple, Google, Paypal, Prosper, Lending Tree, Walmart, Amazon, etc. all want a part of the financial services market and they have the financial tools and market intelligence to beat credit unions at their own game. If we do not quickly and aggressively respond to this growing threat, credit unions will become marginalized. There are CUSOs out there that are responding.
OnApproach, Denali Analytics, Isthmian, CU Wallet, Q-Cash and others are working to find solutions to the challenges of competing with the deep pocketed fin tech folks. Our pace of adoption must increase if credit unions are to continue to keep and grow their membership. I think that forward thinking credit unions understand the threat and want to respond. My hope is that the urgency level will increase in 2016.
The new year is upon us now and what will be the drivers of the credit union world in 2016? I am afraid it continues to be a call to respond to our rapidly changing world. This CU Times article by Kirk Kordeleski sums up the challenges credit union face to the rising number of competitors for the core business of credit unions: payments, loans and deposits. It sort of makes you long for the good old days when there were only banks to worry about. It is as if we are in a race for our members’ business and as we run the race around the track to capture that business there are people jumping out of the stands everywhere to run against us only they have skateboards, roller skates and hover boards. Members expect to do business in several types of delivery channels, including self-directed automated Internet channels and unless credit unions respond, credit unions will be left in the dust.
The good news is that we have solid member relationships and time to act, but act we must. There is also good news in that there are opportunities. In the Wall Street Journal there was an article published on November 27, 2015 which cites evidence that the big banks are pulling back on small business loans. The ten largest banks lent $44.7 billion to small businesses in 2014 down 38% from a peak of $72.5 billion in 2006. In the same period nonbanks have increased their market share to 26% from 10%. There is also a Filene White Paper by John A. Largay, Professor at the McDonough School of Business, Georgetown University which confirms that there are significant opportunities for credit unions to serve small businesses. The cost of making and servicing loans to small businesses kept the bank competition down but that issue is not a barrier to the fin tech lenders. In fact this issue is a competitive advantage for them unless credit unions act to create viable technology solutions that are equally competitive.
So let’s get serious this year about making the changes we know we have to make to stay competitive. Let’s explore the opportunities the CUSO model gives us.
The challenge for credit union leaders who want to explore collaborative partnerships and CUSOs seems to be twofold: how to find and connect with partners who have similar challenges, needs and goals; and, how to evaluate their potential collaborations and develop the data and business plans and get them in front of the decision makers in a timely way, so they know what the advantages are, the timeline and what they will need to invest.
NACUSO is known for the Next Big Idea Competition, so why not build on that creative energy and spirit by bringing people together for a facilitated session to generate some real opportunities to collaborate with other CUSOs and credit unions? So this year, we present our new Partner Connection Sessions! NACUSO will hold two Partner Connection Sessions during the 2016 NACUSO Network Conference to give attendees an opportunity to connect with like-minded credit unions and CUSOs to develop collaboration opportunities that generate net income, achieve scale, share or mitigate risk and/or take advantage of new opportunities.
What Keeps Guy Messick Up At Night? - NACUSO
ABOUT THE AUTHOR: Guy Messick has provided strategic planning and legal consultation services to hundreds of credit unions and credit union service organizations nationwide. Since 1987, he has served as General Counsel to NACUSO where he also serves as liaison with the National Credit Union Administration.