What’s the Greatest Threat to Your Credit Union?

December 10, 2012 at 7:28 am 3 comments

imagesCAMHINUUTo me, the two greatest threats to the credit union business model are the virtual bank and the inevitable competition we will face as big-box retailers offer more and more banking services.  However, judging by the number of credit unions that continue to build branches, my view is clearly in the minority.  So how do we identify and react to those threats that represent a disruption to our business model and, once we do, how do we react?  That’s the subject of an outstanding piece (subscription required) in the latest edition of the Harvard Business Review.  I would suggest not only reading the article but using the framework outlined by the authors as a starting point for a meeting of your top staff and maybe even the board.

The first step outlined by the authors is to distinguish between traditional competition and a truly game changing approach to the industry’s business.  For example, a new bank down the street might force you to make some changes but not the type that would make you rethink your business model.  In contrast, if people like Brett King are right, if you’re not responding to the increasing use of virtual banking services by your competition, then you are standing by while your traditional approach to financial services becomes obsolete.  Once you determine that a competitor’s business model truly is disruptive, then what steps should you take?

  • Identify the strengths of your disruptor’s business.  For example, a virtual bank has little of the traditional overhead that a regular branch model has.  Reduced staff and office overhead translates into the ability to provide financial services at a cheaper cost to consumers.
  • Identify your credit union’s relative advantages.  People like the comfort of knowing that there’s a branch they can walk into and actually talk to a live person.  It seems to me that this is particularly true for more important and complicated transactions such a mortgage loans.  Also, people love credit unions in an era when they despise most other financial institutions.  Don’t underestimate the importance of the brand.  Today, Apple is one of the richest companies in the world, but it is only its brand that kept it alive for more than a decade.
  • Evaluate the conditions that would help or hinder the disruptor from co-opting the credit union’s current advantages in the future.  To me this is the step in the analysis that separates the “branch is dead” crowd from the “haven’t we heard this before?” crowd.  On my side of the argument, the importance of the branch to consumers is waning, particularly for a younger generation of members used to using technology.  Secondly, people love the credit union brand, but do they love it so much that they are going to pay higher cost for services for the right to be a member?

NCUA Announces New Region I Director

Larry Blankenberger has been named the new Region I Director, who has jurisdiction over New York, replacing Mark Treichel, who is moving up to NCUA Executive Director.  Blankenberger currently serves as the Associate Regional Director for Programs for NCUA’s Region IV in Austin, TX.  He assumes his new duties January 7, 2013.  I’m sure I speak for the whole Association when I say we look forward to working with him.

Entry filed under: General, Regulatory. Tags: , , , , , .

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3 Comments Add your own

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  • […] brings me to my last point. As I explained in this blog from several years ago, one suggested approach to this dilemma is for your credit union to […]


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Authored By:

Henry Meier, Esq., General Counsel, New York Credit Union Association.

The views Henry expresses are Henry’s alone and do not necessarily reflect the views of the Association.

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