Explaining the Credit Union Difference in One Taxi Ride

A while back I caught a cab at the New Orleans airport and gave the driver the name of the hotel where I was headed for the CUNA CFO Council annual meeting. A series of storms had just dumped inches of rain on the Crescent City, and as we drove past already flooded neighborhoods in the city that never gets a break, the driver asked me why I was in town.

There are any number of risks we take in any given day and, frankly, chatting it up with a cab driver is among the more significant. I took my chances and shared that I was in town for a credit union conference. And then, in one of those moments that never actually happen in life and only appear in some corny, league-produced video, he asked quite sincerely, “I was wondering if you could tell me the difference between a bank and a credit union?”

I share the story because his question was so eloquently simple. It demanded a simple answer, and yet as I’ve discussed in several presentations at Washington League events over the year, credit unions typically respond with explanations that are anything but. The mantra for effective marketing may be “Keep It Simple, Stupid,” but for most CUs it’s KISS-off. Committees get formed. A subcommittee produces a 33-slide PowerPoint. And the explanation that should be all of 15 seconds is suddenly the preamble to the Constitution, not including all the caveats and asterisks.

The bare essence of how a credit union works and benefits the consumer is basic and clear. Think of how seldom this is the case when someone is trying to sell something. It’s when any message gets murky that you should start raising the red flag with one hand and holding on to your wallet with the other. Think bank credit card disclosure forms. Or the IRS code.

There is no greater example of that right now than the Wall Street meltdown. There are any number of reasons cited for the crash, and the causes of the current recession will fill all-but-indecipherable academic and Federal Reserve studies for decades to come.

In “13 Bankers: The Wall Street Takeover and the Next Financial Meltdown,” the authors, Simon Johnson and James Kwak, dedicate chapters to the Wall Street whizzes’ quantitative analyses, mathematical models, complicated derivatives and credit default swaps. On its surface its all very complex and opaque, and yet as the authors make clear, pull back the curtain and it’s elementary and, except for the size of the numbers involved, what was going on in the Big Apple’s office towers was not much different from the scammers on the streets of New York preying on tourists with a shell game.  You think you know what you’re seeing, but in the end there’s no pea beneath the cup.

The market, especially in mortgages, crashed, because few were willing to admit they didn’t understand how certain investments worked and continued to pay such returns. It takes courage to admit, “I don’t get it,” including at a corporate or natural-person credit union board meeting.

The best things in life may indeed be free, but a close second is “easy to understand.” When it comes to an investment decision, or explaining how a credit union is different from a bank, perhaps the new standard should be the Taxi Test: Can I explain it to a cabdriver from the backseat in a way that can be understood before the fare is up?

Frank J. Diekmann is Publisher of Credit Union Journal and can be reached at fdiekmann@cujournal.com.

Frank Diekmann will facilitate the General Session Panel Perspective: Post Crash – Who’s in Charge of the Financial System, at the 2010 Convention and Annual Business Meeting. To register or for more information visit: www.waleague.org/convention

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