Can Small Credit Unions Survive? CUNA White Paper Says Collaboration is Key

Credit unions must join forces to generate income, reduce expenses and expand the menu of products and services they offer if they hope to compete with larger financial institutions and keep their doors open, a new white paper from the CUNA CFO Council says.

When Troy Stang shared his vision for the future of the Northwest Credit Union Association in October, the organization’s president and CEO stressed the need to maximize collective action to deliver real, tangible value for credit unions and their members.

Now, a white paper from the CUNA CFO Council suggests that kind of collaboration may be crucial if smaller credit unions hope to avoid extinction.

“Sharing the Burden and the Success,” by Bryan Ochalla, contends that credit unions must join forces to generate income, reduce expenses and expand the menu of products and services they offer if they hope to compete with larger financial institutions and keep their doors open.

“It’s a matter of survival, and I don’t think that’s an understatement. I honestly believe that to the extent that we do or don’t do some of these things … it’s really going to have a reflection on whether the small, local credit union will be relevant or even survive in the future.”W. Kent Hartzler, president/CEO of Everence Federal Credit Union

“It’s a matter of survival, and I don’t think that’s an understatement,” W. Kent Hartzler, president and CEO of Pennsylvania-based Everence Federal Credit Union, tells Ochalla. “I honestly believe that to the extent that we do or don’t do some of these things … it’s really going to have a reflection on whether the small, local credit union will be relevant or even survive in the future.”

“These things,” Ochalla writes, include participating in shared-branching partnerships, launching or investing in CUSOs, and centralizing key back-office functions. He points to CO-OP Financial Services — an NWCUA partner through Strategic Link — as one example of how credit unions are already working together to achieve economies of scale.

“It’s all about providing access and convenience at an aggregated and competitive price that an individual credit union cannot achieve on its own,” says Kari Wilfong, CO-OP’s executive vice president and chief financial officer, “because without that kind of scale, the overhead alone can kill you.”

(Strategic Link, the NWCUA’s wholly-owned service corporation, works with CO-OP Financial Services, CUNA Mutual Group, CU Solutions Group and more than two dozen other business partners to evaluate emerging trends and create just that kind of scale. Those partnerships use the power of aggregation to provide the Association’s member credit unions with an array of competitively-priced products and discounted services — from insurance and member benefits to card services, lending and collections, operations and more.

“Having the ability to provide scale and efficiencies to all of our credit unions is a major goal for Strategic Link,” says Craig Reed, the NWCUA’s director of strategic partnerships. “Giving our smallest credit unions access to provide their members with the same technologies and conveniences of our largest credit unions is vital.”)

Ochalla, a former writer for the Credit Union Executives Society and now a freelancer based in Seattle, uses case studies to illustrate how other credit unions across the country hope to leverage partnerships and pool resources.

In one case study, Everence’s Hartzler and five other Mid-Atlantic credit union leaders are creating a centralized back office to handle functions such as the call center, cards (including EFT and share draft), collections, a common core-processing platform, compliance and vendor management. In another, Ohio HealthCare Federal Credit Union is taking the lead in what appears to combine a merger concept with a shared-services model to form the Healthcare Credit Union System. Under the innovative plan, individual credit unions with overlapping fields of membership would keep their individual identities and operations, but would combine assets and share back-office functions and expenses.

Alone, Ohio HealthCare is a $50-million credit union. But by working together, CEO Bill Butler tells Ochalla, “we could become a credit union of over $200 million in assets. Then we’ve got scale.”

Hartzler echoes that sentiment.

“We do better together,” he says.

 

Copies of “Sharing the Burden and the Success” and more than 300 other white papers are available to CUNA Council members for free; for non-members, the cost is $50 per copy. For more information, go to www.cunacouncils.org. For details about Strategic Link and its partnerships, contact Craig Reed at [email protected].

Questions? Contact Gary Stein: 503.350.2216, [email protected].