New Competition
By Joyce Moed, Reporter

There is a lot of new competition out there for credit unions, said Tom Davis, NACUSO’s new president and CEO.

"These include: indirect payday lenders, Wal-Mart, H&R Block, and peer-to-peer lending," he said. "How are we going to compete with these on top of existing banks?" he asked.

Davis said that NACUSO’s approach is "based upon the needs of the individual and the critical needs the industry is facing," Davis said.

And right now, that need is on finding ways to deal with how to survive among the fierce competition.

One way, Davis said, is to make people more aware of the services credit unions offer, including first-mortgage loans. He said that most homebuyers do not often consider credit unions when thinking about their first-mortgage loan choices.

"We have a fuzzy brand and no real market differentiation," he said. "We can’t compete."

This is proved by the very slow member-growth credit unions have seen recently. Last year, there was only a 1.1% net growth. Davis said. And with the majority of members between the ages of 40 and 47, Davis is worried about the future of the industry.

Three solutions to these issues are usually concluded to be: continuing on the same course, merging or converting to banks, Davis said. But Davis doesn’t think any of those options are long-term solutions to the challenges credit unions are facing. Instead, he thinks the solution is the cooperative model.

"Getting credit unions to come together, work together collectively," he said. "Then they can do better things than they can individually." And this is something banks do not do, he added.
"We can do this; we just don’t do it enough," Davis said.

Davis said that this co-operative model can do many things for credit unions, such as providing convenience to members through shared branching and ATM networking, he said.

"When we come together we can gain access to expertise," he said. "We can spread the risk and the capital investment. We own the intellectual capital when we come together. This is an alternative to mergers."

Davis said that some mergers are both inevitable and healthy. He said that mergers are unhealthy when "people are merging just to get bigger and not providing more benefits to members."
"Every time there is a merger, a point of contact is gone," Davis said. "I don’t know if that’s healthy for our industry in the long run."

Instead, Davis asked, "What if we all came together?"

The co-operative model can allow for credit unions to share resources, such as call centers, Davis explained. "We are trying to gain scale and do this cooperatively and collectively."

"Every credit union doesn’t need a call center," he said.

The working model for credit unions wanting to work together includes three pillars, Davis said, –critical thinking, innovation and collaboration.

For the first pillar­–critical thinking–Davis said that NACUSO is putting together seminars for people to learn how to think critically. "This is a prelude to innovation," he said.

For the second pillar–innovation–Davis said what’s key is getting more value to the members than before.

For the third pillar–collaboration–Davis said that NACUSO is planning a conference to discuss exploratory networking solutions.

"One of the strategic questions we need to ask ourselves is ‘Where should we collaborate?’" Davis said. "What is the best place for us to collaborate?"

Some options include: mortgages, indirect lending and payday lending, Davis suggested.

Davis noted there are some barriers to collaborating, however.

The first one is emotional.

"Giving up power and control," he said. "Some don’t want to share ideas, don’t want to work with 20 other egos in the room.

The other barriers are rational, including: technological and geographical, Davis said.

"We’re working to help people understand and overcome these barriers," he said. "We’re helping people by providing information," he said. "We help people to realign organizational structure."
Davis said that there is still the we/they feeling when it comes to credit unions/CUSOs. "We need to overcome that," he said. "There’s really just an ‘us.’ We need to get over that kind of we/they mentality–the 50,000-feet view. That’s what we’re trying to do at NACUSO, helping the industry grow and survive.

Davis said that although the industry still needs to embrace that concept, there are several already doing just that.

"I am a strong believer in collaboration–putting together places that can provide products and services in ways that would not otherwise be able to be delivered," said Stan Hollen, president and CEO of Co-Op Financial Services. "I think there is just great value in credit unions working together."

The main challenge when collaborating is joining different personalities, Hollen said.
"But you have to separate politics from good business service," he said. "Politics takes a back seat to good service."

Hollen said that perhaps the best services on which to collaborate would be information systems and lending origination.

"Lending is a huge issue," he said.