Quō vādis, credit unions?

In a wide ranging, 90 minute interview, retired State Employees’ Credit Union CEO Jim Blaine offered up a provocative look at possible tomorrows for the credit union movement.

The throughline is simply: Quō vādis? – Where are you going?

In 2000 there were over 10,000 credit unions. Now there’s a smidge over 5,000. That math is brutal. But it is fact. 

This is where Blaine’s insights come in. His views are ultimately optimistic because what he sees is how a credit union can win. He knows a lot about that.

Blaine, who served as CEO from 1979 to 2016  of what became the nation’s second biggest credit union, grew the institution’s assets from $300 million to $33 billion. He left a strong foundation; SECU now has over $47 billion in assets.

And nowadays, when Blaine looks around the credit union universe, what he sees is a highly talented, youthful pool of c-suite credit union executives. They have a lot of tech smarts. That is good news. The bad news is this: “I wonder if many are looking at a credit union more as a business than as a cooperative.”

A commercial bank, bluntly put, is in business to profit its shareholders. Period. A cooperative, by virtue of that status, commits to seven cooperative principles that date back to the 1844 Rochdale cooperative. Among the principles: democratic member control; cooperation among cooperatives; concern for community.

Every US credit union is a cooperative, those principles are its principles. And they are also non-profits. Credit unions exist to benefit their members and their communities.

Nothing could be more different from those principles than a commercial bank’s bedrock purpose and, says Blaine, those differences are the building blocks that pave the way to credit union success.

Of course Blaine knows that, to survive, a credit union has to exude black ink. But he also believes that the credit unions he knew and believed in saw themselves less as profit centers and more as foundational institutions in their communities.

He also believes that cooperative bedrock is what will let credit unions compete against – and often win – when they are up against the money center banks that hold an ever bigger share of the county’s assets.  

The nation’s biggest 15 banks are growing relentlessly. From 2019 to 2020 Bank of America’s total deposits grew 28%.  JP Morgan Chase’s grew 30%. At both institutions, assets are measured in the trillions.

Big banks are growing briskly in part due to momentum, in part because they are good at what they do and they can compete wherever they choose on rates, services, just about anything associated with a financial institution.

But a credit union still can win, according to Blaine, especially when it focuses on what he calls its local niche. In North Carolina SECU competed against and often beat the much larger neighbor Bank of America. Could SECU seek to beat B of A also in California, in Asia, in Canada?

Under Blaine’s leadership, in fact, SECU – running counter to how many credit unions have behaved – diminished its presence in multiple states in order to intensify the focus on North Carolina.  “Managers and boards get excited about geographic growth but we decided we could compete more successfully in North Carolina, where we know the people, the communities, the politicians,” said Blaine.

More broadly, Blaine worries that as Select Employee Groups are ever less important to credit unions, many credit unions lose sight of who they are serving and why. SEGs gave credit unions a defined sense of purpose and community: this is exactly who we serve.  

A credit union with a geographic field of membership – Maricopa County, say, in Arizona, the nation’s fourth biggest, with almost 4 million residents – and exactly who is that? There’s nebulousness to that field of membership and, sure, some credit unions succeed with a broad geographical FoM. But many are still hunting for a local relevance that will let them thrive in an ever more competitive financial marketplace.

Know this too: the competition only intensifies. The big banks get bigger. Non-bank fintechs that offer financial tools are getting bigger and smarter.  

How to succeed?

Know who you are serving, know why that matters. Be part of the community. Think local, be local.  And that gives a credit union competitive advantages a mega bank cannot even dream about having.