Here’s my bold prediction for the near future: small and de novo (new) credit unions will play a key part in revitalizing and re-energizing the entire credit union movement.
Small credit unions (or call them “boutique” or “specialty” credit unions if you prefer) obviously have tremendous value to their members. But we’re only just beginning to re-discover and unlock their value to the credit union movement as a whole, and to all credit union members.
Here are eight reasons why I think small CUs have so much value, and why there’s so much reason for optimism around the future of small credit unions.
1) Technology changes everything
Tech is the great leveler. In any arena, new technology is only available to the biggest and richest players at first, then the value of technology accelerates as it becomes more available and widespread. The same thing is playing out in the credit union world; new technology is getting faster, better, and cheaper all the time, and is rapidly solving many problems of scale. Obviously, there are still areas where there’s a long way to go, but in the long run, barriers are falling.
As just one example, new lending tools are using AI and alternate decision models to make more loans and better loans where and when they are most needed.
2) Regulator interest
Thanks in part to the efforts of the CU De Novo Collective, NCUA leaders, and many others passionate about the credit union movement, NCUA is beginning to reverse decades of inertia and accrual that have set up enormous regulatory roadblocks and burdens for de novo and small credit unions. There’s a long way to go, of course, but there are reasons to hope for positive change.
3) Re-discovery of CU roots
Credit unions were a radical idea in the 1890s-1930s. However, in the rush to grow, consolidate, and maximize profits, a certain same-ness, and dare I say, “bank-ness” has crept in. Small and de novo CUs have the potential to bring about a new back-to-basics “return to radical” by sustainably serving many new types of communities. For example, Diverge Proposed Federal Credit Union is working to become a financial home for historically unbanked people and their families, including formerly incarcerated people.
Think of the value of the biological diversity of a wild forest vs. a field of pine trees planted in rows. One fire or beetle infestation can destroy the cultivated trees, yet the natural forest is far more resilient to challenges because of the many interlocking survival strategies. There are many “niches” in the financial forest, and small CUs have an important role to play in creating these reservoirs of knowledge and tested strategies for thriving and surviving.
5) Strong community connections
There’s tremendous value in the expertise, diversity, and the hyper-local focus small CUs bring to the table. The definition of “community” is evolving away from geography and employer, but the small credit union business model is timeless; it works for every community, however it’s defined.
6) CUSOs and collaboration
There’s been incredible growth in CUSOs in recent years, and there are excellent solutions from CUSOs and other partners for pretty much every issue . The sixth credit union principle, “Cooperation among Cooperatives” is a powerful force, creating trustworthy partners and problem-solvers dedicated to the credit union movement.
In fact, there’s a new CUSO (Revolution CUSO) getting started for the express purpose of serving and supporting small credit unions.
7) Small CUs as talent incubators
At the recent NACUSO conference, we heard several incredible ideas for solving small credit union executive and staffing problems, such as fractional CEOs and execs, and creating more career paths to attract and retain talent within the movement.
For example, there’s an amazing idea for a “CU Peace Corps” where talented young execs are trained, supported, mentored, and sent to small CUs to gain a variety of real-world experience and a tremendous head start on their CU careers.
8) Small CUs as innovation incubators
In much the same way, small specialized credit unions have huge potential value in testing and refining new ideas. Even the largest credit unions face many of the same challenges, and the entire movement benefits when innovation is encouraged, supported, and expected.
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