Should a credit union become a data cooperative?

Data Cooperative: Big Crazy or Not-So-Crazy Idea for CUs?

While many credit union boards and C-Level staff still appear stuck in traditional ways of thinking about who they are and what they offer, at least a few CUs seem to be in an all-out sprint toward a new digital future. My only concern is that this particular race to the future is going to end up with every finisher looking just like every other competitor. What happens if all FIs end up in the same place?

If everyone has pretty much the same technology and capabilities, why would anyone choose your credit union over another option? And don’t give me that “member service” and “low rates” stuff. That probably isn’t going to carry much weight when everything is handled in an app instead of in-person, and rates are competitive because everyone has to be competitive about rates.

How will a credit union differentiate itself from every other FI that is offering pretty much the same things? How do you avoid losing members to fintech companies with deeper pockets? Isn’t that what is already happening?

Maybe it’s time for a Big Crazy Idea.

One of the most interesting ideas I’ve read recently comes from MIT professor Alex Pentland, a data scientist whose research focuses on social physics, big data and privacy, and who co-led the World Economic Forum that led to the development of the GDPR – you know, that EU privacy regulation that shook up tech companies by changing the rules on ownership of data collected (no cookies for me, please!). So yeah, he’s kind of a big deal in his field, and he has come up with an idea that just might be crazy enough to help CUs be seen as more than “just another bank.”

The main point of GDPR and Professor Pentland’s work is the idea that people should own and control access to their personal data, and that they should consent and benefit when their data is used.

Right now, there are too many large corporations that are amassing personal information about people who are blindly accepting those annoying “terms and conditions” warnings on the sites they visit. (So much for protecting everyone’s privacy.)

In Pentland’s vision, companies and the government would no longer control the collection of data on individual citizens. Instead, certain organizations could serve as “data cooperatives” in order to pool member data and have more control; to set the terms on how their data is used, and by whom.

Which organizations? Professor Pentland thinks that “the force best positioned to bring this change is the credit union movement.

Wait a minute, you mean my CU might be dealing with data instead of money?

No, I’m not telling you to give up loans and deposits. This would be an addition, not a complete pivot. Plus it’s a natural fit for CUs. After all, credit unions are cooperatives, built to benefit their owner members, not to benefit outside investors. And CUs are legally allowed to collect this information.

By moving their data to the credit union, members could take ownership and control access. Not only could it halt the collection of personal data by corporations, but it could produce better context for those that participate. Their data wouldn’t leave the cooperative, but it could be used to pull information to help both the members and their community. The collected data could be solely based on a single issue (e-marketing, for example), or scale with additional data (medical, healthcare, education, social needs, etc.)

Think of this idea as collective bargaining for data. Because there are 100 million+ credit union members in the US, when that data is pooled together, it becomes much more valuable to companies trying to market to that group. Valuable enough that members could negotiate special terms or discounts for their group, or to show the need for specific government/health/legal resources, all while controlling who has access to their data.

Yes, becoming a data cooperative would be a big deal.

But credit unions have a history of thinking big.

Over 40 years ago, a few forward-thinking CUs in CA decided to link their 20 ATMs together to create the first Co-op network, which has grown and evolved into a nationwide network of thousands of shared branches offering credit processing, payments and several other financial services. From CUNA and NAFCU to state leagues across the country, credit unions are no strangers to the idea of working together to create something of value for their members. CUSOs have been created to build upon ideas and provide services that don’t typically fall within a FI’s traditional realm.

So thinking big is already part of the credit union DNA.

And the best way to stand out, might be to stand together.

Then maybe your members might start to see their credit union as an ally, a true advocate on their behalf, not just as another replaceable bank or fintech app.

Kent Dicken

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