NEWPORT BEACH, Calif.-For most of their history credit unions have rued the fact they are a superior option to banks but many consumers still don't join.
So it is more than a bit ironic, Tom Davis points out, that many credit unions do not take advantage of their option to join CUSOs.
"We need to be constantly reinforcing the fact the industry needs to embrace the collaborative model. I've never seen an idea that makes so much sense be such a hard sell," declared Davis, the CEO of the National Association of CUSOs (NACUSO).
"Credit unions have just 5.8% of the assets in the financial services industry - we are a speck in the market space," he said. "And within that space, credit unions are highly fragmented. It is my opinion credit unions should come together, cooperate, and meet shared needs. It is easy to see doing a lot of things collaboratively and collectively makes good business sense, but it still is a tough sell. There are pockets of collaboration throughout the industry, but it is not the dominant theme."
In the case of credit unions not fully embracing CUSOs - which can accomplish myriad goals from lowering costs to increasing the number of products and services a CU is able to offer to its members-Davis, who is also a consultant on change-management, said the reasons go beyond the rational and get into the emotional.
Need For Urgency
"I think there needs to be a sense of urgency for collaboration, and there needs to be more emphasis and awareness of the benefits of cooperation," he asserted. "Then, people might be more willing to look at collaborative models. But it is not just awareness - many are aware of the benefits of CUSOs but they still don't do it. Why not? Because they worry they might lose control or possibly status, so they don't pursue it. Collaboration brings efficiencies and better economies of scale, but still people aren't doing it to the level they need to do to sustain the industry."
As for potential fixes, Davis said when people are fearful they are going to lose something, they need to be shown how a new situation can also provide a gain. For example, if a credit union joins a multi-owned mortgage CUSO, it usually gets a board seat.
"Why think about joining a multi-owned CUSO in the first place?" Davis asked rhetorically. "Because it will help sustain the credit union. It will drive value to the credit union's members. It spreads risk among multiple credit unions. It adds expertise. We need to point out the advantages, specifically driving value back to the members, which is why we are here. Putting my NACUSO hat on, that is what we are all about...we provide applied learning experiences on the value of collaboration."
Davis sees a trend toward greater collaboration and cooperation, but said the economy's effects are being felt. "Certainly the industry is somewhat in a state of paralysis, so this is not a particularly a good time to tell anybody to do anything. Credit unions are hunkering down and not willing to try anything," he lamented. "The second reason is the fear of lack of control. The third is a discomfort of moving outside what is familiar."
When CU leaders come to NACUSO meetings, Davis said they hear speakers detail the advantage of CUSOs and get excited. But when they return to their credit union, they are put back in the same environment they left the week before and their enthusiasm fizzles out. "Changing a mindset about the way to operate a business is difficult, so this is understandable."
Act Now, Or...
Will credit unions be more willing to accept collaboration as the economy comes out of the downturn? Davis said he certainly hopes so.
"Credit unions have been between 5% and 6% of (total) assets for the past 15 years. If we go back to doing the things we have been doing, it will stay the same."