Starting a credit union from scratch: what would it look like?

Many people have expressed to me that one of the problems that credit unions face is that there aren’t that many new ones being formed.  I think this is mostly because:  1) it’s not that simple and 2) there are many existing credit unions with fields of membership that overlap with people wanting to start new credit unions.  I’ve had a couple of people approach me who initially said they wanted to start a credit union, but when I explained it to them, what they really wanted was a captive financial institution for their own business purposes.  That’s not really the credit union model. 

But if I could start from scratch and create a credit union myself, what would it look like?  The other day, a co-worker said to me that she really liked her credit union, but that she wished that they had debit cards.  This particular credit union picks and chooses what type of member services it buys into.  They didn’t want the expense of supporting debit cards. 

Recently, on my trip to Dayton, there were a number of credit union people who said that they don’t do cash transactions.  These are small financial institutions that, by necessity, meticulously control costs.

A start-up credit union would really have to watch costs.  One might wonder how a credit union can survive without being full service.  It is possible.  In fact, it is smart.  A small credit union that tries to be all things to all people without matching growth with the expense is engaging in risky behavior.  Also, the credit union must ask itself:  what are the services that make the members put money into the credit union?

There’s frugality, however, and then there’s spending a little bit of money on technology to add services.  A no-cash credit union, for example might do well to set up home banking.  There are big players in the financial services world that don’t have branches at all.  They use the Internet to offer other services and then piggyback onto banks and credit unions via ACH.  When you want money out of an internet bank account at these no brick and mortar places, they just ACH it to your normal account.  Some of them offer debit cards so you can use other financial institutions’ ATMs as well.

If I were starting a credit union today, I would think very seriously about the Internet bank model.  I would not have any branches at all.  I’d have debit cards and ATM network memberships for people to get cash in and out.  I would use home banking and also ACH services to allow members to move money.  Maybe I’d have shared branching for people who really need the brick and mortar (but that would be pretty harsh on the other credit unions because I’d have no branch to share).

Honestly, putting as many services as possible online and then ruthlessly cutting traditional real estate would be effective.  That would be the mission statement of my new, web 2.0 credit union.

I ask you credit union folks and blogosphere junkies:  if you were starting a credit union today, what would it look like?


32 thoughts on “Starting a credit union from scratch: what would it look like?

  1. This thought has crossed my mind before! Besides from having the NFLCU or MLBCU, I would think a federal charter would be the right choice and shoot for a national presence. But as you’ve eluded to before, don’t go the brick and mortar approach, leverage technology to the fullest. CU were built on common-bond, and personally, I don’t think a “community” with 10 FI’s in it is a common bond. Regardless, the internet is dramatically creating common-bond groups, or social networks, everywhere. Assuming a favorable legislative and regulatory environment, I would try to go nationwide, but have a very specific niche market. Black Rock Federal is trying it right now for the Burning Man community. Companies or organizations like Wesabe or I Will Teach You To Be Rich are perfect examples of a great opportunity for a common-bond CU.

    The options are almost endless:,,,,, etc, etc.

  2. That’s really kind of mind-blowing, Robbie. Talk about merging social networking and credit unions. Want to be a member of the credit union? Create a myspace page. Wow.

  3. Some credit unions may as well be Internet-only; I’ve been a member of one credit union since about 2000 and have visited the shared branch maybe four times; the rest is mail and online.

    If someone out there is reading and asks “what about low-income,” think about teaming up with organizations such as One Economy (; they exist to bring broadband to low-income homes and have all kinds of information regarding managing finances, helping kids with homework, etc. What a great online network for a financial institution to tap into.

    Thanks – Register Lady (

  4. Hmmm. You know, this sounds great, I wonder if I could form a credit union on a national scale, but for Open Source Software, with almost complete Debit/ATM, ACH, and possibly a single point of presence later on, to house the all-important web and application servers. (I don’t like trusting something like that to GoDaddy or whatever.)

    Does anyone have any information on Tempo Payments’ Debitman network, and how that might be implemented in Linux?

    If I can implement a credit union for Linux, BSD, etc. using almost exclusively Open Source Technology, it would be quite an achievement, yes?

    • Hi Alex,
      It’s been 4 years since the post above– any thoughts to add about a credit union on “almost exclusively Open Source Technology?” I agree with you, it would be quite an achievement.

  5. A credit union created entirely on the web may look something like ING Direct Bank. By using products such as XpressAccounts, LoansPQ, RoboDocs, DepoZip and others, a web based credit union can become a reality. FiServ also has a web based core processor operating in Canada. The conversion from client server delivery to web based delivery of credit union applications has begun. Check out the National Association of Realtors charter application to get a look at the future (today).

  6. I also am wanting a “captive bank” because of the political nature of money my perspective members would deposit. But since its 35 billion annually being spent and there is no bank to support it specifically how do I find such a captive bank to work with on my terms or get started on the dirty work of building from scratch.

  7. I’d like to know what it would take to start a credit union based on principles described in the common good bank slideshow at

    I’d like to see competition to PayPal, basically use it as model but of course have checking account and have everything strictly internet based.

    I’d also like to establish an alternative currency that can be used on the web, unlike the Ithaka Hours, Chiemgauers, Creditos, etc.

    It’s my understanding that a credit union can’t give away money (although I don’t know why), but for starters I’d be thrilled to just have a way for people to bank and not be ripped off.

    I also want to see approval for credit lines NOT based on credit scores and basically do banking like it USED to be.

    Ultimately, I’d like to see the “virtual local bank” granting part of the profits to local projects that people vote on.

    Since I don’t know WHEN the common good bank will open and for all I know, it could be a few more years, I’m ready to do “something” now.

    Appreciate any feedback.

  8. I REALLY like the concept of the online credit union. We are in the digital age and many people (including myself) prefer online banking to waiting in lines.

    This would eliminate diversity issue on loans and also theft. great Idea!

  9. I like the idea of online CU. Can anyone give me some ideas on starting up one for a Church Organization. We currently have many members, but do not have the capitol to start up a Branch. Any comments are welcome

    • I know this is horribly late but perhaps it can help whoever comes upon this site much later like me. I am a member of the People For People, Inc. Credit Union that was started by the non-profit of Greater Exodus Baptist Church in Philadelphia. They started off as just the church, opened up a non-profit and now run a CU, hope center for pregnant teens, community center and make frequent trips to build wells in Africa. They seem to be very knowledgeable and successful as they even managed to offer low rates and incentives on area housing for CU members to pickup Black property ownership. I would contact someone from their organization. They are very friendly and still have time to chat on the phone with people who just have a bunch of questions. Hope they can give you some helpful info!

  10. I am trying to set up a Credit Union in Deutschland for musicians – any help you can give me will be welcomed. I have an interested, there is a need and I have been asked to do this by a body of interested people.

  11. I found this website researching how to open a community-based credit union/bank/financial services company. I like your ideas. Have a question

    Honestly, putting as many services as possible online and then ruthlessly cutting traditional real estate would be effective.

    What do you mean by “ruthlessly cutting traditional real-state?”

  12. An internet-only/direct bank is precisely what PayPal aspired to be before eBay scooped it up. But form it as a member-only CU, now that’s interesting 🙂

  13. Great ideas. I have been thinking that the main gap in banking services these days is international banks – so that you can keep your money in the same place even when you change country. An international online credit union would be fantastic.

    I am also really interested in ethical investment. I have an online federation of community development organisations, and I would love to see loans to community organisations to create community co-operative enterprises.

    It seems to me that we could have quite a selling point if we combined it all and had an “online international ethical investment credit union” – so you could use it no matter what country you were in, and you knew that your money was being used to do good in the world.


  14. Local input and governance seems to be key in many ways for success..many local communities and small businesses cant access capital easily…we have been kicking around idea in SONO New Rochelle, to start on..wish there was a how to guide…

  15. I would like to get information on how to start a Credit Union in Michigan. The Southwest Block Club Association is a small group established 17 years ago.

  16. Can a Credit union access funding as the high street banks for to provide mortgages for their clients / savers etc

  17. We have an electronic funds transfer company. We are a processor for credit card as well as ACH transactions. I fully agree that an internet approach is the best way to go. We would like to start/be a credit union to ‘formally’ process thru the transaction network without having to involve another bank for some transactions.

    • Commongood lending through an online, virtual CU has great appeal. I think I can get 500 solid potential members. I want to be able to start a micro-loan program for U.S. war vets. Any guess as to the time and money needed to get such a CU up and running?

  18. I’m interested in creating a credit union in NY. Is there any consultant that, for a fee, would enlight me in the process and be willing to do the work with me and other bussiness associates. We would need to have an initial discussion as of the feasibility, start up costs and maintenance (operational costs).

    • I can help you check if it is feasible, and start it if you are serious. My experience is in co-operative business in general of which credit unions are one particular corner. I can also give you some supportive contacts in NYC that might have energy to support the process..

      It is reasonably easy to do as long as there is enough people interested in the idea. How big is your team? And how many others are in support?


  19. Im very interested in learning how to own and properly run my own credit union. Was referred by a interview on a net podcast called Anthony Brice I tunes, Six degrees. A gentleman by the name Richard Shealey. Very informal spoke on this in regards to the occupied movement.

  20. We are organizing a non profit organization here in the State of Georgia. Our main goal is to establishing in the future a redit Union to help the Community we are target to serve. In 2007 we still in low profile but we are already complete great works for the Community. Now we are gathering inofrmation what will be next in our Agenda. Apparently the CU is getting nearer. Can you help me about the 500 Membership and the 1000 partnership. If there any service could you offer on this matter Please contact the Foundation Center. And when the time being we will move on with the steps.


    Jean-Claude Leoux

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