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?