Like many Discovery Channel junkies out there, I’ve been watching the Planet Earth series recently. In HD, it is truly a sight to behold. Now I’m old enough to remember Mutual of Omaha’s Wild Kingdom shows from the ‘70s. Those old shows had nothing on the Planet Earth series, yet Planet Earth certainly has its roots in Wild Kingdom.
In one particular episode, a monkey strays too far from the trees and too far from other animals that serve as a warning system. Out from the grass sprang what is now almost a stereotypical tiger. Of course the tiger snapped the monkey’s neck and carried it off for lunch.
Here’s the part where I tie this into credit unions. We don’t see this type of imagery enough, I fear. Sure, if you watch the news or read the paper you hear about shootings and robberies and senseless violence that people commit against other people. But we don’t see enough purposeful violence. In the jungle, the cat has to eat.
When we talk about threats to the credit union movement, it seems to me that these come in two varieties: the senseless ones and the threats with a purpose that’s driven by a need. The latter are the real threats and they come from market forces.
Why are credit unions merging? Because the cat has to eat. I think it’s important to recognize that this is a market force. While it is not pleasant nor desirable for the movement, it is a natural process in the economy. One solution would be opening the door to the creation of more credit unions. Yet, do existing credit unions really want that? Doesn’t that amount to more competition in an already intense market?
I would submit to you that part of the reason that the entire financial services industry is so competitive is because of technology. Historically, having a branch close to where people lived meant something. Today it is still important, but less so. In the past, I needed to go to the credit union to 1) deposit a check, 2) withdraw money, and 3) get a loan. Now, I don’t have to do any of those things in person. So if it doesn’t matter if the financial institution is local or not, then essentially all financial institutions across the country (if not the world) are now directly competing with each other. That greater level of competition drives down the total number of financial institutions. It is an oversimplification to say that this is the sole driving force for mergers, but it is a factor. Increasing costs because of regulatory compliance is another factor.
The point is that credit unions need to grow. They need new members, they need to make new loans. If they don’t, they face stagnation in the face of ever increasing costs of doing business. Would it be possible for a credit union to pare down its costs using the same technology that is driving change? Sure! Do many credit unions do this? No.
But eventually it comes down to a choice: do you want to be the tiger or the monkey?