Competitive Cooperation

How credit unions can compete and still remain true to the cooperative model of the credit union industry.

 
 

In 2013 credit unions owned slightly less than 9% of the country’s deposits. What does that mean? Nearly 91% are up for grabs.

Former General Electric CEO Jack Welch had three rules for business:

  1. Cash is king
  2. Communicate
  3. Buy or bury the competition

Here’s the thing, competition in credit union land isn’t just banks, cash checking shops, and payday lenders. In many markets — especially those where credit unions have a larger presence, like Tampa, FL, or San Antonio —the local competition includes other credit unions. But stealing members and loans from another credit union goes against the foundations of the cooperative model. To avoid stooping to this kind of cut-throat competition, credit unions can embrace all currently available opportunities to further the credit union brand, promote the concept of cooperative financial services, and improve the overall market share of the credit union industry.

The Credit Union National Association calls this concept of shared responsibility “coopetition,” a term that encompasses how credit unions can exhibit the values of a cooperative while also competing for market share alongside other credit unions.

Competition among credit unions escalated in 1998 when the Credit Union Membership Access Act amended federal law and explicitly permitted multi-group fields of membership. This was a big win for credit unions, but it also created an environment in which members have a variety options when they decide to bank with a credit union. Institutions with overlapping fields of membership can, first and foremost, push the message to join a credit union before promoting this credit union. When multiple institutions are touting the benefits of cooperative values, member-ownerships, and the commitment to community that the credit union industry embodies, consumers will take note. But they need to decide to join a credit union before they can decide which one is right for them.

Bringing The Noise

Two West coast credit unions know a thing or two about how friendly competition can ultimately benefit the institution. South Bay Credit Union ($80.6M; Redondo Beach, CA) and United Advantage NW ($35.3M; Portland, OR) held a three-month loan competition in 2013 to see which institution could pick up greater net loan volume. South Bay got the victory with 247 loans for $1,266,239. United Advantage NW maxed out its lending capability with 141 loans for $896,032. For both institutions, the competition was a great success.

"At United Advantage we consider it a win/win," says Chantelle Castle, operations manager at United Advantage. "We came out with 141 new consumer loans for a total of $896,032! That's huge and impossible for us to think of it as losing."

The credit unions share a core systems provider, CU*NorthWest, and the idea to have a competition started at one of its roundtables.

“I called out any other credit union that wanted to play, and United Advantage’s CEO [Evie Rasmussen] said, ‘Absolutely, we’ll take you on, bring it!’” says Jennifer Oliver, CEO of South Bay Credit Union.

CU*NorthWest agreed to serve as the moderator and provide weekly loan totals during the three-month competition. The game was on.

“We called it the CU Smack Down,” Oliver says. “Both of us are pretty casual CEOs and we allowed some pretty harsh trash taking. It was pretty funny, actually. The staff got really into it.”

Although the competition was fun and brought in some nice loan numbers for both credit unions, the cooperative approach was not lost in the fray of trash talking and taunting. Through the competition, the two institutions have formed a solid partnership and now tag-team projects, share best practices, and maximize their knowledge network.

“We learned a lot about each other,” Oliver says. “The competition created an insightful look at our credit unions, but just having another partner out there, it was nice to have that. So we kind of built a stronger relationship.”

Rasmussen and Oliver share due diligence, review each other business plans, and try to help each other when they can.

“I might do research on, for example, student loans and she’s doing research on small business lending, and we can shorten that due diligence process a little bit by working together on it,” Oliver says.

The competition taught South Bay some new lessons about efficiency. And because the two credit unions have the same core system, both learned more about how to use the loan funding and follow up systems as well as how to create new marketing leads.

The competition was a great success and the two credit unions plan to do it again this year.

“We have friends in Portland,” Oliver says. “It’s a whole new level of cooperation and collaboration among the teams.”

The CU Smack Down

  • Participants: South Bay Credit Union ($80.6M, Redondo Beach, CA) and United Advantage NW ($35.3M, Portland, OR).
  • Goal: Create more net loan growth.
  • Results: South Bay Credit Union, 247 loans for $1,266,239; United Advantage NW, 141 loans for $896,032.
  • Time period: July 1, 2013, to September 30, 2013.
  • Winner: South Bay Credit Union.

 

 

 

 

 

Jan. 27, 2014


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