Can A Divided Movement Survive A Stress Test?

Credit unions seem to be dividing between mission-based and bank lite. What do you see?


Over the past several weeks I’ve been out talking with credit unions at several conferences. Through some conversations during breaks or over a meal I have started to see an emerging, diverging pattern.

For many years one of the things we worried about at Callahan was the "changing of the guard" at credit unions around the country. Would these new leaders share the cooperative, collaborative values the movement was built on — and progressive credit unions still carry on — or would they go it alone?

And, if they do take that more insular route ? if their values are more “go it alone” — what will that look like? We’re beginning to see, and it sometimes looks a lot like a bank.

Different By Design

We’ve always talked about credit unions being different by design. Member-owned financial cooperatives are different, or can be. While I haven’t seen a lack of collaboration I am seeing some credit unions employ what I could call a "bank lite" model. The credit union will look and act like a bank but with lower fees, and better service. There are many successful credit unions providing real value to members using this model. It's not a bad strategy.

I’m also beginning to see a growing contrast to this group: those that see themselves as being mission-based organizations. They measure progress in terms of improved member financial health and community development. These credit unions see members and communities in need.

These are likely towards the bottom of the market in dollars and demographics, but they see themselves as serving higher goals. While most financial institutions are fighting over a shrinking top tier — as the middle class continues its well-documented disappearing act — these credit unions are building relevance by expanding their services to meet that new reality. This is not a strategy that works for everyone, but I’m seeing more and more credit union executives taking this path.

New year. New ideas. See what credit unions will be talking about in 2017 in "Big Ideas For 2017."

A Simple Question

I often ask people I just meet a simple question: “Tell me about your credit union.” Depending on how they answer I can petty quickly tell in which of these two camps their strategy falls.

Music to my ears is when the reply starts like this: “We were founded in 1938 by eight people who …” These credit union leaders generally go on to tell me about how they are positioned to help different segments of their community.

The questions I keep pondering is: Are these two strategies reaching the fork in the road and taking different paths? Will that splinter the movement?

The credit unions with the mission bent seem to be working together ever more closely. But what about the rest? Credit union suppliers have long told us that one of the differences they see in working with credit unions over banks is the level of cooperation with each other.

Will that continue? As many credit unions increasingly find themselves serving the same markets, will they keep up that spirit of co-opetition? Or will it devolve into simple competition? Are these growing pains or is something fundamental about to change?

This question is neither academic nor rhetorical. Would a divided movement be able to survive an external stress event? This isn’t the kind of stress test regulators demand of the balance sheet. These would be sea changes that would affect everyone all at once. Possible examples: losing the tax exemption or NCUA consolidation into the FDIC are good examples.

Maybe our common purpose will prove to be greater than our differences, but the latter seems to be getting bigger. What do you see?

Jon Jeffreys is managing partner at Callahan & Associates. Contact him at or 202.223.3920.


Feb. 6, 2017


  • Jon, I don't intend to sound overly critical, but this seems to be a new corollary of the same old argument that credit unions own the high ground when it comes to providing a much greater level of care and service to their customers than do banks. We agree that huge national banks generally lack the personal care for their customers that is demonstrated daily by credit unions and community banks. And I do believe credit unions as a whole live by a philosophical mission of taking greater care of their members well being than do these larger banks. But if this is true and is the most important characteristic of financial institution selection to consumers, it causes me to continue to ask the question; "why then do banks continue to own control of 96% of all banking assets in the country?" Unfortunately, this is not heretical fantasy, it is fact. I point this out to try and drive home the point that as long as care for the member is our philosophical driver, why should we fear rather than embrace being "bank lite". Do you still pull your car over to use a pay phone every time you need to make a call when you're on the road? Change is inevitable. Why can we not embrace change, while retaining the best from both our own past and present and provide an even better experience for our members. And in so doing, be proud we are sufficiently competent, astute and open minded to create a hybrid model that works even better in 2017 that the model our forefathers used in 1938. Maybe the question you should be asking is "what are you doing in your credit union today to improve its performance and sustainability while enhancing your member's experience?". Maybe it should be about changing focus just a little and asking just a slightly different question to prompt a transformational shift in how we see ourselves and our organizations and prepare us to collectively take the next step in the development of the credit union movement.
    Greg Gibson
  • Hi, Jon: Thanks for the thought-provoking article regarding the the divergence of the credit union mission and our future. At Infinity, our mission is to "do banking differently to keep you a step ahead in life". We believe that the spirit and strength of our difference vs. most banks and some credit unions is doing what's right for people -- and positioning them for success however they define it. We are growing, expanding into new markets and attracting new members of all demographics as a result of our focus and strategy. I agree with you -- credit unions with a mission are working more closely together than ever, while those that are "bank lite" are going their own way. Personally, I believe the best path is to collaborate to compete vs. compete on our own.
    Liz Hayes