It’s A Small World After All

It’s planning season the time of year when I find myself talking with credit union executives and their boards on nearly a daily basis. This morning on my way into work, something hit me, an ah-ha moment, about size and impact.

Be The Mouse That Roars

Nationwide, credit unions hold approximately 6% deposit market share. In autos, they hold about 18%, and in mortgages, about 8%.

This from a movement of just more than 5,800 credit unions.

In the broader context of financial services, even the largest of credit unions is small. Many argue that’s the reason credit unions need to wave the white flag and merge. And 200 to 400 credit unions a year have been doing just that.

But being small means credit unions can tackle opportunities that larger organizations can’t or won’t.

Because they are closer to customers, they can pivot faster. A credit union can better understand what opportunities members are hiring it for and what it would take for members to fire their bank.

Jobs to be done has become a catchphrase for that approach. It is indeed a perfect fit for the financial cooperative space, a movement arguably born of the need to be nimble in responding to the financial needs of its member-owners.

Click here to read more about the jobs to be done concept.

Being nimble allows credit unions to take market share when others don’t even know they’re losing it until it’s too late. ContentMiddleAd

I was working with a smaller credit union $60 million in assets and 6,000 members that had carved out a nice niche serving an assisted care facility in its community. The facility had 20 employees, and this credit union’s managers were wondering if other facilities in the community would have the same need this SEG did.

I assured them that M&T Bank, with its 30% market share in the community, would not be going after 20-person opportunities. Yet, if this credit could attract four or five of these assisted care facilities, it could increase membership significantly. This would be a real win for the credit union and the new members, and aging population care is certainly an area of significant growth.

Stockholders’ lust for immediate returns forces banks to look for big, high margin lines of business. That’s why 20-person opportunities just don’t make sense for them. The credit union opportunity is to use banks’ investment time horizon and profit formula grow gross margin and ROE against them.

That’s why it’s critical for credit unions to identify where they can find, and grow, these niches. If they do that well, over time, the niche can turn into a big opportunity. When credit unions get so entrenched with these niches, it will be difficult for a new competitor to come take it away.

An Ah-ha Moment

I heard a radio ad for Navy Federal Credit Union this morning.Navy’s TV spots on Monday Night Football are funny and well done. This radio one, though, had two guys talking about what it meant to serve and how Navy was distinctly positioned to help their specific needs. There was no rate or product mentioned. It was all about community.

Many might think Navy is so big that it can do whatever it wants. Navy is the largest credit union, but it would rank around the 38th biggest bank, about the size of an average regional bank.

Navy, too, started small like every other credit union. Over the years, it worked its niche and discovered what matters to members. That’s why it gets hired more often than it gets fired.

What does it mean as an institution to get hired or fired? Learn more about that in the jobs to be done concept.

This is a reminder to all to get out there, talk to members, and get your arms around what it would take for more people to hire your credit union.

Understand how close you are to getting fired. And then do something about it.

Click here to read more about the jobs to be done concept.