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Balancing Innovation And Regulation

The cooperative business model is gaining momentum, but is the NCUA keeping up with demand?

The cooperative business model already possesses the built-in framework needed for long-term economic growth. But an ongoing concern is whether or not the industry can continue to incorporate expanding regulation, without eventually encumbering its growth potential.

At CUNA’s 2013 Governmental Affairs Conference, NCUA Chairman Debbie Matz announced that a new outlook for the agency was on the way. She indicated that credit unions could anticipate a more cooperative outlook from NCUA, as well as enhanced efforts to mitigate regulatory burdens.

Many in the industry are pleased to hear that these initiatives are forthcoming. But in order for regulatory leaders to find a lasting middle ground between established guidelines and innovation, there are some fundamental steps that will be required.

First, credit unions must been seen by NCUA as active participants in building a stronger financial future for their communities. There must be a resolute commitment to, and courageous effort extended towards, defending the sustained value of the cooperative charter.

A cynic or apathetic bystander may suggest that financial services are all perceived as the same by consumers, and thus the value of a cooperative charter is negligible. However, an objective observer sees that in communities all over America, individuals of all classes are actively engaged in, and are benefiting collectively from, the cooperative business model.

A recent article by Farida Helmy and Jeremy Runnalls in Corporate Knights Magazine reads: “Owned by their communities and workforce, cooperatives have an ideal opportunity to dictate business decisions that drive social and environmental change.”

Without the traditional burden of corporate expectations and the interests of an investment audience, cooperatives can take a long-term view to community growth.

There remains a vital need for the credit union business model and the cooperative spirit. In fact, cooperatives are growing in use and popularity in communities all over the country; from grocery stores, to health clubs, to community gardens and housing developments. All these business enterprises have risen out of a sense of community well-being.

Second, regulatory leaders must have an understanding of the downstream impact that regulation has on the individual member, including those who own and run small businesses.

Right now, every new requirement for disclosure increases the complexity of compliance and is a direct expense to doing business with any entity that doesn’t align with traditional regulation.

Because many regulatory leaders, elected representatives, and lobbyists have not previously been employed in the private sector let alone run their own business, these individuals must work harder to cultivate an awareness and understanding of this member segment and reduce regulation that creates down-stream consequences.

The small business sector made up 46% of the non-farming Gross Domestic Product (GDP) in 2008 according to the SBA Office of Advocacy.


With this percentage of the economy resting on the foundation of small business, regulators cannot continue to devalue cooperative options for this segment through regulatory limitations.

Third, regulatory leaders must understand and have a firm commitment to free enterprise. Competition and capitalism are powerful economic engines and are absolutely necessary to fuel any vibrant economy. Creating regulatory oversight over free enterprise will inevitably restrict the competitive landscape.

History is replete with examples of significant innovations which revolutionized society and spurred economic opportunity. Innovation is also at the heart of the cooperative charter and is crucial to creating economic value for each credit union member.

Fourth, as credit unions work to build efficiencies, drive new growth opportunities, and increase member service and retention, technology has become an absolute necessity for building a sustainable future.

Regulators must have not only a firm commitment to free enterprise but also the vision and determination to engage with technology innovators and assist in creating options that automate or reduce regulatory burdens

As the industry seeks to more aggressively uphold the value of the cooperative business model and promote free enterprise, these recent changes from NCUA indicate that it may indeed be possible to strike a more perfect balance between regulation and innovation.

To see more on core image processing, click here.

Bret Weekes is the President and CEO of eDOC Innovations. He can be reached at bweekes@edoclogic.com


Founded in 1992, eDOC Innovations is an industry leading core image processing CUSO, building technology to address the changing needs of credit unions and their members. With 20 years of experience, eDOC has emerged as an industry leader in providing image capture, automation, item processing, eDocument workflow and management solutions.
This article is sponsored by a recognized solutions provider in the credit union industry. Callahan & Associates does not endorse vendors or the solutions they offer, and the views and opinions offered here might not reflect those of Callahan. If you are interested in contributing an article on CreditUnions.com, please contact the Callahan team at ads@creditunions.com or 1-800-446-7453.
August 12, 2013

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