Banks As 'Partners?' Why Not Just Hire A Fox To Guard The Chicken 'Co-op?'
Am I dreaming or do I hear the same reasons for partnering with bank-owned subsidiaries for processing and switching of credit and debit card transactions that I've also heard for why credit unions are selling their credit card portfolios to banks?
You know the script by now, right? "We don't have the capacity or the ability to do it ourselves." Or, "This is strictly a business decision, and this makes good business sense for our members."
Last November, one of the largest credit union-owned ATM and POS network in the country signed a long-term contract for switching and processing with Fifth Third Processing Solutions, a unit of Fifth Third Bancorp. This network's chairman called the deal "a result of our continuous review of our strategic direction," and said it was "in the best interests of our member owners."
So I have a question for the chairma: does he think the best interests of member-owners (credit unions) extend to only the next several quarters, the next two years, or does his strategy envision the best interests of credit unions several years down the road? What about that old standby, long term?
Because, frankly, I don't happen to believe that selling our souls to those who are committed to swallowing us whole is in our best interests. I agree with "Pogo," that beloved comic strip character most of us in the Baby Boom generation will recall fondly, who said, "We have met the enemy and he is us." Pogo's creator, Walt Kelly, had a way of showing the shortsightedness in human nature, and I think that drive to go for the quick fix rather than deal with the hard work, perseverance and vision required of self sufficiency is what this deal (and other, similar moves in the credit union world) are all about.
Are We Just Going To Give Up?
Are we just going to give up? Are we willing to sell pieces of ourselves, bit by bit, until there is nothing left to barter? And, are we so na?ve to think that the wonderful people at Fifth Third, a bank that is a supportive member of the American Bankers Association, will always act ethically in all their dealings with credit unions? Wouldn't it be smart to consider what their agenda might be? What's their strategy for dealing with credit unions? Do you really believe their long-range plan is to coexist and partner with us? (I have a bridge...)
Because I thought it would be smart to ask the people involved about my fears about this obvious conflict of interest (bankers out to tax credit unions and banks out to get the credit union share of this business) I hired a researcher to ask a few questions.
First, you should know that this network stated in its 2002 annual report that it "believes that those within the movement better serve our members than those looking to capitalize on our success." More on this in a minute.
The network's director of communications told my researcher, "Regarding bank and bank trade association conflicts with credit unions, well, there are some issues there." He also said that the network had gotten "assurances in writing" that Fifth Third would not do things like seek to convert credit union members into bank customers or market other bank products and services to them. "We are comfortable with the protections in our agreement," he said.
Speaking for Fifth Third Bank, Stephanie Hagen was thankful for the opportunity to respond to questions regarding the bank/credit union relationship. "I've done some research and spoke with many folks here. Because our business with credit unions crosses many different business lines, the answers aren't quite as simple to deliver. As you are already aware, credit unions are both our customers-as is the case with our recently announced partnership... and our competitors. Because of two distinct levels of involvement we are not comfortable addressing your line of questions at this time."
They're not comfortable? They admit that they are in competition with credit unions, yet, they are unwilling to directly address the inherent conflict of interest that entering into a partnership with a credit union organization presents. They won't provide any assurances, and this network's spokesperson acknowledged that he could understand why they wouldn't do so. "I respect that answer," he said, when advised of it. "It's non-committal. They're pressured by (bank) lobbying groups so they don't want to make a point of taking sides. I see it as trying to remain neutral."
Maybe I'm just a plain-speaking kind of guy, but all this dancing around sure makes me suspicious. Can we do a reality check here? Do we have a real reason to believe these guys won't eat our lunch? Shouldn't we be building/expanding our own network? Wouldn't that be in our best interests? Why are we making deals with the devil?
While I understand the concept of doing the best deal, there are other, viable options. A collaborative effort is required for credit unions; whether it is in marketing to promote the not-for-profit credit union option or the nuts and bolts of item processing. It can work in the EFT arena; there are several successful CUSOs providing that service now. The spokesperson doesn't believe that, however. He said, "There is no viable credit union alternative for major payments processing; they're all affiliated with banks."
So much for the network's belief "that those within the movement better serve our members than those looking to capitalize on our success." Can they really buy that Fifth Third isn't looking to capitalize on credit union success?
Other than financial gain, I am perplexed why credit unions would do business with banks and their respective service organizations. These bankers want credit unions to go away and are going about it by influencing credit unions' operations as a first step. And we are handing them the power to do so.
We have met the enemy, and it is us.
Tom Reed is president of ENCORE, which provides EFT/ATM services, shared branching, merchant services, card services and more. It is owned by 124 credit unions in 14 states. Mr. Reed can be reached at treed