GRAND RAPIDS, Mich.-A credit union can be the most efficient organization in the industry, but if it is not effective, it won't grow.
That is the stance of Randy Karnes, CEO of CU*Answers, who emphasized understanding and valuing the cooperative business model first, before any discussion around efficiencies is held. "You can do all that you can to gain scale and lose by not being effective with your member-owners."
Karnes cautions against too much attention to the banking business model.
"The economics and drive between a customer-owner architecture, as with credit unions, and a third-party owner architecture, as with banks, are different," stressed Karnes. "A credit union does not raise capital, it raises an active ownership base. We keep attributing our success to the actual business we are in instead of the business model we use. We downplay the actual activation of ownership-you take customers and make them aware they are owners. You then take aware-owners and make them active."
To illustrate his point, Karnes noted a bank can have 100,000 customers and out of that group only one may be an owner-a stockholder-and that situation won't negatively impact the bank's business. However, if a credit union has 100,000 members and only 1% act like owners, that organization's business is threatened.
What's happening in the credit union community, observed Karnes, is "we are so busy aligning ourselves with our competition that we are potentially not understanding what makes us effective-and that is an active, engaged membership. Credit unions are cooperatives first, not banks first. We often don't preface economic arguments first, like those around economy of scale, by first saying what is unique about the CU business model and then how do you excel in the environment of banking."
