BIRMINGHAM, Ala.-Credit unions in 2109 will play even stronger roles in their communities, thanks to money center banks gobbling up community banks, predicts Dennis Dollar, principal with Dollar Associates.
"We'll fill that gap to become the dominant locally owned and locally based financial institution," said the former NCUA chairman. "But I don't think credit unions will be the dominant financial institutions because banks will all be larger and international in their scope and presence."
Field of membership will have evolved to the point where each credit union will define its own FOM based upon its ability to serve. "That's the way FOM should be defined, not by whether a community is too large geographically or in population, but by whether the credit union has the financial and operational wherewithal to serve the entire area they desire to serve," asserted Dollar.
Dollar added that credit unions will always have a defined FOM, but that regulators will not be able to arbitrarily say a particular area is too large to serve. The question will be whether the credit union can present a business plan to demonstrate how they will serve the area safely and soundly. "Without enhanced FOM to ensure diversification and growth, credit unions will struggle," insisted Dollar. "But the regulators and Congress will come to the realization that FOM should be driven by the ability to serve more people safely and soundly, not by trying to make bankers happy. And, with the bankers being more international and nationally focused, they are going to care less and less about how a credit union's local market area is defined."
Shared branching will be nationwide and even international - a key to the industry's ability to differentiate and compete in 2109 and beyond, according to Dollar. "Credit unions will market themselves nationally as an industry, and the bulk of credit union marketing dollars will go into a nationwide branding campaign similar to the Canadian Desjardin model."
Also on Dollar's 2109 CU horizon: Small business lending will be a major credit union strength due to the mega-banks' lack of interest in this area, generating a Congressional support base for credit unions that will withstand any banker attacks.
Credit unions will still be tax exempt.
Credit unions will be under a risk-weighted capital structure that recognizes the lower risk nature of their community based roots. Some type of alternative capital will also be allowed because of the need for credit unions to invest in local communities.
Credit unions will form holding companies to manage their CU and other credit unions. "This is a natural flow and will be an alternative to a formal merger," Dollar said. "That is why there will still be 3,500 credit unions in 2109. Many will be a part of a credit union consortium, probably managed through a CUSO. There will be more CUSOs than credit unions in a hundred years, probably much sooner."
