News flash: Bankers attacking credit unions All right, so it's not exactly news flash material, in fact it's nothing new at all. After the bankers lost (sort of) the HR 1151 battle, most of us have just been holding our collective breath and waiting for the next big strike.
Then we leaned forward and watched with great interest as the bankers sent out probing attacks, testing our defenses, looking for our weakness; and the first really volley of this battle was launched against the "mega" credit unions in Utah.
Now with the presidential election over, the battle lines are drawn and credit unions are tensing up for the next great battle, this time over taxation. The banks, especially the friendly, local community banks, would like nothing more than to watch their primary competition be dealt a blow so severe that it would likely force the end of most smaller credit unions.
The larger credit unions would likely be forced into becoming mutual savings banks as their spread would not only evaporate, but would likely go negative with the onset of taxation.
Why Are They Doing This?
It is easy to place these community bankers in the role of the villain; after all, they are attacking not only our industry, but our livelihoods as well. When you are around a group of credit union CEOs you don't have to listen long to hear terms such as "evil bankers," and phrases such as "they can't compete with us so they cheat by trying to change the rules."
In fact, the bankers have one very real, substantial advantage over credit unions; they play in the real commercial market and have for years. They know what actual commercial competition and market pressures are. They understand that age-old free market rule that the strong survive and the weak get acquired (if they are lucky).
Why are the bankers attacking credit unions? Primarily because attacking credit unions is good business, as is anything that can give them a competitive advantage.
The bankers talk about leveling the playing field and requiring credit unions to pay their fair share. They also talk about how credit unions have lost their way and have digressed from their original mission. They talk about fairness and equality. For some of these bankers, this may really be how they feel, but in reality that is completely beside the point. Regardless of how they feel, their actions are good business; not nice perhaps, but who ever said business was nice?
Unlike credit unions, where our focus is keeping our membership happy, the banks have to turn a profit, maintain shareholder value, and keep their stockholders and board of directors happy. Successful commercial businesses are always looking for ways to leverage their own advantages, turn their disadvantages into advantages and leverage their competitor's disadvantages into advantages for them. That is good business.
Should We Respond?
We have no choice but to respond to these latest attacks against our industry, but in so doing we are also losing a part of the battle at the same time. The bankers also know that for every challenge, for every attack they raise against us, they are forcing us to pull our attention away from what is really important-serving our members, growing our credit unions, and becoming more competitive.
As an industry, we are beginning to put the resources in place to effectively meet these attacks, but we still have a long way to go. Credit unions need to leverage our trade associations by having them provide the education and defenses against these attacks.
Credit union funded trade associations armed with sufficient legal resources, Political Action Committees, and public educators can fight these battles for us while allowing us to focus on the important things, running our credit unions and probing for bank weaknesses.
Jack Dempsey once said the best defense is a good offense, and although Mr. Dempsey was a heavyweight boxer, he should have been in business, because he had the right idea. As businesses competing in the commercial financial industry, credit unions need to begin thinking like our competition. It is imperative that we understand not only our competition, but also their motivations and the rules under which they play the game.
How can we turn this against them?
Credit unions no longer have the luxury of burying our heads in the sand and pretending that we are somehow safe and protected from the rest of the financial market because we are not-for-profit. We need to start exploiting everything that is wrong with banks and turn that to our advantage.
We all know that many bank customers are frustrated by the service they receive and the fees they are paying to banks, especially for the banks' "no fee" products and services. Yet how often do we actually leverage that by exploiting those bank weaknesses and making them credit union advantages?
Not Settling For Scraps
How often have we heard that we have to give up on the idea of being the primary financial institution for our members and that we just have to settle for the scraps that the banks don't want? Besides, if a member already has an established account at a bank, they are not going to move their accounts, especially their checking accounts, over to their credit union, right?
As long as credit unions continue thinking this way they will be correct, and the banks will keep the business. At some point, however, one crafty CEO is going to stop looking at why we can't get those accounts and will start looking at how to get those accounts and when that happens, the tide will begin to shift.
One advantage credit unions have had traditionally and still hold on to in great part, is the trust our members have in us. By leveraging this trust and conversely the lack of trust they have for banks, credit unions can begin competing at the same level as our competitors.
By asking our members the right questions we can let them draw their own conclusions. Questions like; "do you feel your bank has your best interests at heart," and "has your bank always been there for you, been there when you needed it the most," are two examples of exploiting a weakness with banks.
It is time that we start fighting back and playing the game by the same rules our competitors are. We should be leveraging our trade associations, planning our attacks and staying focused on the things that will keep us healthy and strong, while not being distracted by the bankers continuing attacks.
We have a choice, we can continue to be victims of the evil banks' senseless and cruel attacks against the poor, little credit unions, or we can accept the fact this is simply a matter of our competitors doing business by the rules established in the commercial world, rules with which they are both familiar and effective, but that seem foreign to many in the credit union movement.
If we chose to accept the second choice, then we have an obligation to learn the rules and turn them to our advantage. We can still be the "good guy" to our members, but we need to become relentless, effective fighters when it comes to our competitors.
Lester Warby III is Vice President and Chief Information Officer at Seattle Metropolitan CU and a member of the CUNA Technology Council Executive Committee. He can be reached at LesterW
