MADISON, Wis.-Credit unions' unique governance structure will take the industry to new heights by 2109.
But credit unions must first resolve the alternative capital issue to ensure they have the resources to prosper and survive, while retaining the true CU model, explained John Lass, SVP-strategy and business development for CUNA Mutual Group.
"A lot of the for-profit financial institutions like to talk about pursuing a customer-intimate strategy, but it is difficult for them to do that," Lass said. "They are very large and the credit union value proposition — putting the member first — cuts against the grain of the banks' governance and for-profit orientation. To me, the challenge for the credit union system over the next 100 years is how to hold onto its value proposition while recognizing that its governance structure may change."
Probably, and much sooner than 100 years, a new hybrid credit union capital instrument will develop, predicted Lass, pointing to the efforts of the Squam Lake Working Group on Financial Regulation to devise innovative solutions to avoid a future credit crisis. "One thing they are proposing is a capital vehicle that starts off as a debt instrument that the financial could use to raise capital during good times. But if a bank or credit union system fell below a certain level, and individual institutions' capital fell below a certain level, then that debt would convert to equity."
With the capital issue resolved, Lass sees credit unions being very successful in 2109, due in part to strong member-intimate strategies, and because there will always be room for "someone to come right down the middle" with financial products and services that are transparent, easy to understand, not complex, and fairly priced. "That's how credit unions will stand out," he said. "They won't have to be the lowest-priced player in the market. They won't even have to be the most innovative products in the market. But the member has to know that the credit union is placing their best interests first. That has to remain intact during the next 100 years."
