As we continue into the second half of 2012, we see signs of economic recovery with low mortgage rates and pent-up demand leading to a gradual improvement in the housing market.
However, we also see evidence of just how precarious our economic recovery is. Recent employment data shows a decline in job creation and a slight tick up in unemployment.
The U.S. economy is tracking $2 trillion below where it should be, even after 11 consecutive quarters of positive GDP growth. Credit unions and the financial services industry as a whole still face intense challenges from burdensome and unnecessary regulations enacted post-crisis, and the Consumer Financial Protection Bureau is threatening to compound these challenges.
In addition to the regulatory environment, credit unions are challenged by low loan demand from over-leveraged consumers who are unwilling to borrow. But we cannot pin our economic struggles on consumers, whose fears are warranted with the current unemployment situation.
At the start of the year, I wrote where new opportunities lie for credit unions and the importance of reviving the American Dream. I doubted that policy makers would take steps to lighten the regulatory and compliance loads that are weighing down credit unions. The CFPB's broad brush efforts to protect consumers promises to add costs and compliance burdens that will make it harder for credit unions to deliver the products and services their members and communities need.
Look Behind, And See Ahead
For these and other reasons, the second half of 2012 is likely to resemble the first. We cannot drive growth and stability or increase consumer confidence while policy makers continue to thwart community-based financial institutions from doing what they do best: supporting the entrepreneurs and small businesses that create 65% of net new jobs.
Still, there are steps that credit unions can take to help themselves in this challenging environment. These include collaborating to reduce costs, and upgrading your technology infrastructure, and creating greater awareness about your role in the economy.
Collaboration has long been the bedrock of the credit union industry. Credit unions consistently utilize collaborative technology and shared services to help reduce costs and improve efficiencies. But greater opportunities for collaboration exist and by exploring and taking advantage of them, credit unions will not only be able to compete with their larger counterparts, but position themselves to have a strong foothold in the marketplace.
Hand-in-hand with collaboration is the need to upgrade technology. Banking today is built around individuals, not transactions. Credit unions can no longer meet the consumer needs of the 21st century with transaction-based enterprise technology that dates back three, four or even five decades. These complex and inefficient systems are expensive and difficult to maintain, and designed for a completely different business model.
Consumers Ahead of CUs
In addition, consumers have embraced technology in a manner that far exceeds what many credit unions are currently capable of providing. For credit unions to continue to serve their role as the financial service providers of choice for their communities, they must adopt the open standards and relationship-based technologies that allow them to provide the services consumers expect and compete with larger institutions based on the level of personal service they offer.
As I point out in my book, Saving the American Dream: Main Street's Last Stand, the basic tenets of the American Dream are at risk today because of numerous misguided perceptions and regulations. There is a shocking lack of awareness about the unique role that credit unions and other community-based financial institutions play in the national economy. We are at a crucial juncture in America's history and we must do more to make our differences known and prevent further legislative threats to our existence.
I have started a movement to Save the American Dream that challenges our policy makers to repeal or revise regulations that have undermined our Main Street businesses and community-based financial institutions, and stifled and derailed our economic growth. I ask everyone to join this movement and sign the petition at www.SavingTheAmericanDream.org so that we can deliver this important message to the president and Congress after the November elections.
There are obstacles in the road ahead, but also opportunities that offer great promise for the future of credit unions. By collaborating, investing in technology and creating grassroots awareness, credit unions can lead the way in reviving Main Street and saving the American Dream.
Louis Hernandez, Jr. is Chairman and CEO of Open Solutions, Inc.
