Blog

Volatility and Disruption: The Perfect State for Credit Unions

karin off balance at the beach
Jeff Rendel, CSP Photo
President
Rising Above Enterprises

3 minutes

Credit unions can benefit from embracing the opportunities that come with constant change.

A few years ago, the Harvard Business Review published an article about the states of disruption across all industries. Retail banking fell into the category of “high” levels of current disruption and “high” susceptibility to future disruption. The authors referred to this as a state of volatility. Where most might consider banking durable, it’s quite the opposite.

Remember the days when credit unions focused on consumer loans, banks on business loans, and savings and loans on mortgages? Gone. Countless credit unions now offer every product once considered the exclusive domain of a specific kind of institution. That’s great for member acquisition. But when a financial institution acquires a member, that means that member left, or decided against, another financial institution. Volatility is a two-way street. But it still might be a great thing for credit unions.

The Impact of Volatility on Credit Unions

Recently a board member asked what state of disruption was right for credit unions. After thoughtful discussion, all present agreed that “volatility” was the best state for our cooperative institutions. Uncomfortable as it might be, volatility compels credit unions to constantly recognize, seek and create change for members.

Another director commented that credit unions were disruptors. When credit unions were first forming in the United States, they were new entrants offering products and services to overlooked, ignored and avoided segments in an established banking market. Today, the fact that there are more than 130 million credit union members in the U.S. proves that disruption works.

Disruption has always been with us and will continue to take the form of mobile and digital banking, mobile wallets, blockchain, fintech, and so on. Perhaps it’s time for credit unions to actively recognize the opportunity that accompanies volatility and disruption, building this mindset shift into culture and strategy.

The Value of Monitoring the Market and Your Strategy

Many credit unions actively observe other retail services for insights into changing consumer expectations and service standards, making the adjustments expected by members. Others research new and established fintech companies that turn business intelligence into experiences and provide delivery methods that appeal to consumers, as well as use artificial intelligence and automation in operations.

Further, exploring fintech partnerships and investments (within and outside of the credit union industry) can provide new sources of value for members, revenue for your credit union, and access to technology that sets the tone for the future of financial services. And, to add more volatility to the mix: charter expansions, mergers and bank acquisitions highlight that the credit union industry is prepared to continue as a unique, but always upgrading, entrant into an established market.

Many credit unions realize that, as the industry swiftly advances, systematic monitoring and enrichment of strategy is exceptionally important. A credit union CEO recently shared with me that she considers disruption, in partnership with volatility, as an active tactic rather than an outside threat. Making the opportunity that comes with volatility a part of her credit union’s culture, she assembles the executive team each month for half-day strategy sessions focused on volatility authenticated by trends, opportunities to “intentionally adjust for excellence” (her term for planned disruption), and making real-time refinements to operations. This has allowed her credit union to be nimble and always on guard for new ways to be an improved partner in members’ financial lives. The results? Double-digit growth, return on assets and equity, and a net worth ratio nearly twice the industry average.

If volatility and disruption have always been with us, perhaps the committed pursuit of the duo is spot-on. It can deliver the next point of distinction that your members are counting on for you to present. Some have discovered that the ever-changing nature of our business and members’ expectations are best met by consistently exploring new ways to add value for members. Volatility is the perfect state for credit unions.

Jeff Rendel, CSP and resident of Rising Above Enterprises, works with credit unions that want entrepreneurial results in sales, service, and strategy. Each year, he addresses and facilitates for more than 100 credit unions and their business partners. Reach him at 951.340.3770.

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