Oct 24 2011

Credit Union Sustainability: Costs, Consolidation, and Differentiation

Report  
Number  
251

Credit unions need to be lean and disciplined so that they are ready to face the certain uncertainties. We need to be sustainable.

James Wilcox
Lowrey Professor of Financial Institutions
Haas School of Business, University of California-Berkeley
John Lass
Senior Vice President
CUNA Mutual Group
Rashi Glazer
Professor
Haas School of Business, University of California-Berkeley
Report Number 251

Executive Summary

As credit unions begin to see the proverbial light at the end of the tunnel after the economic calamities of the past few years, we’re all looking for ways to take what we’ve learned during that time and use it to drive future sustainability—sustainability of our own institutions and of the credit union business model itself. A variety of credit unions made it through the hard times, but their survival wasn’t just a matter of serendipity. What does it take to survive—and flourish— as we move forward? What is within our control and how can we best manage these factors?

What is the research about?

This report documents the presentations and discussions of the colloquium at the University of California-Berkeley. Our speakers tackled the subjects of mergers (not always the cost-saving tool they’re perceived to be); the different ways credit unions can manage levers to drive performance; members as the most sustainable asset; and the role Lean Six Sigma techniques can play in long-term growth. This diverse range of topics shared one end goal: A strong future for credit unions.

What are the credit union implications?

  • James Wilcox held a discussion of mergers and the impact they have on credit union costs. While it might seem logical to assume that mergers always drive cost- reducing efficiencies of scale, the reality isn’t quite that straightforward.
  • John Lass followed that discussion with an analysis of industry growth trends and thoughts on which levers credit unions can pull to drive ongoing financial sustainability. He stressed that while the credit union universe is incredibly diverse and there are many paths to success, leverage amplifies the success or failure of any financial strategy.
  • Rashi Glazer took the discussion of sustainability down a new path by focusing on what he described as a credit union’s only truly sustainable asset: members and pushed new-economy credit unions to move beyond the “four Ps”—product, place, price, and promotion—and embrace the “four Cs”: communication, customization, collaboration, and clairvoyance.
  • Rukmini Banerjee tackled the subject of operating expenses and challenged credit unions to create process excellence in order to reduce them. She showed how Lean Six Sigma could be an effective tool to achieve this.

This report is sponsored by CUNA Mutual Group and the California and Nevada Credit Union Leagues.