Nov 17 2015

The Access Economy and Credit Unions: Banking Implications of Sharing and Collaborative Consumption

The access economy is a global movement away from private or traditional ownership toward collaborative, collective consumption—or put simply, sharing. Entrepreneurs are capitalizing on this trend to offer consumers worldwide access to pools of products and services, inspiring them to own less and share more—with family, friends, and strangers. The business to-consumer (B2C) model of production/consumption is giving way to the consumer-to-consumer (C2C) model, often called peer-to-peer, in which the business institution exists in order to enable resource access, or the sharing of resources between consumers.

Credit unions were onto this “new” trend in the finance world in the 1800s, when farmers first combined resources to cooperatively acquire equipment, on credit, before the harvest season. Credit unions have continued in a member-to-member, collaborative financial model that is, in light of the access economy we see today, extremely farsighted. However, when talking about the share or access economy financial models, credit unions are not mentioned in the popular press.

This research explores why credit unions have lagged behind in the access economy. The credit union’s source of competitive advantage stems from the collaboration with members that creates a sense of belonging and the feeling of being “taken care of.” This gives credit unions a competitive advantage over traditional banks and other financial institutions in meeting the needs of their members. It is important to understand how credit unions can leverage their forward market-facing position, their relationships with members, their mission, and their resources into a competitive advantage in the access economy by being in tune with their members.

A forward-looking perspective toward reinventing member-to-member financing will allow credit unions to be the financial institution of choice for the shared access economy. This can be achieved by:

  • Embracing and publicizing the original credit union mission. Credit unions can capitalize on the access economy’s growing message surprisingly easily. The original charter for the creation of credit unions aligns almost identically with the share economy’s ethos and goals. Credit unions should trumpet their roots as member-to-member wealth aggregators and member-to-member lending as the basis of the credit union mission.
  • Acknowledging the threat and opportunity of peer-to-peer lending companies. Peer-to-peer lending companies like Lending-Club and Prosper have become the face of the sharing economy’s financial market. They are being touted as market disrupters. This is a great threat to credit unions, but it also poses an incredible opportunity. As these companies are being touted as the financial face of the share economy, credit unions can target their messaging to capture this market segment.
  • Reviewing family requirements in financial instruments. Financial instruments that have strict family definitions and requirements not only rule out all sorts of alternative household arrangements but also restrict financial products catered to these arrangements. The spirit of credit unions is member wealth aggregation and wealth access. Moving beyond legally sanctioned collectives aligns with the credit union mission.
Report Number 379