Report
387
Number
Jan 28 2016

The Network Credit Union: A Modern Alternative to a Traditional Merger

The Network Credit Union is an alternative to the traditional merger option that allows credit unions to generate greater membership and loan growth. 

Report Number 387

What is the Research About?

Benefits of Collaboration  

  • Collaborative merger models have helped credit unions reduce costs related to audit fees, league expenses, data processing, and bonds. Collaboration opens the door for employee sharing and expanded access to IT and business development tools.
  • Smaller credit unions experience great efficiency gains in a time when the entire financial services industry is rapidly evolving. The face of competition is changing with the emergence of mobile banking alternatives and the proliferation of new entrants such as Walmart.
  • When back office processes are consolidated, more attention can be given to frontline staff in order to improve transaction handling and member advising time.

Strategy for Collaboration

Keys to a successful network credit union:

  • Democratic Governance
  • Cooperative Business Model
  • Local Identity; Shared Resources
  • Common Quality Standards

Benefits of Collaboration

  • Opportunities to create more real value for members via scale and reducing footprint of back office and related distractions from better service
  • Builds a platform for further scale
  • Maintains local identities and local decision-making
  • Operates as more of a partnership, which opens the door for shared services, better alignment of the member experience, and collaboration

Challenges of Collaboration

  • Difficulty gaining widespread buy-in and agreement on decision making because of the number of CEOs and boards involved
  • How will balance sheets be aggregated?
  • Are long-term cost savings enough to generate a positive ROI?
  • Member experience supremely dependent on alignment of all the credit unions’ products, underwriting standards, services, and delivery channels
  • Would each participating credit union operate under its own data processing system?