A Finnish Co-operator’s Suggestion for U.S. Credit Unions

The following observation is from Leo Sammallahti, Marketing Manager for the Cooperative Exchange.   He follows cooperative enterprises in Finland, Europe and the United States. His article suggests a specific investment credit unions can make to help another cooperative effort in the US.

“There are many examples of new legislation seeking to help cooperatives.  But  first we in the movement should  try to find ways to utilize the existing legislation better. Before illustrating this existing opportunity, I want to present something extraordinary happening in Iowa City.

Taking on a FinTech

In 2018, the local food delivery app in the city was bought by Grubhub, which already controlled more than half of the market in the US. They doubled the delivery commission from 15% to more than 30%, wreaking havoc among the local restaurants.

John Sewell was one of those restaurant owners, but he had also worked in  organizing purchasing cooperatives and similar arrangements for rural hospitals. He started an initiative that grew into Chomp, a cooperative food delivery app owned by the local restaurants.  Chomp takes a modest commission and distributes any surplus generated back to the member restaurants.

By the end of the year, it had outcompeted Grubhub with twice as many restaurants on its platform. It became a sort of mass movement with the majority of the residents using it. Rather than a global monopolistic rent-seeker, it transformed the model into a local democratic institution creating community wealth.

Typically, each local market has one delivery platform that with a leading market position – most likely Grubhub. Restaurants join the platform with most customers and customers join the platform with most restaurants.

These “network effects” drive platform  businesses models like food-delivery apps towards a “winner takes all” outcome. These kinds of monopolies and monopsonies are exactly one of the market failures cooperatives counter and fix.

Once a for-profit company app gains a dominant market position, its incentive is to extract as much value from the restaurants for the shareholders as possible. However, for a restaurant owned cooperative platform, the incentive is the opposite. If it gains a dominant position, it has no motive to extract monopolistic “rents” from the restaurants.

Rather it can use economies of scale to lower costs. set lower prices or pay higher dividend rebates. By doing this the monetary benefits go back to the restaurants which pay the delivery commission. If the cooperative  kept the money for itself, the restaurants could elect a new board of directors.

The Credit Union-Cooperative Opportunity

This cooperative food delivery option is now being replicated in seven cities (1)– one in Jersey City, New Jersey.  This is one of only eight states where state chartered credit unions can make direct equity investments in other cooperatives.

Only one credit union in the country, Vermont State Employees Credit Union, is actually using this legislation to invest in other cooperatives. This authority is an example of a very useful but underutilized legal tool.

An immediate example where this option could be especially useful is  helping local restaurants in Jersey City who  are creating a platform delivery cooperative to keep money circulating locally and more equitably.

Supporting Local Economies Via the Members

However, there is much any credit union could do besides investments. It’s common for credit unions to provide retail discounts for their members, for example, 30% off  on movie tickets.

Restaurant cooperatives promote themselves with discounts sending a coupon code for a free first delivery. Credit unions could distribute this discount for a free first delivery in the six cities where  a restaurant owned delivery platform cooperative is being formed.

These discounts provide a tangible benefit in the everyday life of a credit union member. It would align credit unions with the wider cooperative ecosystem generating community benefits and social capital. It would help the restaurant delivery coops reach a mass audience  quickly and inexpensively.

It reduces the uncertainty of the startup and avoids the costs of  big tech ad intermediaries like Facebook or Google. Instead, credit unions could directly reach around one-third of adults, on average, who are credit union members.”

(1)The six additional cities are:

KNOXVILLE, Tennessee

OMAHA, Nebraska

RICHMOND, Virginia


TAMPA BAY, Florida

LOS ANGELES, California



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