Chip Filson
The chart below shows that the formation of married families is occurring later in life for both genders. It is a long term generational trend.
One question would be to ask why? And will the trend continue?
If yes, what will be the impact on credit union strategy? Both the impact on member demand for certain loan products and the changing pattern of employees’ career planning?
“There are some serious disconnects going on. Ones that imperil the safety and soundness of credit unions. One is the disconnect between members and their credit unions. The other is between credit unions and their regulators.
Organizations such as credit unions are market driven. Regulatory systems are bureaucratic and not market driven. The regulators are not so cognizant of just how rapid the changes in the real world are. They are just focused on a bookkeeper’s definition of safety and soundness.”
– Ed Callahan, May 1999
Voting is how democratic firms (cooperatives) and countries sustain effectiveness and legitimacy. For citizens, it is an important civic duty in all circumstances requiring elected office holders.
Cooperative democracy is strengthened every time members vote for directors in a credit union’s annual meeting. For co-op owners, it is the process that undergirds sound governance.
The National Cooperative Business Association (NCBA) is asking all co-ops to encourage member voting in the upcoming November elections.
Voting, they maintain, is the practice of cooperative principles and values. Co-ops often serve as more than just a place of business. They play a central role in the community. Especially during a pandemic they are uniquely positioned to help people register, act as a conduit for critical voting information, and assist people to make a plan to vote.
NCBA CLUSA, U.S. Federation of Worker Cooperatives (USFWC), National Rural Electric Cooperatives Association (NRECA), and Democracy at Work Institute are sponsoring a webinar today, September 15 at 1:00 pm EDT. In the webinar, presented in English and Spanish, they will share information about National Voter Registration Day and how your co-op can play a part encouraging a high voter turnout this election.
The webinar is free. Register here: https://ncbaclusa.coop/blog/how-your-co-op-can-help-turn-out-the-vote-join-this-coopsvote-webinar-on-september-15/
National Voter Registration Day is September 22, 2020. The following are additional NCBA suggestions to get involved. I personally found the vote.coop website intriguing. There is even a store!
Elections have winners and losers. However practicing the responsibility of voting creates a win for democracy, whether in a credit union or for a public office.
“I feel the wind blowing, and it’s blowing in the favor of monopoly. You can feel it in tele-communications; you can feel it in banking. It is an ill wind.
Credit unions are small. Yes, very small. But it is vital that America not say they are too small to be worth the effort of keeping them around. Because if nothing else, credit unions keep alive a principle; that principle is freedom of choice.”
– Ed Callahan, June 1997
“Encouraging the formation of new banks is another top FDIC priority. A key feature of any competitive industry is the ability for new startups to enter the market. In the banking industry, de novo banks are a key source of capital, talent, ideas, and ways to serve customers. They bring innovation and new energy to the industry.”
– FDIC Chairman Jelena McWilliams on June 12, 2019 at the CATO Institute
In the second part of this series, I share a case study of the regulatory difficulty cooperative entrepreneurs confront when trying to obtain and sustain a credit union charter. This contrasts with the FDIC’s very public effort to encourage de novo banks as a “key source of talent, ideas and ways to serve customers.”
Internet Archive Credit Union (2011-2015), while not set up by students, is perhaps one of the greatest missed opportunities for the American cooperative movement. Its demise is told in this video and article from the Internet Archive blog: http://blog.archive.org/2015/12/14/internet-credit-union-2011-2015-rip/
Leo Sammallahti, marketing officer for Coop Exchange, sent me his summary of this landmark effort:
Started by one of the founding pioneers of the internet age, Brewster Kahle, it attracted tech talent alongside experienced people from the financial sector. They had innovative ideas on how they could use technology to transform banking, motivated by a genuine passion to help people, not to make profits for themselves.
They managed to charter the credit union in 2011, but the regulations crushed it in 2015. Just one example – their total loan portfolio was restricted to $37,000 when they had $1,000,000 in reserve for bad loans!
I have only read their account of the events, simply because there is no one making the case that the regulations that crushed them were reasonable. Maybe someone knows something I don’t, and it makes more sense. But I’m afraid that is not the case. And if so, who suffers? Ordinary consumers – the same persons the regulations seek to protect but who now have a diminishing amount of choices where to put their money.
But here’s one interesting thing the founders mentioned that might give some hope. They said that technology makes it “easier”, not harder to start a credit union than ever before. Sometimes the reason why new credit unions are not considered is partly due to technology – the reasoning is that once you need sophisticated software instead of pen-and-paper to run a credit union, it gets more expensive to start one. But according to the founder of Internet Archive, the opposite is true.
American credit unions know how to lobby – they have had to defend themselves from attacks from the banks, perhaps one of the most powerful industries in Washington. Could some of that political power make it easier to charter new credit unions? From the average American’s point of view, it would hardly be an issue anyone would be opposed to, regardless of their political leaning. Can the movement afford to miss opportunities like the Internet Archive Credit Union?
FDIC Chairwoman McWilliams’ closing commitment to new charters at CATO:
“Finally we launched a nationwide outreach initiative focusing on de novo bank formation, beginning with a roundtable discussion in DC in December. We have since hosted similar discussions in each of our six regional offices, which have been constructive and thoughtful.”
Every product, brand, business, service, and even non-profit institution has the challenge of engaging the next generation of users. Or risk going out of business.
Coca-Cola’s marketing focuses on this never-ending generational transition. The One Day Last Summer ad series (from 2018) targeted Gen Z with a series of Vimeo shorts about high schoolers’ summer fun before college.
Coca-Cola also tapped into this generation’s social activism with the initiative summarized in the following release:
Coca-Cola launched the “Dear Future [Community] Challenge” inviting Gen Z and young Millennials to be changemakers and better their communities. The beverage giant has identified 15 communities across the U.S. where the company has bottling centers and other community stakeholders to partner with locals and address their concerns. Individuals ages 18-24 can submit proposals on how to strengthen these areas, and for residents outside those selected locations, there is a national competition. To help bring their ideas to life, winners will receive a $30,000 grant from the company as well as support and guidance from former Coca-Cola Scholar Foundation recipients and other community partners. Caren Pasquale Seckler, Vice President of Social Commitment for Coca-Cola North America, explains the engagement approach saying, “We really want to write the next chapter together with ‘Dear Future’ by engaging consumers and doing something together, [as well as] engaging all of our local partners in identifying all of the issues that are truly meaningful to them.” Coca-Cola is spreading the word with a “Dear Future” ad, which features employees and former scholars, as well as print, social and TV spots.
Individual colleges will also thrive or slowly expire depending on their perceived relevance to each new cohort of students. George Washington University in the heart of DC has long attracted liberal arts and science majors while being in the nation’s capital. But like a number of leading universities, it found that prospective students were not just interested in learning, but also applying their passions to start businesses and social enterprises. Hence the founding of the GW Office of Innovations and Entrepreneurship.
The Office sponsors an annual New Venture Competition:
The winners receive significant cash, mentoring, legal and in-kind support to carry their ideas to the next stage. The summer showcase provides another opportunity for startups to garner resources and external interest through the University. The nine winners from this summer’s 2020 GWSSA program are linked below.
These 8-12-minute pitches are classic models of the “elevator speeches” honed to attract investors. They demonstrate the iconic American spirit of innovation and inspiration as well as the necessary business disciplines to succeed.
The cooperative challenge is not merely honing the Coca-Cola skill of attracting the next generation of “customers” but more critically, captivating those members who want to be credit union “entrepreneurs.”
Those students who want to fashion the credit union model for the needs and virtual world of their generation, not copy what has gone before. The GW New Venture Competition awarded one of its prizes three years ago to a group of freshmen who proposed offering a credit union uniquely designed to serve the needs of fellow students far into the future.
Are Credit Unions Missing Out on the Next Generation of Entrepreneurs?
Those freshman winners are now entering their senior year. They are transitioning the project’s leadership to underclassmen to continue the chartering effort. The challenges are not technical or even financial. They have completed all the policies and projections and raised the minimum level of donated funds NCUA said was needed.
But NCUA’s chartering process is endless. There is neither encouragement nor transparency. NCUA’s attitude appears to be “no one has a right to a charter;” regardless of circumstance. The practice is to extend the process until people just give up and go away.
Public companies and private universities have made significant changes to attract generation Z’s loyalty. And to continue their institution’s relevance and sustainability. Will credit unions just attract Gen Z as users or can it also include those who aspire to create the next evolution of the cooperative model?
Tomorrow: The fate of one credit union entrepreneur.
The following comment from Leo Sammallahti, a coop enthusiast from Finland, was posted in response to “From the Field: Democratic Governance Makes a Difference”:
Voter participation in large cooperatives can be increased from the low level it is in the US.
I’m from Finland, where the most widely used bank is the OP cooperative, with 2 million members out of a population of 5.5 million. Around 15% of the members of the largest branch voted in the board election, where any member who would get a signature from 3 other members could stand as a candidate. From hundreds of candidates, 10 receiving most votes were elected – the votes are very contested!
This does not require a long tradition – Tipton and Coseley Building Society in the UK increased their voter participation more than ten-fold, from 1.7% to 18% between 2002 and 2009 by introducing donations per vote cast, online voting and pre-paid reply envelopes.
Here are few ideas how credit unions could do this in the US:
Have contested board elections. There are many credit unions that do, and they seem to be doing fine. Research should be conducted on what is the effect – would be great to hear your thoughts on contested board elections in credit unions.
Cooperation between credit unions by having them coordinate the the vote on same day in all or many credit unions, and work together to campaign to get members to vote. Maybe the shared ATM network could be used to advertise members to stand for board or vote in board elections by showing a message encouraging them to do so when they use the ATM and wait for their cash?
Instead of board members being unpaid volunteers, pay them according to voter participation of the members. So if 10% of members vote, each board member receives 100$ per monthly meeting. If 20% vote, they receive 200$, etc.
To get paid more, one would have to encourage members to hold one accountable. There’s a lack of incentives for members to vote as #coop membership grows. Incentivising elected representatives to increase participation could help. It could incentivise engaging contests, as more votes for candidates not elected would increase the pay for those elected. Might be that it would backfire, and members would be *less* likely to vote if it meant paying the board more! But nevertheless, it could be tested in a low-risk way.
It would be a performance-related pay model designed uniquely to cooperatives that could not be adopted in conventional businesses.
Leo Sammallahti
Coop enthusiast from Finland, where 90% of the population is a member of at least one cooperative
One of the late summer pleasures that has been cancelled around the country is the fair season. In some locales this is the state fair. In Montgomery County, MD, it is the Agricultural Fair.
These week-long events display the animals and products of an area’s farmers. “Livestock” ranging from cattle to rabbits compete for best of show. Winners are honored with blue ribbons on their stalls and cages. Exhibitions of colorful vegetable tables, bell jar canning displays, hand-made and knitted clothing remind spectators of a time when America was composed of smaller communities skilled in all the arts of self-sufficiency.
In addition to animal races, judging contests and musical shows, there is the carnival of rides, 25-cent games of chance, and food.
Cotton candy and fairs are long time partners. But the product is only spun sugar. It is made by heating and liquefying sugar crystals. This liquid is then spun through minute holes causing the sugar to condense into fine strands. It is collected on a paper cone. Coloring and flavoring can be added to give the cotton-like texture a light blue or red shading.
Made on the spot with its gossamer texture, it is sometimes put in a plastic bag to keep up with demand. While superficially inviting, the product has no food value. Just hot air and a sweet taste.
On June 9, NCUA Chairman Hood made a surprise announcement of the signing of a 3-year collaborative agreement “to bring small business and credit unions together and expand awareness about EXIM programs.”
The announcement was unprecedented. As the topic of Export-Import Bank of the United States (EXIM) lending was totally new, I FOIA’d NCUA asking for all agency documents for this unexpected “enterprise.”
The documents provided were already in the public domain: the Memorandum of Understanding, the June 9th press release, and Chairman Hood’s video statement the day of signing.
This “background” information included the following statements:
Given these statements, I asked the agency to confirm that I had received all the relevant documents about this new program. On August 9, the agency reconfirmed they provided all they have.
The documents show no agency or credit union data or research to support this program. There is no trade association or credit union interest expressed. There is no example of any credit union member, whether small business or natural person, inquiring about this possibility.
The NCUA board was not part of this event. It was a solo signing by the Chairman, even though former Chairman McWatters had been nominated to serve on the EXIM board by the President in 2016.
NCUA had nothing to show the relevance of this program or “the discussions that. . .began many months ago.”
At this same time, credit unions were in the midst of vital Payroll Protection Plan emergency lending to help businesses and members through the largest quarterly GDP economic downturn ever recorded (the second quarter of 2020).
According to the article “Credit Unions Help Save More Than 1.1 million Jobs Through PPP,” credit unions in all 50 states and DC disbursed 11,424 loans exceeding $150,000 (1.73% of all loans in the $150K-$1 million category). Total balances of $3-8 billion had to be estimated because individual loan amounts in this size range were not provided.
For loans less than $150,000, credit unions granted 179,085 loans for a total of $4.67 billion. By number of loans, the credit union share was 3.29 percent, and by dollar balances 4.23 percent of all borrowers.
This analysis of Treasury Department data ends with the most active coop lenders:
Mountain America Federal Credit Union ($9.3B, Sandy, UT) originated more than 7,000 loans, more than any other credit union. Of these, more than 6,560 were less than $150,000. Greater Nevada Credit Union ($1.1B, Carson City, NV) originated the most loans of all credit unions in the larger loan category — almost 700 loans more than $150,000.
Credit unions are doing what they do best in a crisis: lending to members. As stated in the article, “credit unions played a larger role in lending to smaller companies, underscoring the movement’s commitment to Main Street business borrowers.”
By contrast in NCUA’s EXIM signing video, a bank spokesman says there “is nothing active now.” The banks chairman Kimberly Reed reported that the total financial assistance provided small businesses in 2019 was $2.3 billion. Credit unions, in the three months included in the Treasury data, extended over $9 billion in the critical PPP initiative.
NCUA has published nothing about this extraordinary effort. Instead, as this was being done, NCUA was spinning cotton candy. Irrelevant in both context and member need, this PR event was “just hot air with a sweet taste,” while credit unions soldiered on confronting the crisis at hand.
The following comment was posted by Leo Sammallahti, a Finnish advocate for cooperatives, in response to “The Key to Credit Unions’ Future: “Trust Each Other””:
I have tried to find but have not come across any research looking into whether having contested board elections has an impact on the performance of a credit union. Some credit unions that have them seem to do just fine. Yet if I’ve understood correctly they are rare in US credit unions. Imagine if only 10% of members of US credit unions would vote – that would be a massive democratic exercise of over 10 million Americans. That would demonstrate the cooperative difference to the mass membership in a way no advertising campaign can.
In Finland, with a population 5.5 million, the largest grocery chain is a cooperative owned by 2.4 million people and the most used bank is the OP cooperative, owned by 2 million people. 15%-25% of the members vote in the *largest* branch of these cooperatives. The US credit unions would mobilise over a million Americans for every 1% of increase in voter participation. Let’s not underestimate the impact of such a mass mobilisation.
