Category: Cooperative Design

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The Legacy Effect of Credit Unions

I’m 78 years old.  Many  requests for donations to support various organizations from prior years now come with a special option: Become a legacy member.

These institutions cover the entire spectrum of public and civic service: hospitals, colleges and universities, churches, choral groups, and local theaters.  The appeal here in D.C. even includes the many public museums, National Archives, Smithsonian institutions, Library of Congress et. al.  that are part of the Washington community.

A legacy commitment means that an individual will make a bequest to the organization in their will or via an estate planning vehicle such as a trust.   It is not an immediate contribution, but rather a commitment made upon passing to support an endowment-like fund for the organization’s continued operations.

These legacy commitments are shown separately in donor listings to recognize this future intention.  Last Sunday was Legacy Sunday at our local church.  The bulletin insert asked Are You a Member of CCPC’s Legacy Society, listed the names of both living and deceased members who had made a commitment along with statements of support by individuals such as:

“I pledge every year.  None of us know when we will pass away, but I feel like this is a last commitment to the church.  Think of it as my last pledge.”

Credit Unions’ Legacy Commitment

A credit union recently sent me their founding story from 74 years ago.  It reads:

On April 29, 1949 ten tire factory floor workers set their names together in a bond of common trust that lives today as the cornerstone of the credit union.  

Long on hope, but short on cash, the credit union charter members carried a few dollars around between work shifts in a lunch box distributing $5 and $10 loans for the small essentials of life.

On a factory floor or at a cafeteria table, in a quick exchange of papers and promises between shifts, the hushed request for a $10 loan for groceries, the nod of a head in answer, a review meeting after hours, a handshake-this was Local 310 Credit Union in action in the founders’ first days.

A plink of quarters in a metal lunch box carried from shift to shift sounded the word: here is a resource created by workers for workers, that feeds families, futures and trust.

That credit union still thrives today.   Those founders met not just current needs, but created a legacy that continues to serve members and communities generations later.

The Legacy Impact from a Lunchbox

Like all founders, these credit union incorporators created a perpetual legacy not just a financial intermediary for the present.  Today this credit union’s  board and members carry on the founders’ belief in serving their community through an organization “where they know your name.”

Some current members are the grandchildren of the first organizers.   Their legacy is to continue to “pay forward” what they inherited to their children’s children.

These members will soon celebrate their 74th Annual Meeting.  Almost 300 have signed up for the event with dinner. They are witnessing to the power of service, hope and trust that a cooperative brings to  members. Far beyond the current economic uncertainties or the latest fiscal year outcome.

These individuals both continue and increase the legacy they now celebrate, so the credit union can continue to be there for future members.

As stated in the credit union’s founding story:  we stand on the shoulders of legends who carried a crumpled dollar bills from lockers, to cafeteria, to work stations in a steel lunch box-symbol of a special bond between people who care about people.

That is a Living Legacy we should all want to support.  A unique benefit of cooperative design.

 

 

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Lessons From the Field: Sharing the Good and Bad

Managers’ monthly reports to staff are an important way of communicating both successes and short comings.

This April report includes a fraud effort recounted in detail.  The learnings prevented a second theft. The CEO  then characterizes the $125,000 loss as a tuition payment.

We processed a wire transfer request for a member on Friday, March 24 for $125,000 and unfortunately incurred a fraud loss.  The caller impersonated the member, knowing the answers to all out-of-wallet questions asked (e.g., name, address, account number, mother’s maiden name, etc.), and also knew the account’s code word and year that the account was opened.  The phone number was spoofed, making it appear to be the member’s phone number. 

The caller changed the contact information of the account, then called again to request the wire transfer.  Another wire request from that account was made on Monday, March 27 and the call was appropriately escalated by front line associates.  After determining that identity theft occurred, the account was locked down, law enforcement was contacted, the member was contacted, and appropriate affidavits of forgery forms were executed. 

Our fidelity bond which would typically cover insured perils such as this will not cover this loss because we didn’t place a verification call to the old number on file.  This step is required by the bond company and is documented in our wire procedure for all accounts with contact information changes within the past 30 days.  The wire transfer procedure was amended and training was being enhanced as appropriate. 

As is typical, losses such as this are thought of as tuition payments, making everyone on the team smarter as we move forward.

Everyone in the organization needs to be aware of this fraud threat. On April 25 the same fraudster called into the lending call center.  He had enough data (name, address, account number, last four of social, etc.) to convince the first associate he talked to that he was a legit member.  He then used social engineering techniques to obtain various other pieces of account information.  He accessed online banking and changed some contact information; he again requested a wire transfer. 

The fraud attempt was caught so no additional loss was incurred.  But we still have to deal with reputation risk with our member and establish a brand new account, which can be time consuming. 

Net Promoter Scores:  Both 10’s and 0’s Shared

Many credit unions rely on the net promoter score processes  to monitor operational performance in real time.

Often just the overall score, usually in the mid 80’s, is shared with staff and the overall trend.  Sometimes a compliment will be added to the update.

This credit union CEO believes both high and low scores can inform and lead to better service.  He shares the verbatim comments.  Here are a few examples from the 248 remarks submitted by members during the month:

  10. When I had my debit card number stolen my savings & checking accts were cleaned out, you all took care of me. I was very upset! I had all my money back in 2 days. I’ve always been a fan of credit unions instead of banks.

 10. The customer service was excellent and Palisha was amazing. She answered all of my questions and made sure I was comfortable with everything. She broke everything down for me and was very communicative.

 10. Gave me loans when my own CU turned me down.

And areas for improvement:

 8. Online banking is not user friendly, when I contact the branch no one is helpful. I set up a credit card payment years ago and want to increase the amount and no one seems to be able to help me. I bank at a few other institutions as well and I never have the same issues.

  0. Make it so the app is usable to pay car payments without having to have a bank account- sign in to car account. Same with website. Such a chore to make car payments.

 0. because I live in Tennessee now. Open a branch in Knoxville.

4. Work with me on my credit or a loan to build credit I have always paid loans off and now my income is more annually.

Transparency and effective leadership are interdependent.  Staff feels part of a team when occasional shortfalls, or even errors, are transformed into  lessons from which all benefit.

 

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University Student Entrepreneurs Win–but Credit Union Charter Still Distant After Six Years

The current generation of students is attracted to business and social startups.  Many major universities now offer competitions encouraging students to design and launch new business and non-profit ideas.

These efforts are so widespread that there are now multiple rankings of the leading programs at colleges and universities across the country.  Here is one showing the top 20 competitions.

One of the leading forums is at  George Washington University, here in DC.  The results of its annual New Venture Competition were just announced.

In their 2023 contest, 417 participants spread across 161 teams participated. Judges awarded $357,200 in prizes, including $163,000 in cash to the winners.

Twelve finalists received a minimum of $5,000, across four tracks: Business Goods and Services, Social Innovation, Consumer Goods and Services and Healthcare and Life Sciences Tracks.

Participants represented nine of the 10 GW schools resulting in a diverse range of innovative startup solutions.

GW President Mark S. Wrighton commented on the outcome: “If this is an indication of the next generation of problem solvers, then we are all in good hands. It is extraordinarily impressive to hear about the diverse set of new businesses.” 

The full profile of all winners in all five tracks and their ideas can be seen in this listing.

A Credit Union Winner

In April 2018 three GW freshman from  different academic schools devoted much of their first year in college to this competition.  They reached the finals and were awarded $10,000 to continue implementing their project.

Their new venture proposal was to charter a credit union for the GW students and community.  I recorded their five minute “pitch” on my iPhone from the audience.

Their words provide the promise that every credit union offers including the need and importance of financial literacy, member ownership and direction, online delivery, better rates, and strengthening the community with a firm “run by students for students.”  Their slides are in the background on stage.

https://www.youtube.com/watch?v=s_xCpDe9a3U

(https://www.youtube.com/watch?v=s_xCpDe9a3U)

What Happened?

Dozens of students volunteered their time to complete the charter application, the group raised over $100,000 in donated capital and recruited an experienced advisory board of credit union professionals and GW faculty.

NCUA has twice rejected hundreds of pages for the  charter applications.  The agency has requested updated market surveys, revised financials, and numerous other shortcomings, all the while hinting that more capital would be desirable.

Meanwhile the three freshman who devoted a significant part of their college career to this effort have graduated; however two still serve on the advisory board.  New student volunteers have persevered to carry on the founders’ original concepts.

NCUA has not assisted but rather stalled this six- year effort.

This status occurs despite the words in the February 28 presentation by NCUA’s Vice Chairman, Kyle Hauptman at this year’s CUNA’s GAC conference:

Our society isn’t the best at getting people to save and invest. This is where credit unions come in, with financial literacy and savings programs that improve their members’ financial wellness.

Financial wellness can save relationships. Financial wellness is a great product that we only buy if we value it more than all the cool ways to spend money. Credit unions help people achieve financial wellness. . . Financial issues can be a dry topic, but it’s not about the money itself – it’s about living your best life.

My three personal priorities for my term are:

  • Revamping the de novo chartering process. . .

I’ve good news on all three fronts.

On the issue of de novos, we’ve revamped and streamlined the chartering process. We will be rolling out a provisional credit union charter that fixes the chicken & egg problem, whereby a potential credit union wants to get its initial capital from a CDFI but can’t get that capital until we’ve issued them a charter. Still, we wouldn’t issue the charter until that credit union has the capital.

I’m proud of these improvements – I think it’s a part of facilitating true financial inclusion. I love seeing announcements about new charters. . .

Except this streamline chartering process does not exist. When asked about this “improvement” and the “provisional credit union charter”, there is no response.   That effort, like credit union chartering, is stillborn.

Instead of supporting the next generation’s startup energy and goals to serve their community via coops, the NCUA is teaching potential supporters about the age-old witticism, “I’m from the government and here to help you.”

Apparently even board members cannot accomplish their priorities.  How can de novo credit unions overcome the bureaucratic obstacles that even NCUA’s leadership is unable to move forward?

New credit unions are an endangered species.  The future of the coop system is at risk.  Not because the billion dollar segment which manages 75% of assets will disappear.

Rather it is because this generation of student entrepreneurs is unable to overcome government impediments.  The result is that  these motivated, creative individuals will find their opportunities for the benefits presented in the “pitch” above through other creative organizations.  I suspect they will be called FinTechs.

 

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American Pastimes:  Baseball and Credit Unions

The culture of credit unions-locally founded, community centered, volunteer led by committed fans-mirrors  the passion for baseball across America.

Recently I published the story of Day Air Credit Union’s support for the Dayton Dragons minor league franchise.  The team has the longest running consecutive sellouts of any professional sports team in America.

Credit unions are involved in the sport across the country.  From sponsorships of local Little Leagues to  university teams to minor league affiliations up to PenFed’s  support for the Washington Nationals, baseball and credit unions are natural allies.

Recently a baseball player at Springfield High (Illinois) where I graduated decades ago, wrote his thoughts on baseball’s lessons for life for the student newspaper, The Senator.  The author, Seth Impson, seems an excellent player based on his self description.

His thoughts about the sport show why baseball is often called The Game of Life.

Anyone who knows me knows I live for the game of baseball. There’s nothing better than the smell of pine tar and the sound of a ball hitting the bat. Nothing better than feeling the wind in your face as you round third base. Nothing better than dirt and dust flying everywhere as you slide into home. But it is more than just a game; baseball has taught me a lot about life.

  1. If it’s close, swing the bat.

Too many times in life fear keeps us from trying something new or different. We let opportunities pass us by because we’re afraid we might fail. Then later we wish we would have gone for it. In baseball, if a pitch is close, you have to take a chance and swing. It’s the same way in life– it’s better to give something your best shot and risk failure than to stand there looking while the perfect opportunity flies by.

  1. You’re only as good as the guys behind you.

I had a lot of success pitching last year. I struck out 79 guys, walked 17 and only gave up 54 hits. But I threw 65 innings. I faced 264 batters. Do the math- the guys on the field behind me made plays and got 114 guys out. Over 100 times, a batter hit the pitch I threw to him and someone else on my team made a play. Only 16 of those 264 players scored runs against us. Without those guys on the field with me, my season would not have been anything special. In life, surround yourself with people who have your back and will make those plays when you most need them.

  1. Practice makes better.

No, that’s not a mistake. I didn’t mean to say “practice makes perfect.” The fact is it doesn’t. No one can ever be perfect. There is always room for improvement. But if you put in the work, you will get better. Work each and every day to come further than you were the day before and bettering yourself. The goal of life is to make yourself a better person than you were the day before, baseball is the same way.  You will see growth.

  1. Don’t let them see you sweat.

There are moments in a baseball game where you find yourself under intense pressure. When your team is down by one with a runner on third and two outs and you’re up to bat. When you are on the mound about to face the best hitter in the conference. Whatever it is, you can’t let the other guys know you’re stressed. You can’t let someone else get in your head. Take a deep breath and focus on the task you need to accomplish.

  1. Failure builds character.

Baseball is a game of failure. In the MLB, a batting average of .300 or higher is considered good. That means a player gets a hit 3 out of every 10 tries. That also means 7 out of 10 times, that player gets out. On Tuesday I flew out, struck out and walked. I didn’t get a single hit. But the next day I hit two triples and a homerun.

In baseball, you will fail. Life is the same way. You just can’t let failure stop you from getting up and trying again, because the next day things might go your way and you’ll find yourself right where you want to be. This builds persistence and in every tough, successful person there are characteristics that sets them apart. Baseball brings out these certain things, builds them up and creates strong character. 

 

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Money Management and the Voices of Gen Z

Each year the Credit Union Foundation of Maryland and DC sponsors a contest to distribute $12,000 in scholarships for college and trade school bound students.

There are three categories of awards:  ten $1,000 essay-based scholarships, one $1,000 video-based scholarship, and/or one $1,000 photo-based scholarship.

The topics for each category this year are:

This year’s essay topic: “In life, things can happen fast.  “More than two-thirds of people in America are not financially healthy. How would you define financial health? Describe how your credit union has helped you understand how to manage your money.”

This year’s video topic: “To be financially literate, or financially healthy, is to know how to manage your money. Show one lesson you’ve learned from your credit union about managing your money.”

Photographers are asked to capture an original photograph that represents the credit union core value of “Cooperation”

The contest is marketed through the League’s member credit unions.   The Foundation provides lobby posters, newsletter articles and access to all applications.   The result:  hundreds of submissions in all three categories received by April 15.

The Judging Begins

Now the fun begins. The foundation seeks over a hundred volunteers to review the submissions.  I signed up.  I was sent 19 one-minute videos and 10 essays to review and score.   The foundation provides a scoring model for the evaluations.  The progress is tracked automatically in a spread sheet for each volunteer reviewer.

A Generation’s View of Financial Health

I started with the 19 one-minute videos and reviewed all in a single sitting.   Some were applicants sharing their personal stories.  Others were more elaborate creations with one offering a “film” on the topic.  Some acted out short skits.  Several used animations to create their message.

What all had communicated was common sense money management suggestions or experiences.  The submissions showed clear financial maturity.  Following are three different approaches to the topic.

The first uses animation to communicate the lessons from a first-year college student.

(https://www.youtube.com/shorts/svZv-szOgCo)

A second video took a different tack and discussed just one topic: should a young person buy crypto or not?

(https://www.youtube.com/watch?v=_mrsj5AsZjI)

Another example by a high school student demonstrates the benefits of financial courses helping younger people understand the basics of money management.  The word she uses for the result is empowerment.

(https://www.youtube.com/watch?v=gYkoreEXmHY)

The Power of  Gen Z’s Financial Minute

While my sample of videos is a small portion of the hundreds submitted, these brief summaries show an awareness of financial skills that are well grounded.  These minute videos are literate, smart and often creative messages on the basics of financial life.

The Foundation’s contest is much more impactful than just the $12,000 distributed to the winners.   It provides hundred of personal snapshots of this generation’s awareness of financial responsibility.

These submissions rarely mentioned credit unions, but all of the applicants would have learned about the opportunity via a credit union.

For the hundreds of students continuing their post high school education, the volunteers reading the applications and the credit unions promoting the contest, this is a special cooperative effort.   It highlights the Foundation’s mission of financial self-sufficiency.

The student, volunteer and institutional contributions meld into a financial quilt of financial learnings from the upcoming generation of credit union members.

My only thought: Can more credit unions individually or collectively create this learning opportunity.  Perhaps the MD/DC Foundation might  share their software and infrastructure that makes this seem so effortless.

I certainly learned much.  It  creates confidence in this new generation’s understanding of financial responsibility.

 

 

 

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The Member-Owners’ Annual Meeting: Compliance Obligation or Celebration?

I attended my first credit union 2023 annual meeting recently.  No, I was not a member.  However the credit union published its Zoom link.   Anyone could follow along with the hundreds of members who attended in person.

The agenda was informative.   The CEO and three senior staff made presentations-all specific updates on future projects.   This formal meeting had apparently been preceded by an all-hands gathering soliciting open dialogue.    Questions were asked from the members,  but few spoke up.

It was a positive experience.  Well organized.  Direct communication that was respectful of the owners. The post-covid combination of in-person and virtual participation expands the opportunities for real member engagement and owner feedback.

But that is not every credit union’s plan.

The Required Meeting Notice

Yesterday I received an email with the Notice of my credit union’s 2023 Annual Meeting.  It opened with these words:

We are conducting the 2023 Annual meeting by Electronic Transmission as provided in Section 411 of the Amended and Restated Bylaws of the Credit Union effective April 28, 2017 (the “Bylaws”). The Annual Meeting will be hosted by video conference on April 28, 2023, at 5pm PT. Members can register by submitting an email request to annualmeeting@thecu.org.  Questions will not be taken during the Annual Meeting, so please submit any questions that you have in advance along with your attendance request. Answers will be provided during the virtual meeting.

The Notice then listed the material that could be downloaded in advance, such as the 2022 Annual Report, prior minutes and concluded:

Please note that there is no new business to discuss. The only matter requiring a vote of the members in attendance is approval of the 2022 Annual Meeting minutes. The four Directors nominated will be approved by acclamation of the Board of Directors as provided by the Bylaws.

The Notice ended with a brief economic update from the CEO headed:

We’re in this together 

The CEO’s comments summarized important market events in 2022 and the outlook for the coming year.  The message ends with these words:

Whatever 2023 brings, the credit union has the financial stability to continue supporting our members and helping them deal with whatever financial challenges come.

A Member “Woodstock” Celebration

Next month I was invited to a smaller credit union’s annual meeting to make very brief remarks to members.  To have an idea what might be appropriate I asked the CEO about the event.

It will be in the evening with dinner at the local Holiday Inn banquet room.  All members invited.  We will introduce new board members and go through the business.  There will be a local speaker who works at a non-profit in the areas we serve.  We hope you can give your thoughts about the future role our credit union can play in members’ lives and community.  You have 15 minutes. Expected attendance of 100-150.

We discussed the idea of brief video interviews with members to ask about their credit union experiences.  The CEO had done this at a prior credit union’s annual meeting with the question, if we were in a court of law, would anyone be willing to testify on the impact the credit union made on them?  Member after member told their story.

That is now being planned for  use in future member communications.

Prior to the event,  the CEO asked if I could visit the credit union, see the local community and some of the organizations with which they partner. And have dinner with the Board.  I jumped at the chance.

The CEO expects to retire next year. He has a transition plan underway and wants to affirm his belief in the credit union’s essential role and its vital future.

This is the kind of event that gets me excited.   I can’t wait to see his team, the credit union’s activities and hear the member stories.  A brief “Woodstock event” for the cooperative’s member-owners.  And for me.

 

 

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Are Credit Unions Being Disrupted?

Disruption is both an adjective and a noun.  A word to describe changes upsetting the status quo in a market.  And a way to compete against larger and stronger foes.

The business theory with this name was formalized by Clayton Christensen. In this interview with MIT magazine the essential ideas are laid out.  He describes the circumstances as follows:

Disruptive innovation describes a process by which a product or service powered by a technology enabler initially takes root in simple applications at the low end of a market — typically by being less expensive and more accessible — and then relentlessly moves upmarket, eventually displacing established competitors.

Disruptive innovations are not breakthrough innovations or “ambitious upstarts” that dramatically alter how business is done but, rather, consist of products and services that are simple, accessible, and affordable.

In this process identifying the “job to be done” for the consumer is an important insight.  See below for the example of a disruptive example coming at credit unions from below.

The Adjective

A second approach to understanding disruption is to identify some consequences that become visible in markets when the process is at work.   Is the credit union system being disrupted?  What would be indicators?  Who is doing it?

Author and speaker Greg Satell wrote in an April 1, 2023 article “4 Signs Your Industry is Being Disrupted.” Among the four are events that may be familiar.  Note he is not writing about credit unions or even financial services.  Some of his terminology may seem more appropriate to manufacturing, but I believe his observations are still helpful in understanding where competitors are emerging.

One sign is maturing technology.  The truth is that every major technology has a similar life cycle called an S-curve. It emerges weak, buggy and flawed. Adoption is slow. In time, it hits its stride and enters a period of rapid growth until maturity and an inevitable slowdown. That’s what’s happening now with digital technology and we can expect many areas to slow down in the years to come.

A second is consolidation, or mergers.  Yet when an industry is in decline, the forces external to the industry get the upper hand. With new market entrants and substitutes becoming more attractive, customers and suppliers are in a position to negotiate better deals, margins get squeezed and profits come under pressure.

That’s why a lot of consolidation in an industry is usually a bad sign. It means that firms within the industry don’t see enough opportunities to improve their business by serving their customers more effectively, through innovating their products or their business models. To maintain margins, they need to combine with each other to control supply (or I might call it vendor relationships). 

The third response he calls “rent seeking and regulatory capture.”

The goal of every business is to defy markets. Any firm at the mercy of supply and demand will find itself unable to make an economic profit — that is profit over and above its cost of capital. . .

That leaves entrepreneurs and managers with two viable strategies. The first is innovation. Firms can create new and better products that produce new value. The second, rent seeking, is associated with activities like lobbying and regulatory capture, which seeks to earn a profit without creating added value. In fact, rent seeking often makes industries less competitive. . .

It seems like they (rent seeking industries) are getting their money’s worth. . .Occupational licensing, (read new charters) . . . restrictions have coincided with a decrease in the establishment of new firms. If your industry is more focused on protecting existing markets than creating new ones, that is one sign that it is vulnerable to disruption.

His fourth indicator he calls the Inevitable Scandals.   He cites Thernos and WeWork as examples.

He might have included the ongoing compliance problems at Wells Fargo or the recent failures of well capitalized institutions such as Silicon Valley and Signature banks as “scandals”—although it is still unclear who all the contributors to these failures are.

Who Is Coming After Credit Unions’ Members?

Disruption is a constant factor in competitive markets.  Firms try to respond to these pressures in both self-protective ways as well as the more formal response in Christensen’s theory.

Where is credit union competition coming that  would fit both descriptions?  In many credit union consolidations scale is cited as the dominant motive, suggesting that bigger players are the greatest threat to credit unions’ future.   Apple Pay, Walmart Financials services, even some recent fintech firms such as Rocket Mortgage, SoFI or other product centric online platforms will take away critical member-product segments.

But my two favorite examples of disruptive competitors using Christensen’s analysis are Venmo’s peer to peer payment transfer and Chime, a neo bank.

Venmo was described by a 21 year old financial writer in an article last year.   The person-to-person payment application requires a depository account, but then begins to function as a broader transaction option overtime.  While it must synch with an existing account from which to draw funds, this would seem just the first step in becoming a dominant player in processing multiple kinds of consumer financial transactions.

My favorite example is Chime which describes itself as the #1 Most Loved Banking App.   The firm’s goal is to be the entry point to a person’s financial institution by making digital banking easy.  It lists some benefits as follows:

Online banking made easy

No minimum balance requirement or monthly service fees

 Manage money 24/7 with the #1 most loved banking app

 Get paid up to two days early with direct deposit

 Deposit checks from anywhere

One of the most enlightening interviews about Chime is from January 2022 in which founder Chris Britt is interviewed by the CEO of Goldman Sachs.

The whole strategy is easily followed in this 17 minute interview.   Listen carefully to how Britt describes his addressable market description (paycheck to paycheck); “we are not a bank”;  how incumbent providers pay attention to only the top 20% of users;  how direct deposit is the pathway to his customers; and designing the firm’s services to match unmet consumer needs.  Listen also to the role of core values.

Chime is a classic example of Christensen’s theory.  There is nothing in this model that credit unions could not do or have not done in the past.   I believe however that many credit unions have moved “up market.” Now firms like Chime are after the market credit unions were originally designed to serve.

Review again this disrupter’s description of financial strategy–a transaction business with a subscription service.   Note his relationship with regulators: Respect the Rules.

This model is what credit unions were designed to be.   Is Chime signaling that  we left our core members and purpose behind?

 

 

 

 

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A Holy Week Theme: Money Changers and Temples

Managing money has always been political. And always will be.

A measure for credit unions:  “The extent to which we apply social values more than mere monetary profit.”

FDR and Credit Unions: “Push This”

Temples and Money:  Old and Modern

Cleansing the Temple

by Malcolm Guite

Come to your Temple here with liberation

And overturn these tables of exchange

Restore in me my lost imagination

Begin in me for good, the pure change.

Come as you came, an infant with your mother,

That innocence may cleanse and claim this ground

Come as you came, a boy who sought his father

With questions asked and certain answers found,

Come as you came this day, a man in anger

Unleash the lash that drives a pathway through

Face down for me the fear the shame the danger

Teach me again to whom my love is due.

Break down in me the barricades of death

And tear the veil in two with your last breath.

 

 

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Baseball and the Four Stakeholder Credit Union Model

A credit union’s relationship with its local minor league baseball team became more than a promotional opportunity.  It evolved into a strategic expression and expansion of its mission.

The Dayton Dragons (Dayton, Ohio) have the longest continuous sellout streak in North American sports history –1,441 games.   The team is the High-A affiliate of the Cincinnati Reds and plays in the Midwest League.

The team’s 2023 promotional video clearly highlights the credit union’s naming rights: the Day Air Credit Union Ballpark.  However the relationship with the Dragons goes much deeper than naming one of the most iconic venues in Southwest Ohio.

Both organizations have created a partnership that grows Day Air, the Dayton Dragons, and the economic vitality of the region.

Joe Eckley, Director of Marketing for the credit union, describes some of their joint activities:

  • Weekly meetings throughout the season to align strategies and prioritize promotions to drive fan engagement for the Dragons and member growth for the credit union.
  • Each year the two organizations develop a new promotion to meet a credit union-specific goal. The Dragons utilized their vast reach in the community to support this initiative.
  • During the off-season, the Dragons and Day Air work together on numerous events and promotions to benefit the community to enhance  key performance metrics for each organization.
    • College Prep Night
    • Business speaker seminars
    • 50/50 Holiday Raffle fundraisers
    • Annual 5k event.

  • The Dragons utilize their reach and community reputation to drive promotions for Day Air.
    • Special jerseys were only available at the credit union.
    • Food trucks and incentives for Day Air associates.
    • Sponsored donations to numerous organizations on the credit union’s behalf.
    • Mascot visits to Day Air locations.
    • Special ticket pricing for members
    • Discounts at the Dragons team store for Day Air members
    • Early access to exclusive events
    • Special service booth at Day Air Ballpark.

  • Day Air provides Dragons Associates, a SEG group, special member benefits.
  • Day Air supported the the Dragons throughout the pandemic when games were cancelled.

Building Community

The Dragons are a Dayton entity–they draw from the outskirts of the region to provide family friendly entertainment to all comers.

Day Air serves the greater Dayton area– people doing good for friends and neighbors. All the big banks in town are headquartered elsewhere (New York, Cleveland, Pittsburgh).

CEO Bill Burke says that from a strategy perspective, the naming rights partnership made sense because of the close alignment of both organizations for the community.

As a result the credit union changed its three stakeholder model to add a forth criteria when it obtained the naming rights.  All decisions are now run past the lens of the Credit Union, members, associates (employees), and the community.

The opening day on April 11 will continue the record sell out streak.  For the credit union, the Dragons and the Dayton community, it is a local celebration of two great American pastimes—alive and well in America’s heartland.

 

 

 

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Is “Creative Destruction” the Future of Credit Unions?

One of Austrian-American economist Joseph Schumpeter’s descriptions of capitalism was called “creative destruction.”

This refers to a competitive economy’s relentless efforts to innovate for advantage and market dominance.   He described the process as: “the old way of doing things is constantly getting destroyed or supplanted as it is replaced by a newer, better.”

Some would suggest that business failures in a competitive economy are an inevitable and necessary event, even when they cause local hardship or dislocations.

The cooperative system is supposed to be immune from some of these economic forces. Credit unions are owned by their users, they have no traded stock, cannot be bought and sold as private firms, and reflect the values necessary for a communal, versus for-profit, enterprise.  Their founding, focused on a ”local” constituency with a common bond, is intended to improve the welfare of a community, not just individuals.

Local Destruction Where Dreams Become Reality

One example of this “creative” process is in neighborhood across the street where I live.   There is no home sold for less than $1.5 million and when offered, most list for at least twice that amount.

Even with this going-in price tag, Edgemoor is not a place for old homes.  No matter the asking price,  every purchase becomes a tear down.   Here is an example from across the street this past week.

The builder, entrepreneur, risk taker and innovator.

The destruction phase.

The front view.

This home built during  the depression was sold as is for $2.0 million.  About five or more large white oaks were cut down before the demolition started.  The land and location are so valuable that the builder will put up a mac-mansion of enough square feet to justify a new sales price at least double his cost.

Obviously, whoever buys this new home will believe this is progress, just what they were looking for. This is the free market at work.

Credit Union Destructions

We can debate the social and political implications of tear downs to build back bigger and more expensive homes, office buildings or condos.   But the example is not limited to real estate.  It happens in credit unions.  It is called mergers.

The key question is whether mergers are helping or hurting the credit union system–to be more precise, the mergers of sound, well capitalized long standing credit unions which have served their markets for generations.

Everyone undertaking a merger believes their new creation will be bigger and better.  Any downsides will be temporary.   Mergers are just a way of getting to the future faster especially when asset size is believed to be THE essential for competitive competence.

No Creativity, Just Destruction

Now to be fair, the house across the street had not been well maintained.  The owners had lived there for four or five decades.  The yard and landscaping were totally neglected.   The 80 foot tall oak trees made the property look like an unkempt urban jungle.

So whatever goes up after this tear down, will certainly be a visual and living enhancement-except for the missing trees.

Similarly, some sound credit unions have not been well maintained.  Leadership is just holding on until retirement; the board has given up leadership responsibility.   Selling out looks like an easy way to take care of members when the motivation has gone.

It becomes time for a new generation of leaders to take over the credit union’s legacy and continue serving members in the future.

An Existential Vortex

These easy-exit examples are becoming more numerous.  Personal advantage, not member value, appears to be the motive.

The systemic risk is creating an “existential vortex”  where all credit unions, not just the small, the poorly led or even the ambitious, are caught up in a system that is  increasingly circling the drain.

There are no new charters.  Industry assets are more concentrated. The leadership purpose  is more and more institutional growth and success.  The members, are not owners in any sense of the term, but merely customers used as the means to greater financial glory.

Credit unions competitive advantage has been collaboration and interdependence.  This is how the cooperative system was created, their regulatory institutions were differentiated, and why purpose justified a tax exemption.

Creative destruction destroys legacies, whether buildings, companies or credit unions.   New brands emerge.  Old locations closed.  New markets and business models tried.

Credit unions are not rebuilding on their old foundations.  Instead large mergers are just the age-old, typical financial market strategy of buying up competitors to become more dominate and survive.

I don’t think the merging of well run credit unions is sustainable.    It will take over two years before the new home is ready on the now demolished site and the new owners move in.   This  is also about the operational transition timeline of a large merger when members start to look for other options.

Unfortunately the creative destruction in credit unions is not putting new homes in place of the old; it is just moving all the occupants into the existing one.

Schumpeter believed that capitalism would gradually weaken itself and eventually collapse. Specifically, the success of capitalism would lead to corporatism and to values hostile to capitalism, especially among intellectuals.

In an historical irony, cooperatives intended as an antidote to the excesses of capitalism, are instead succumbing to the allure of free market takeovers.

Everyone wants to own a bigger house.