With the advent of fintech and its promise of personalized, forward-thinking service, credit unions have been feeling the heat to innovate. After all, if members can bank on their phones, where’s the incentive to use an outdated brick-and-mortar financial institution? If that’s not enough of an incentive to innovate, there are plenty more reasons to shake things up at your credit union — namely, that it’s necessary to stay competitive. Here are 10 more reasons why credit unions must innovate or risk fading away into irrelevance.
1) Credit unions are community based organizations
Credit unions are community-based organizations that exist to serve the needs of their members, not shareholders. They’re committed to helping members achieve financial success. Credit unions also provide many other valuable benefits, such as free checking and debit cards, low fees on transactions and loans, and free online bill pay. Learn more about the benefits of a credit union at their website.
2) They have a mission to serve their members
A credit union is a cooperative financial institution where members share the risks of providing loans. They have a mission to serve their members and provide savings, affordable loans and other financial services. Credit unions are not-for-profit organizations that exist for the sole purpose of serving their members’ needs.
3) They are member-owned and operated
Credit unions are member-owned and operated, which is a key difference from the large banks that are publicly traded. This means members have more control over the direction of their financial institution. They’re insured by the National Credit Union Share Insurance Fund (NCUSIF): All federally insured credit unions are required to be members of NCUSIF.
4) They are not-for-profit organizations
Credit unions are not-for-profit organizations that serve their members by providing fair and competitive rates, low-cost loans and financial products, and free member services such as free checking accounts. They are owned by their members who elect a board of directors to oversee the organization. Credit Unions can offer these benefits because they don’t have to pay shareholders a profit like for-profit banks do, so they can keep their rates lower.
5) They are governed by a board of directors
A board of directors at a credit union is responsible for overseeing the operation and management of the institution. The board’s primary responsibility is to make sure that the institution is operating in compliance with federal laws and regulations, but it also has other duties. One duty is to appoint an executive officer to oversee day-to-day operations and implement decisions made by the board.
6) They have a unique business model
Credit Unions have a unique business model that is unlike any other. They are not-for-profit and exist to serve the needs of their members. This means that they do not have the same incentives to make risky investments, pay out high dividends, or fund share buybacks like some other financial institutions.
7) They are required to maintain a certain level of reserves
Credit Unions are required by the National Credit Union Administration (NCUA) to maintain a certain level of reserves, which is determined by the Federal Reserve. If you’re not familiar with this term, it’s basically a rainy day fund that is used in case of an emergency. It’s calculated using a formula that takes into account how much capital and surpluses each credit union has on hand, as well as the size of their balance sheet.
8) They offer higher interest rates on deposits
Credit unions are often the first stop for people looking to start saving money. They offer higher interest rates on deposits and lower fees on loans than some of their competitors. However, with more and more people going online to do their banking, credit unions need to evolve by making it easier for customers to access their accounts digitally while still offering the personal touch of a branch office.
9) They offer lower fees on loans
Credit unions offer lower fees on loans than banks. The average interest rate on a credit union loan is 16% while the average interest rate on a bank loan is 15%. Credit union members also have access to free checking and savings accounts.
10) They provide personal service
An important factor that has contributed to the success of many credit unions over the years has been their ability to provide personal service. Credit unions often offer more personalized services for their members, such as in-person transactions, one-on-one financial counseling, and face-to-face interactions with bank staff. In addition, many credit union branches have tellers on site who can help process transactions quickly and efficiently.
