To hear credit union officials tell it, their century-old industry is in need of an image-building campaign.
Credit unions have been growing steadily, to be sure, and they’ve gotten a boost from the public’s negative perception of banks during and after the Great Recession. But local and regional credit union leaders say many people don’t really know what credit unions are or what they do. That basic lack of familiarity, they say, has limited their growth potential.
“The name ‘credit union’ — people don’t understand what that means,” says Steve Kenny, CEO of Columbia Credit Union, the largest in Clark County in members and assets. “They say ‘I don’t need credit and I don’t want to be part of a union.’ ”
That aside, the county’s credit unions are remarkably popular, with approximately 200,000 members in a county of about 435,000 residents. Credit union membership is dominated by Columbia and iQ, which together account for more than half the county’s credit union membership.
Even many credit union members don’t understand the deep structural and philosophical differences between a not-for-profit credit union and a for-profit bank.
“Banks want better, faster, higher returns for investors,” said Troy Stang, president and CEO of the Northwest Credit Union Association, a trade group serving 154 Oregon and Washington credit unions, about 90 percent of the two-state total. “Credit unions exist for the benefit of their members. It feels different when you are anchored in that structure.”
Al Schauer, retired president and chief executive officer of MacKay & Sposito who chairs Columbia Credit Union’s board, said he sees the difference in the way the credit union staff and all-volunteer board make financial decisions.
“Credit unions in general are member-centric,” said Schauer, who recently turned down an offer to serve on the board of a Portland bank. “The question always is, ‘How does the member benefit by whatever changes we would make?’ ”
Credit unions are a financial option that are particularly attractive in the Northwest. Credit union membership in Washington and Oregon represents about 45 percent of the population, compared to 40 percent nationally, says the Northwest Credit Union Association. Those numbers come with a caveat: a person can be a member of more than one credit union, and could also be a bank customer.
The credit union share of total financial assets is another matter: credit unions hold just 6 percent of assets in financial institutions nationally, a number that’s generally held steady for two decades.
Despite an overall positive image, credit unions have reported only modest growth even in an era of strong public criticism of the banking industry and Wall Street financial institutions. In Clark County, the one-year change in membership between June 2012 and this June ranged from a 4 percent membership increase at Columbia to a 2 percent loss in the small Cascade Forest Products Credit Union.
In other words, it takes more than an international banking crisis to get people to move their money out of banks.
Of course, banks make sense for many people and especially for businesses. They offer a national and even international scope of services and expertise. They also have much deeper pockets to make commercial loans, since credit unions face severe legal restrictions on the percentage of their assets they’re able to loan.
But credit union advocates are constantly struggling to understand why many more household savers don’t sign up for credit unions. Hypotheses are abundant: People opt for familiarity and family tradition, and in our mobile society, they’re slow to change to an unknown local entity. The power of advertising, good local service and specialized services can be a draw.
Facing new challenges
Facing new challenges
But despite their foundational differences, credit unions face many of the same technological and regulatory challenges as their bank competitors.
As more consumers embrace online and mobile banking services, banks face new costs for technology and declining use of costly branch banking services. After Congress approved Dodd-Frank banking rules largely in response to financial industry abuses that contributed to the nation’s financial meltdown, credit unions are finding themselves having to respond to countless new rules that increase their administrative costs.
“The compliance issues are very large,” said Linda Jekel, director of the Division of Credit Unions at the state’s Department of Financial Institutions. “Many credit unions are very small. It’s tough for them to even read 2,000 to 3,000 pages of regulations.”
Credit unions have learned that cooperation helps all of them compete for market share against banks. Nationally, the credit union cooperative network of no-fee ATMs is larger than that of any single bank, Stang said. And locally, Clark County’s four largest credit unions have launched a modest cooperative advertising campaign that pitches their institutions and credit unions in general.
Like their banking competitors, credit unions face tough decisions about branch banking. Customer surveys consistently report that people choose their financial institution because a branch is close to their home or work, Stang said. But in the same surveys, many customers say they like the branch even if they rarely use its services.
Lacamas recently opened a new branch at 6725 N.E. 42nd St. in Vancouver that features specialized services and a more open concept in its lobby design. Lacamas President and CEO Kathleen Romane says branch banking remains vital even though she predicts that traffic in branches will drop by 30 percent in the next three years. Stang predicts that credit unions will shift to smaller branches to cut costs in the future.
Jekel of the state Department of Financial Institutions said she expects credit unions to continue to grow, and some mergers of smaller credit unions as the regulatory and competitive environments become increasingly challenging for the smaller players. The jockeying between the banking industry and credit unions over rules and services also will continue, as it has for decades.
Schauer is among those who say that an image makeover would turn the tide.
“I come across people all the time who don’t understand what a credit union is or why they should join,” he said. “If everybody understood exactly what credit unions were, there wouldn’t be much use for banks, in my opinion.”