For many Canadians, credit unions are looking more attractive than ever. They charge fewer fees and their lending rates are competitive. And then there’s the warm and fuzzy stuff. Compared to the big five banks, credit unions feel more tied to local communities and less driven by profit. To some, they’re a refreshing alternative to the big corporations currently making headlines for predatory upselling practices.
Now, some of Canada’s largest credit unions are making big plans for national expansion.
The door opened in 2012 when credit unions were granted a key regulatory change that allows them to expand beyond provincial borders and operate as national financial institutions. In recent months, two have made public their intention take advantage of this opportunity. In August, Meridian (Ontario largest) announced plans to go national.
In October, BC-based Coast Capital Savings made a similar announcement. The emphasis, in both cases, is squarely on digital and mobile. “The plan is to do more digital banking, offer more services online,” Coast Capital CEO Dan Coulter is quoted as saying.
Credit unions, of course, aren’t the only ones who see opportunity in digital innovation.
New technology and new customer expectations are creating ripples of change in most industries. Banking is no different. Investors are currently pouring record-setting funding into the Canadian fintech sector. The big five are responding by simultaneously partnering with fintech firms and investing heavily in their own digital capabilities. RBC, for example, launched an innovation lab in Silicon Valley last year.
The question, then, is this: Where do credit unions fit in this crowded landscape?
I see four unique tensions that Canadian credit unions will need to navigate carefully as they make their way towards digital-first national expansion. Finding the right path through all four will make the difference between success and failure.
1.) Alone vs. Together
The spirit of community and togetherness runs deep in credit unions. But in our modern world of smartphones and social networks, the veneer of utopian connectivity can mask a very different reality.
Harvard Medical School’s Dhruv Khullar puts it this way: “Social isolation is a growing epidemic. A great paradox of our hyper-connected digital age is that we seem to be drifting apart.”
Navigating this point of tension is about asking how might credit unions re-invent the spirit of togetherness at their heart for today’s smartphone user?
2.) Equality vs. Elitism
Credit unions are all about inclusion and equality. Most were born to serve specific groups that were underserved by mainstream banks—fisherman, farmers, tradesmen.
And yet some would argue that mobile banking as a concept is inherently elitist. First, there’s the “digital divide”. In 2015, the Canadian Internet Registration Authority found that “in the lowest income quartile, 27% of people don’t have Internet access, compared to only five per cent in Canada’s richest bracket”. In other words, modern digital banking—like the banking systems that initially spawned the credit union movement—has left some Canadians behind.
Internet access issues aside, money management itself is also inaccessible to some Canadians. Recent research has found that coping with the immediate effects of poverty can noticeably decrease a person’s cognitive abilities—including the ability to make sound financial planning decisions.
Navigating this point of tension is about asking how might credit unions bring their egalitarian spirit into the less egalitarian world of digital money management?
3.) Emotional vs. Functional
The black-and-white nature of numbers masks a deeper truth that community credit unions understand inherently: Money matters are highly emotional.
And yet, modern apps and digital services typically focus on function over emotion. They’re geared towards utility and action—ideally frequent actions that help app-makers demonstrate “stickiness”. If you don’t believe me, sign up for the fintech service of your choice (or really any modern digital platform) and then do absolutely nothing, or use the service only minimally. A flood of encouraging automated emails will inevitably follow.
Navigating this point of tension is about asking how might credit unions create a digital experience that works on both functional and emotional levels?
4.) Everything vs. One Thing
In recent decades, credit unions have followed the banks lead and offered an ever-broader array of services across the full financial spectrum. In contrast, the prevailing model in todays’ burgeoning fintech sector is to take one small piece of what banks do and focus on doing it better. Vancouver’s Mogo, for example, just does personal lending. Toronto’s Wealthsimple just does personal investment management.
Navigating this point of tension is about asking are credit unions better off building a full-service digital bank or should they take a page from the fintech playbook and choose a hyper-focused path?