Should Credit Unions Be Consumers' Primary FI?

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In a speech at the recent GAC conference, CUNA president Bill Cheney said:

“Service excellence will be achieved by providing services that are forward moving and constantly improving. Proof of success will be 50 million Americans that call a credit union their primary financial institution by 2023.”

While there are plenty of proof points of success, this goal sounds pretty reasonable, no?

Maybe not.

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A 2012 Filene Research report titled Mind over Money: Measuring Health and Happiness among Credit Union Members reported on a study which found that:

“Credit union members who use their credit union as their main financial provider are in fact significantly (with statistical confidence) less able to make ends meet than those who use it alongside another financial provider (i.e., a bank).”

This isn’t great news for credit unions, and puts Mr. Cheney’s goal in a tough place.

If credit unions are truly concerned for the financial well-being of their members — and I do believe the concern to be sincere — then becoming primary FI might not be in all members’ best interest.

Furthermore, it might require that CUs find ways to collaborate — not so much with each other, but with banks. With all the bank-bashing coming out of credit union professionals (oh, I can find links if you really want me to).

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What credit unions really need to do is re-think the concept of “primary FI” and reconsider why they would want to fill this role.

For many consumers, their primary FI is the bank (or credit union) where they have their checking account.

But with the growing Debanked segment, and the growing popularity of prepaid cards, and Neochecking accounts like those from Moven, Simple, and GoBank, the checking account might not be the primary account for many Americans in a few years.

Furthermore, with caps on overdraft fees, reductions in debit interchange, and a desire to cling to free checking, the traditional checking account might not be particularly profitable for an increasing number of consumers over the next few years.

In that case, being the “primary” provider sounds nice, but isn’t necessarily profitable.

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Personally, I’d like to see another alternative emerge.

A scenario where a consumer’s primary financial provider is one who provides advice and guidance on managing ones’ financial life — regardless of whose FI’s products the consumer owns. Oh, and in this scenario, the “primary” FI monetizes this advice and guidance.

If credit unions can create this scenario, then they will certainly be living up to Mr. Cheney’s are call for services that are “forward moving and constantly improving.”

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