Ok, so clearly they’re not banks but putting aside regulatory distinctions, it’s an interesting question. And if you’re Canadian you may already have a view, as last week Ontario’s biggest Credit Union, Meridan announced “motusbank”: a national digital bank with a Credit Union ethos. How long before we see something similar in Europe?
In the UK, the 400+ Credit Unions have over 1.8 million customers and already have some distinct head-start advantages over the Neo-banks coming to market:
- They have established member bases, and established savings and loans products
- All profits are redistributed to members
- You can find some truly compelling rates (I saw a £5,000+ unsecured loan last week for 4.6% APR)
- They are cash rich, have strong balance sheets and aren’t pressured by their owners (the members) for quick returns or valuations
- They still have local branches and a personal feel
Nevertheless, the Credit Unions and Challengers also have more in common than you might think:
- They have little-known brands and low awareness
- They are both targeting specific customer niches – those being under-served by the traditional high-street players
- They have a clear value propositions and work hard to offer a unique customer experience
- They are unconstrained by large, expensive organisations
- They have ambitious leaders who live to make a difference
What’s stopping Credit Unions from making bigger impact on the industry and reaching even more customers in the communities they serve? This is where Fintech and Challengers currently have an edge: technology. But technology is only a short-term barrier. In future, were Credit Unions to invest in the changes necessary to promote and deliver their offering through digital, mobile and take full advantage of open APIs, they could be a force to be reckoned with – challenging both the Building Societies and Challenger banks, or even established banks, too.
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