Credit unions have been a hot topic for me this week. I have had two completely independent conversations with people about them. On Tuesday night I met a chap from the US at an investor summit who mentioned he felt the US credit unions, although more numerous
than the UK, were technologically challenged. The following day I met with a group, from the UK, who agreed that finding the right tech was difficult but also that there is a perception of Credit Unions as being a bit down-market.
This combination of lack of the right technology and perception of the services they can offer is affecting their ability to expand their business.
It seems that credit unions and community banks tend to fall between two stools. A simple pre-paid card platform doesn’t provide the features or flexibility that they need and a core banking system is too complex to use and too expensive. The specialist systems
are good for what they were originally designed for but have not progressed and lack features users expect today, such as internet banking and smartphone apps.
This relates in some ways to the comments section on
last week’s blog about the differences between pre-paid platforms, account platforms and core banking systems.
It seems to me that an account platform can provide the flexibility and features required, with the accessibility that their users expect but without the massive price that would come with a core banking system. If required an account platform can be connected
to a pre-paid card program as an access point to the accounts but can also provide for current accounts, savings accounts and loans. Most account platforms provide internet banking, smartphone apps, customer service functionality and will manage the accounts
and provide reports on P&L and customer funds.
There is a potential upside here though. If we were to roll out a payment network like the one discussed
here the geographically based credit unions and community banks could offer a really modern, cost effective and inclusive payment system for their local community that would allow small stall holders, schools and other merchants who currently feel excluded
from cashless payment transactions to be able to accept payments directly to their mobile phone.
As with the blog regarding
card schemes, the key here is the ability for both merchant and customer to sign up instantly and provide features that are light years ahead of what’s on offer currently. These could include receipt with purchase and notification of age restricted purchases
for young person's accounts. Of course instant peer-to-peer transfers are a given, even between accounts on different credit unions.
Clearly then, this could significantly increase the customer perception of what a credit union is and who it is aimed at. With that change we would hope that both user numbers and general liquidity would rise, raising the ability to provide further loans to
those who need them.
Please feel free to contact me if you would like to discuss this further.