In New York, Leon, Manchester, Washington D.C. and Winnipeg we debated the 2012 United Nations International Year of Cooperatives. Would it be as notable as the International Year of Microfinance, or as unnoticed as the International Year of the Potato? In 2011, when the Year of Cooperatives was launched, we saw much coverage in the cooperative sector press, but not so much in the popular media.
In 2011, we still suffered from the impact of the global financial recession. In the U.S. we saw the Occupy Wall Street movement as consumers reacted with distrust and anger about the impact of Wall Street banks and government policy. We saw Bank Transfer Day, when consumers, angered by high fees, moved their accounts from the large banks to credit unions.
Why do we care about international Year of Cooperatives? During a time of consumer unrest and searching, i t offers an opportunity for credit unions to shine. It is an opportunity to review the credit union appeal to today’s consumer and to refresh the credit union brand. We say credit unions are different. What is the credit union difference?
I grew up with Don. He is married with two kids. He owns his own home. Don is a working person. He does not have a lot of money. He is a bright guy who considers how he uses his money, and he cares about what is best for his family.
Does Don care about cooperatives? He does not really think much about them, but he has a notion that they are generally good. Does he care about U.N. International Year of Cooperatives? He had not heard about it. Does he care about credit unions? He does not think much about them.
Don does not let me get away with anything. If I want to champion credit unions and why they are different, he is going to challenge me every step along the way.
What is that credit union difference? Is it that they are cooperatives? Is it their democratic nature?
No. Cooperative ownership and governance is a structural form. Cooperative democracy is not an explicit determining factor when Don decides where he chooses his financial services. What Don values the most is the quality of the service, the convenience and the cost. Don does not care how we provide competitive pricing and service; he just expects it … or he will find it elsewhere
Yes, it does not matter what country you look at. What people comment most to me on is that what stands out about credit unions is the passion that they have for serving their members. This is very different than a commercial stockholder-owned institution. The institutional mission is not driven by maximization of shareholder value or return on shares. The internal mission is driven by member service. That internal passion and drive for member service comes from the cooperative structure and values. The one-member, one-vote cooperative principle and the notion that every member is as important as another is what drives the internal service culture of credit unions.
It is not the cooperative structure and the democracy which Don sees. It is the service driven by that passion that Don likes.
Don is going to try us out. But he is going to test us.
His first order conditions tell us what is necessary to get his business. He is going to compare rates and fees; he is going to see if he saves money. He is going to see if he can use the services and vehicles that he wants. He wants mortgages and debit cards, a large ATM network, internet banking and online automatic bill pay. He wants to access his accounts with mobile cell phone banking. We will attract his business with the pricing and the services that he wants. Once he is signed up and plugged in, it will be a hassle for him to change to another institution. This is the stickiness that keeps him for the short run.
But this is not the credit union difference. There are banks, microfinance organizations and finance companies that can offer these conditions. If we want his loyalty and we want to keep him over the long run, we have to meet his second order conditions. This is the credit union difference.
We have to help him improve his and his family’s life. Credit unions in Kenya manage their liquidity to provide members with the loans to put their children through school and access better life opportunities. We have to provide service when others do not.
In Ecuador and Poland, during the financial crisis and the recession, credit unions continued to serve their communities and lend money when other financial institutions would not. We have to stay with him when he goes through hard times. Credit unions in Ireland continued to find ways to help their members through the recession when household members lost their employment.
And the real hallmark of a credit union, of a cooperative, is to provide members with the best alternatives for them versus the most profitable alternative for the credit union. This is what members notice and what members remember. Credit unions in Guatemala and Mexico invest at their own cost to teach their members how to farm to meet global GAP standards to earn a better living and provide better nutrition and education for their children. This is what we mean when we say we put people ahead of profit. This is the Loyalty that keeps him for the long run. This is the difference from the simple commoditization of financial services.
But this works only if we can maintain the necessary conditions. Remember that stickiness is only sticky in the short run. If we learned anything from Bank Transfer Day, it was that consumers will move to where they can get a better price and the better services that they want. If we meet the second order conditions but do not maintain the necessary first order conditions, we lose Don and others like him.
Why do we care about the International Year of Cooperatives? The year provides an opportunity to examine our appeal to consumers today and to promote the credit union difference. Can we refresh the credit union brand? Can we communicate the benefits of that “difference” in meaningful ways that respond to what today’s consumers are looking for?