It’s a strange time for credit unions. Credit unions face unprecedented pressures from regulators and examiners and capital pressures for net interest margins and fee income. Often they don’t benefit from “economies of scale” or the resources, people, and capital, to invest in the infrastructure demands of vendor due diligence, regulatory compliance, or technology demands of their members. How are they going to navigate through this “perfect storm”?

Credit unions can respond to this challenge in three ways:

One, they can toss in the towel and begin to negotiate the best merger.

Two, they can form a business management cooperative or a CUSO with other small credit unions for infrastructure services like core systems, compliance services, HR services, and marketing services to realize the economies of scale enjoyed by larger credit unions.

Three, they continue business as usual, hoping the competitive and consumer climate miraculously improves, member demands subside, and the credit union philosophy of “people helping people” matters again to consumers.

Here are five questions senior management and Board need to be asking to discover how to respond:

1. Does the credit union have the capital to absorb the loss of fee income, competitive pressures, and compressed net interest margins?
2. Does the membership understand and value the products, services, and relevance of the credit union?
3. Is the credit union able to compete on access, price, and service levels?
4. Is the membership genuinely engaged with the credit union or are you cherry picked for products that, as a result of pricing strategies, fail to be profitable for the credit union?
5. Is there a group of like-minded credit unions nearby that you can “partner” with on a shared services agreement?

A credit union can get caught up in the “romance of the movement” and lose sight that it cannot provide the products, services, or access that its membership demands. As a result, the credit union is not genuinely serving its members, and if they cannot build economies of scale, access, and products to meet member demands, time is working against them. Too often, we see a small credit union seeking a new CEO when an objective response to the above questions would indicate what they need is a merger, not a CEO, to serve their members adequately.

This business climate is not going away quickly (if ever) – it will never again be business as usual. Now, more than ever, credit unions need to re-invent themselves and their model to attain sustainability. Strategic Planning needs to be an exercise in transformation and differentiation, followed by expert execution of the tactics designed to reach these aspirational goals.