Home' Connexus : Issue 46 Contents At the same time, Coast Capital, Canada's largest
credit union by membership (more than 500,000), is
almost too big for its British Columbia jurisdiction.
It is weighing up whether to go national or to focus
on the demographic block it has traditionally ser ved:
“It depends who you are,” says Burns. “There are
a lot of regulatory and practical impediments, and
there's the big issue in Canada that, if we are going
to continue to grow and move out of our market
share, the next great opportunity is with national
aggregation. But we’ve got to fnd a way to get there.”
Burns is confdent there is a real desire among
Canadians for a larger, nationwide credit union
presence. “What it would really do is validate
the model for many more Canadians who are not
exposed to credit unions.”
Diffculties in other countries include New
Zealand’s archaic 1982 Act which means credit
unions are unincorporated entities without their
own legal status. That's an unusual situation for a
modern fnancial institution because credit union
assets need to be held in a trust by credit union
trustees. In addition, credit unions in New Zealand
have another layer of super vision by tr ustees who
are delegated many, but not all, of the Reserve
Bank’s regulatory responsibilities. This adds to
compliance costs, reduces agility and confuses
members and the public.
Lynch says the industry wants to report directly
to the Reserve Bank. “That’s a huge layer of
compliance that is novel – nowhere else in the world
has it. Everyone realises that it needs updating, but
it’s never high enough up the agenda.”
New Zealand’s parliament has also passed a law
introducing a new licensing regime for non-bank
deposit-takers such as fnance companies, building
societies and credit unions. It gives the Reser ve
Bank new powers to inter vene if such an entity gets
The upshot of such rules is that credit unions
face additional hurdles in taking on the banks, says
Lynch. “We’re one of the most regulated countries
in the world for credit unions and building societies.
It’s certainly not a level playing feld by any stretch
of the imagination.”
Louise Petschler, chief executive of Australia’s
Customer Owned Banking Association, says she was
“str uck by how common the challenges are” when
she did a study tour late last year in her role as a
WOCCU board member.
Regulation, compliance, funding, demographic
changes, technology – they all present common
challenges. Petschler says that, to ensure customer-
owned banking organisations attract new customers,
they will have to take a model built in the post-World
War II era and “renew and reinvigorate” it.
“It has to be relevant to the customers of today
and tomor row who want values-based banking,
who want banking organisations that are going to
contribute in a positive way to their communities.
Globally, we are struggling with that.”
Although credit unions, in particular, battle an
image of being old-fashioned in markets such as
Australia, Canada and the US, Petschler believes
today’s consumer-centric times, with fast-evolving
technology and digital channels, can play to the
strengths of customer-owned organisations.
"This should work for us. This should be a time
when our model, which relies on this very close
relationship and respect for individuals, comes to
Arguably the biggest disruption for fnancial
institutions is the emergence of new non-bank
players in the payments market. Third-party
payment processors, hardware providers and mobile
app developers are moving in on a market once
ruled by the major banks.
Burns argues that customer-owned banking
organisations have been “a bit slow out of the gates”
in developing mobile payments strategies, but they
are starting to catch up.
“It’s both a threat and probably the greatest
opportunity credit unions have seen in 50 years,”
In a banking sector that hasn’t changed signifcantly
over the decades, social commerce has the ability to
‘disintermediate’ fnancial institutions, he says.
"But it could also empower them. Credit unions
are small and nimble and quick to respond. If they
seize the opportunity and become leaders, they
could steal market share from the banks. If they
wait and follow what the banks think, they will miss
The likes of PayPal, Square, Apple and Google
are clearly revolutionising the payments market. In
Australia, supermarket giant Coles is moving into
the banking space.
Branch says customer-owned institutions have
no option but to continue to innovate and compete
against non-bank competitors that, in many cases,
don’t have the bricks-and-mortar legacy that
fnancial institutions have.
“I think it’s exciting, it’s challenging,” he says.
have to be
going to do.
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