The Filene Research Institute and the Canadian Credit Union Association recently commissioned me to write a report examining the characteristics of the well-governed credit union and exploring the values and risks associated with co-operative governance models. Below, I summarize some of the key insights. You can download the full report on which this summary is based here.
Recent mergers and consolidations in the credit union system have led to a decrease in the number of credit unions and an increase in the size of the largest ones, which collectively manage tens of billions of dollars in assets and serve millions of members across the country. As credit unions diversify and grow, they face more risk and greater competition, as well as challenges to the effectiveness of their board governance. Continue reading →
Dionne Pohler.* Photo credit David Stobbe / stobbephoto.ca
I grew up in a small farming village in rural Saskatchewan, where we commonly referred to the credit union as “the bank.” It was the only deposit and lending institution available in my hometown.
The words “bank” and “banking” have clear meanings in common language: Canadians use “banking” as a gerund in the same general way that people use the term “google” to mean an Internet search, or “uber” to ride share. Few understand “banking” as a term reserved exclusively for a subset of federally regulated financial institutions.
On June 30, however, the Office of the Superintendent of Financial Institutions (OSFI), the national regulator of Canada’s federally incorporated banks, issued an advisory that clarifies their interpretation of the Bank Act. The advisory aims to discourage what OSFI claims is increased use of the words “bank,” “banker,” and “banking” by “non-bank financial service providers.” Continue reading →
An American colleague recently asked me and a number of other academics and co-op leaders if we could provide a quick snapshot of large-scale co-operative activity in our geographical regions — consolidations, mergers, the nature of supply chains, and whatever else we felt was important. Here is my response. Continue reading →
We have recently added a “Recommended” section to our blog that contains links to material on co-operatives and credit unions that we believe will be of interest to readers. This menu item features a collection of curated content in three general subcategories: Reading, Viewing, and Listening. On each of these pages, you will discover links to books and articles, videos, blog posts, and podcasts. We have provided titles, authors and speakers where appropriate, and brief descriptions. Continue reading →
Across Canada and the United States, major banks are facing public scrutiny after media reports that employees feel intense pressure to mislead customers in order to meet unrealistic sales targets and avoid losing their jobs. Is this an opportunity for credit unions to show that they treat their members — their customers — differently? Continue reading →
In a recent post on future options for the credit union system in Canada, Dionne Pohler and I argued that to be effective and meet the needs of a wide variety of stakeholders, the new system must rely on a mix of both extrinsic and intrinsic incentives. What are these two types of incentives? And why are they important?
Extrinsic motivations are monetary rewards or penalties such as pay-for-performance schemes and financial payments for not complying with rules and regulations. Extrinsic incentives work, it is believed, because people make decisions based on the financial costs and benefits of the options they face.
Intrinsic motivations, in contrast, can be observed in the desire to undertake activities simply because they are enjoyable or because they generate satisfaction — the wish to do a job well or to undertake a task because it leads to some greater good. The mission motivation that drives the behaviour of many people is a good example of an intrinsic incentive. Continue reading →
The question posed above is the entirely appropriate title of an October 2016 report by Central 1 on possible futures for the centrals in the Canadian credit union system (read the report here). As the report indicates, low margins, increasing competition, rapid technological change, increasingly diverse expectations for member services, and new and often unfavourable regulatory environments make it clear that the status quo is unsustainable and change is required at the second-tier level. Continue reading →
Murray Fulton, director, Centre for the Study of Co-operatives
The Role of Co-operatives in the Economy
In a StarPhoenix/Leader Post op-ed piece published on 7 December 2016, Brett Fairbairn, Dionne Pohler, and I outlined why a mix of business types is required for a well-functioning market. As we said,
Achieving the correct balance of different types of business forms is critical.… Just as biological environments benefit from a rich mix of different organisms, so, too, do markets benefit from a diversity of business types. Consumer interests and a desire for local control can be met with co-operatives; niche markets can be served by entrepreneurs; and employment opportunities can be generated through employee ownership. Established chains have a role to play, given their brand identification and experience.
While we were commenting specifically on the privatization of liquor stores in Saskatchewan, the argument is a general one and applies to all markets in the economy. It is particularly relevant for co-operatives and credit unions. Continue reading →
The Future of Credit Union Branches in a Digital World
A conference recently made me think about the future of credit unions as connecting points between the real world and the digital world. The conference was in Luzern, Switzerland, where mainly German-speaking co-op leaders and academics came together to discuss co-op identity and growth. One of the working groups was on co-operative banking and digitization, and it was their report that got me thinking.
Co-operative banking is one of the most mobile and digital lines of business any co-op could be in. We have come to understand that money, deposits, loans, and so on — many of the “products” credit unions deliver — are essentially information. They are numbers in databases — numbers that can be transferred or changed at computer speed. Today, the digital world is the real world of banking commodities.
Only occasionally does the virtual world of banking services take material expression. An automated banking machine (ABM), when you think about it, is a machine that converts information into physical monetary bills when you need them. An ABM is a small, specialized material outpost of an unseen digital world.
Which brings me to credit unions, especially their distributed physical facilities. What is a credit union branch? What will it be in the future? In an increasingly digital world, such branches could go at least two ways. Continue reading →