By Frank J. Diekmann
Hey, credit unions, maybe you’re the niche.
That was more than just the impression I got recently; it almost felt as if a rather large group of companies were making a Las Vegas spectacle of themselves in making that point, while simultaneously demonstrating how getting outside an organization—or an industry itself—is the only way to really get an actual perspective, to see the landscape from a different point of view.
In the case of credit unions, that’s why it’s so beneficial to occasionally hold board meetings somewhere other than the board room, like in the parking lot of a major bank or a Walmart, or, better yet, on a college campus, so board members can see an entire generation that has no interest—at all!—in doing their financial business the same way those board members did when they were young and toting around something called “books.”
The value of the outside-in perspective extends to meetings and events, too. Credit union get-togethers can be great, but after the kumbayahs and self-congratulatory praise for each other’s white hats are dispensed with, in the end it’s credit unions talking to credit unions. (And, as I’ve heard any number of consultants and a few CEOs asking with some frustration in recent years, btw, why, when conducting market analyses, do credit unions keep comparing themselves to other credit unions only? But that’s another column.)
I hope you’re sitting down as you read this, but nobody at any non-credit union industry event really gives a damn about the color of your hat--they just want to knock it off.
Let me share with a Cirque de Soleil of an example. The legions of hat-knocking companies, partners, enemies and frenemies—at least 11,000 of them—were a force to be seen during the recent Money 20/20 conference in Las Vegas (CUToday.info detailed the overall scope of the meeting here). I was struck by many things at the event—like the hundreds of breakout sessions that were starting every 10 minutes or so and which were spread over four floors, not to mention the small airport of a trade show floor, which was at least six times larger than that of the biggest event in Credit Union Land, CUNA’s GAC. And all populated by companies that have one thing in common.
Guess Who Was Missing?
Amid all that, I was most struck by the absence of anything credit union-related.
And that includes attendees. Several people who didn’t tell me how they are privy to such things said there were fewer than 200 CU reps to be found among the badge-wearing throngs filling the Venetian Hotel’s massive convention center space.
Credit unions didn’t appear on the agenda. I never heard a speaker mention a certain type of financial co-op. And if anyone was saying CU, it was “see you.”
There were more than 500 companies vying for attention in that aforementioned bazaar, which never closed during the day. It’s hard to know just how much venture capital is backing the companies looking to deploy fintech in order to grab a slice of the financial market pie, but it dwarfs that invested by credit unions, who were the nickel slots during the show.
A Little Comparison
In fact, prior to the launch of Money 20/20, Mitchell Stankovic hosted one of its Underground Collision meetings, during which Brian Kaas, president of CUNA Mutual’s venture capital fund, CMFG Ventures, said that funding for fintechs last year exceeded $130 billion. The tech budget for the credit union industry combined is $6 billion, he said, adding that fintechs in North America now outnumber credit unions two to one.
“Fintechs have knocked credit unions out as the number-one source of unsecured personal loans,” Kaas said. “Today, fintechs have just shy of 50% marketshare, and there are more fintechs now hungry for other loans.”
At Money 20/20, those looking to eat weren’t just represented by booths full of eager young start-ups and vest-wearing tech bros. JPMorgan Chase was there. Amazon was showing off its cardless shopping technology. Payments tech was everywhere. There were companies and brands I had heard of, and many, many more I had not. (My favorite vendor name must go to “Very Good Security.” Not great. But very good.)
Reading the Eye Chart
The appropriately named Money 2020 offered a clear vision of what credit unions are facing in the marketplace. You’ve no doubt heard of the threat of disintermediation? Meet the disintermediators, companies of all sizes looking to pry your prized member relationships away piece by piece.
And in the years ahead, that prying away is only going become even more intense, if the CFPB has its way. Bureau Director Rohit Chopra travelled all the way to Vegas to announce the CFPB’s plans for supporting open finance and open banking, which will hand the consumer/member a crowbar if they want to use it. You can read more about that here.
The Great Big Takeaway from all this? As I said at the top, if you still view fintech as some sort of niche, you’ve got an un-niche-sized surprise coming. The fintechs think credit unions are the niche.
And while Sin City likes to advertise that “What happens in Las Vegas stays in Las Vegas,” in this case the only thing staying was the visitor’s money.
An Encouraging Reminder
But before credit unions decide to sigh, fold their cards and leave the tables to their deeper pocketed adversaries, I did hear an encouraging reminder last week during the California and Nevada leagues’ REACH Conference. Jeremy Gutsche, CEO of Trendhunter, shared how in an earlier life he worked at Capital One overseeing a billion-dollar-plus card portfolio.
“We envied everything you did at credit unions,” he said. “This was before Capital One bought a bank. You have a membership, a loyalty, a way to connect. At times of chaos like now, when people start hating banks and rising interest rates, there is a great opportunity at credit unions to steal away marketshare. We used to study that, envy that.”
That’s something I’ve heard before from bankers, that many believe it’s credit unions that have the real advantage. In many ways you do. But CUs will need to develop their own fintech and/or partner with fintechs to create the new kinds experiences members expect.
It is, after all, the only way to keep your hat on.
Frank J. Diekmann is Cooperator in Chief of CUToday.info and can be reached at Frank@CUToday.info. Mr. Diekmann is also author of several new book, including the brand new “The Last Lyric,” a humorous satire about a murder investigation at the Rock & Roll Hall of Fame in which every line of dialogue is either a classic pop/rock song title or lyric. Available on Amazon, Apple iBook, Barnes & Noble and Smashwords. Mr. Diekmann is also author of a non-fiction compilation of the very best & worst he has seen and heard in covering more than 500 CU meetings and conferences, “501 Name Tags: How Everything You Need to Know About Business Can Be Learned at a Conference & Forgotten in the Trade Show.” It is available on Amazon, Barnes & Noble, Apple, Lulu, and Smashwords