Network Credit Union Model

Can The Network Credit Union Model Help You Compete?

The National Credit Union Association has suggested in more than one article that small credit unions should at least consider the idea of a network merger in the context of potentially creating partnerships with multiple small credit unions in the same wider region.

Of course, such an idea typically receives skepticism at first from small credit union leadership, seeing the idea as a threat to their own existing control and direction of their financial organization. However, that reaction is also often based on the assumption that a merger automatically means losing control, and that’s not always true. Credit union mergers can also mean forming a long-term partnership with a similar entity for mutual long-term protection and market success, which is exactly the idea behind a network merger as outlined in a Filene study.

Rather than competing against each other and wasting valuable energy, money and resources scrapping for bits of a market, a network merger option not only gives a small credit union a greater strength and wider market presence, it also gives the same size credit unions involved a greater synergy potential in both cost control and profit generation. That in turn increases a small credit union’s longevity and strength as well as the ability to continue growth for all involved versus stagnating and then eventually losing a market altogether.

Specifically, key benefits of a network merger approach combining two or three small credit unions are multiple. They include:

  • Increased operation cost control – A larger entity can leverage economies of scale and greater depth in resources. That then allows both players to offer more member services and products which attracts new customers faster. Account growth often increases in such situations as members take advantage of new benefits and expand their investment portfolios with a given credit union.
  • Identity retention is possible – No one wants to lose all the brand development that has been created through hard work and effort. And that’s often one of the main fears of a merger. With a network merger, however, the individual small credit union can still keep its brand and name while working together behind the scenes as one entity with other credit unions.
  • Combined boards for leadership direction – In a traditional merger one board of directors takes over everything. With a network merger, combined entities share the same board with appointments representing each entity involved. The amount of representation is split evenly so no partner has a dominating influence over the entire show.

With today’s competition coming from multiple fronts and different economic capabilities, it’s well worth the time for small credit unions’ management to think and consider how combinations and network partnership mergers can leverage greater capability and market reach working together. While the network merger option may not work for every small credit union it can offer many a new chance at exponential success matched with the right partner.

See Video: Is Now the Right Time for a Merger?

The key in making a win-win relationship in a network merger is that all involved need to have “skin in the game” and be dedicated to mutual success. One wins when all win. This can be a hard challenge to achieve so heavy research and matching efforts are needed ahead of time to avoid misadventures, but this is not an uncommon situation for mergers in general. And management teams involved need to remain focused on the big picture success potential a network merger can offer. Many times these strategic wins can easily offset specific aspect compromises. With the right help guiding, and sometimes mediating these differences, very different credit unions can find perfect unions with each other realizing the forest for the trees.