Monday 20 November 2017

My view: ‘Consumers want more from their credit unions, and they should get it’

Young adults and high earners are willing to shift from their banks, but debit cards, ATMs, and online banking are a must

Kevin Johnson is CEO of the Credit Union Development Association
Kevin Johnson is CEO of the Credit Union Development Association

Kevin Johnson

Why do credit unions exist? The answer is simple - they improve lives. All credit unions throughout Ireland, and indeed the world, share the belief that all people have the right to access affordable and reliable financial services.

Credit unions are in the financial services business, what makes them different is how they do this and what they do with the surplus they generate, through reinvesting for members. They have proven they're good at doing this business, having built up capital reserves of approximately 15pc (50pc above the regulatory requirement].

The Credit Union Development Association (CUDA), which is owned by credit unions and acts as a catalyst for the growth, development and expansion of progressive credit unions, confidently endorsed the April 2012 report from the Commission on Credit Unions as it was consistent with CUDA's vision for the viability and sustainability of the sector.

The new Act (CUCORA '12) that followed put in place the enablers for a viable business model to evolve, namely strategic plans, policies, committees, compliance, risk, internal audit functions, new governance requirements at Board level, and much more.

These measures were intended to be proportionate to the nature, scale and complexity of the business that a credit union would provide for its members. Such a system would enable small credit unions to successfully continue to offer basic services (with an appropriately lower regulatory demand on them), while also enabling other credit unions who wish to expand their range of services.

Credit unions have consistently maintained their one-third share of the personal (non-house purchase / investment) loan market. However, the decline in this market has served as a cautionary note of the need to broaden the offerings to members.


A substantial body of research recently carried out on behalf of ReBo, the Credit Union Restructuring Board, found that while the local ethos is important, so too are the full range of financial products and services.

Some 84pc of consumers support separate credit unions joining forces if this would result in the delivery of additional services like debit and credit cards and mobile banking apps.

Over one quarter of consumers surveyed would definitely consider leaving their bank and moving to their credit union for day-to-day banking if the latter provided the normal range of financial services.

In simple terms, consumers want a stronger and faster development within the credit union sector. They want - and have every reason to expect - their Credit Union to provide ATMs, debit cards, online banking and to have the ability to electronically transfer funds to other bank accounts, just like Irish banks and similar to the services offered by credit unions in other countries.

In 2015, why should credit unions members be denied access to the most fundamental elements of financial services - ATM's, debit cards and online banking? Due to the restrictions imposed by regulations on credit unions, many offices today are closer to 1915 rather than 2015.

Credit unions would never adopt the same stance as banks, who have forced their customers to interact with technology rather than individuals. The personal contact in credit unions has been - and will continue to be - an integral part of how we operate. However, our members need to be able to access our service through the same 21st century technology platforms as in other financial service providers.

To achieve this rapid level of development, credit unions need to be willing to take on significant change and additional responsibility, and the sector needs supporting and enabling regulation.

There are some concerns within the sector that the current review of regulations, the Consultation on Regulations for Credit Unions (CP88), is primarily focusing on minimising or eliminating risk to the detriment of appropriate development and sector evolution.

Credit unions have taken the pain and now need to be permitted harvest the benefit from this enhanced infrastructure and extra cost, through enabling regulations. A further set of regulations are on the way, and it is vital that these rules are based on where credit union services are going, not simply based on today's activity.

CUDA has for some time advocated the position to set aside a one-size-fits-all regulatory approach. This view was supported by the Commission on Credit Unions. It recommended a new tiered approach to regulation based on the nature, scale and complexity of the credit union concerned. Isolating the recommendations dilutes the spirit of the commission's findings - for a strengthened regulatory framework within the context of tiered regulation.

We need regulations that align with consumer need, and that allow for choice, access, fair competition which will see a bright future for Credit Unions.

Kevin Johnson is CEO of the Credit Union Development Association

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