ABCUL launches consultation on the future of credit unions

Discussion included strategic mergers and ways to beat techfins in the expanding millennial market

The Association of British Credit Unions (Abcul) has launched a major town hall consultation process on the future of the British credit union movement.

Speaking at the sector’s annual conference in Manchester on 8 March, Abcul CEO Robert Kelly provided an overview of the key themes covered by the consultation.

He said the cross-sector initiative would engage members and stakeholders, drawing on the experiences over the last couple of years to take the movement forward.

Brandi Stankovic
Brandi Stankovic facilitated the session. Photo: Paul Herrmann

The session was facilitated by organisational change expert Dr Brandi Stankovic of CU Solutions. She said credit unions around the world faced challenges in terms of technology, enterprise risk management, and governance.

Most credit unions are concerned about the increasing appeal of fintechs – but Dr Stankovic argued that the real worry is techfins. These are technology firms that find better ways to sell their products by creating their own financial services. Around 68% of millennials trust them, she said.

And she issued a series of tips for credit unions looking to meet this challenge: update legacy systems, increase tech literacy, and know the member experience.

She also advised delegates to examine strategic risks and establish multiple lines of risk assessment.

Another challenge for credit unions is ensuring strong succession on boards – a crucial governance challenge for the sector. Dr Stankovic warned that although some board members are good representatives of their communities, they do not know how to run a credit union.

Related: Treasury minister John Glen addresses Abcul conference

Other challenges include the ageing membership of credit union, having lending limited to unsecured personal loans, and ensuring the delivery of those loans is digitally effective.

Some credit unions face regulatory issues around serving the financially excluded while others struggle to present and market their products to younger people, or with diversifying their lending portfolio.

The session explored the idea of proactive mergers and consolidation within the sector, as well as the role of Abcul in facilitating this.

Dr Paul Anthony Jones, who heads up the Research Unit for Financial Inclusion (RUFI) at Liverpool John Moores University, said most credit union mergers in the UK had been the result of larger credit unions rescuing smaller ones, rather than large organisations joining through strategic mergers.

Asked whether Abcul should be taking the lead in facilitating merger activity, the audience voted in favour of the suggestion (53%).

The conference also explored the idea of strengthening collaboration within the sector, including through credit unions service organisations, a model pioneered by the USA.

Dr Stankovic encouraged credit unions to be careful with contingency planning, deal with issues in a timely manner, drive young leadership development and collaborate in a more pro-active manner.

“While we’re trying to figure some things out, Amazon is taking over our business,” she warned.