Collaboration within the credit union sector: case studies from Ireland, Scotland and England

In its first edition, the conference looked at achieving scale through effective collaboration while remaining true to the credit union ethos

Collaboration was high on the credit union agenda at the first conference of the Centre for Community Finance Europe (CFCFE) , held in Manchester on 18 January.

Set up in 2017, CFCFE provides support and research to credit unions across Europe. So far, it has published six research papers and welcomed 41 members.

In its first edition, the conference looked at achieving scale through effective collaboration while remaining true to the credit union ethos.

CFCFE chair Ralk Swoboda is also managing director of Cufa, a Dublin-based provider of financial analytics software to credit unions and other mutual financial firms.

He offered delegates an international perspective on credit union collaboration, looking to his native USA, where the sector serves 150 million people. US credit unions benefit from collaboration on back office provision, said Mr Swoboda: 72% of multi-owner service organisations for the sector have between two and 10 credit union owners.

“They benefit from collaborative back office providers,” explained Mr Swoboda, adding that 72% of multi owner credit unions service organisations have two to ten credit union owners.

“There is no right way to do it”, he added. “Sometimes credit unions own the credit union service organisations, sometimes a group of five credit unions own it, but the organisation provides services to 100 credit unions.”

Over 100 credit union directors and professionals attended the conference at One Angel Square in Manchester

The Credit Union Development Association (Cuda) in Ireland adopted a similar approach. A credit union owned network, CUDA facilitates Solution Centre, a fintech that supplies product development and business support to 48 credit union members. Credit unions participating in Solution Centre’s digital loan marketing programme have seen loan growth of 10-20% in a relatively short space of time. The Solution Centre has also embarked on an ambitious business transformation programme for the sector, and is working on developing a collaboration toolkit.

Cuda CEO Kevin Johnson said it was important to increase collaboration in stages. Credit unions should define their readiness, find the right partners, lead early negotiations, develop the concept and business case, and review
legal options.

It is also important to have a high-level objective, he added, separated into measurable short-term goals, such as improving social media, and long-term ones, like developing a mortgage offer.

Another collective project is enabling 39 credit unions in Ireland join together to provide current accounts to members. Established by six credit unions in 2016 as a company limited by guarantee, Payac is working to deliver current accounts to their members to enable them to access their accounts on a 24/7 basis. As part of this process, the credit unions involved are also looking at standardising processes.

Chief executive Seamus Newcombe said that rather than having all credit unions convert to a new IT system, Payac is working with the IT service providers from each credit union to achieve this standardisation. Instead of competing with each other, the IT providers are collaborating to enable the credit unions to launch the current account while using different systems. The project has 39 credit unions on board who will be able to offer current accounts to members from May 2019.

Likewise, in Scotland, five credit unions came together to pilot an employment engagement project, with backing from the Carnergie Trust. 1st Alliance (Ayrshire) Credit UnionCastle Community BankEast Kilbride Credit UnionKingdom Credit Union and West Lothian Credit Union have appointed a shared employer engagement officer to increase the number of Scottish workers offered credit union payroll deduction as a workplace benefit.

As a result, all five credit unions – which are also developing joint generic marketing and reporting – have established new employer partnerships.

In Greater Manchester, credit unions are working together through the SoundPound consortium to increase their influence and speak with a single voice.

Christine Moore, CEO of Manchester Credit Union, said SoundPound had helped raise awareness and improve market penetration. It is now working with housing providers in the area, including co-operatives, to help provide affordable loans and savings to heir members and reduce household debt. Last June, SoundPound was awarded a Social Value Award from the Greater Manchester Chamber of Commerce. Its long-term aim is to triple credit union membership in Greater Manchester.

Keynote speaker Roger Marsh, former credit union regulator at the Bank of England, said it was important for directors and managers to work together. But the biggest challenge for credit unions, he warned, was the lack of a common vision because there are too many factions in the sector.

“There are lost opportunities because of not talking with a single voice – a common purpose and working together are needed to make progress,” he added.

The credit union ethos

It is also important for the sector to stress its co-op ethos, the conference was told.

Ed Mayo, secretary general of Co-operatives UK Ed Mayo argued that co-operative values played a key role in attracting members and employees as well as driving innovation. He gave the example of the Bristol Pound, a local currency run by a non-profit community interest company (Bristol Pound CIC) in partnership with the Bristol Credit Union to boost local economic development. Similarly, in Preston, the council is keeping money in the local area through targeted procurement. It also gave Blackpool, Fylde and Wyre Credit Union (now trading as CLEVR Money) space in the town hall in order to offer financial services to people in the city.

At St. Anthony’s & Claddagh Credit Union in Galway, Ireland, maintaining a close relationship with the local community is a priority. The credit union is sponsoring Fuel, an artist development programme for theatre makers. To address homelessness in the city, the credit union is backing Galway Simon Community, an organisation that provides housing, support and health care services to those who are homeless or at risk of homelessness. And it has given  funding to Cúram, a centre for medical research whose goal is to radically improve quality of life for patients with chronic illnesses.

Members of the credit union also get a Connect Card, a discounts card they can use at different retailers, food places or hotels.

Some people join just because of the discount card but others are inspired by the work the credit union does in the local community, said Louise Shields, risk and compliance manager at the credit union.

Also in Ireland,  Dundalk Credit Union – which boasts 27,000 members in a city of 35,000 – hired a community engagement research company to see what organisations people viewed as the embodiment of the community.

The survey found the credit union itself was perceived as the most community-focused organisation in the city. Others mentioned were Dundalk Institute of Technology, Dundalk Football Club, and Louth County Board of the Gaelic Athletic Association or Louth GAA. Since then, Dundalk Credit Union has formed partnerships with all of these organisations. This helped it grow membership by 10% in 2018.

Reflecting on the examples from Ireland, Roger Marsh warned UK credit unions that while supporting local communities could help them differentiate themselves, they needed to be financially sound enough to do so.

“Being warm and fuzzy and nice is not going to be a big substitute for offering products below the market standard, that’s yesterday’s world,” he said. “You’ve got to be able to say, if you want what the bank is offering we can give you something that is equivalent and we will approve your loan application in time and efficiently.  Otherwise there won’t be anything to engage with.”

The conference was a component of the EU-funded Erasmus+ Fincare project. Ralph Swoboda said: “We are delighted to bring so many people together from the credit union movement in the UK and Ireland for this unique event, and starting or continuing valuable debates and conversations. We are looking forward to presenting more research reports in 2019 that help credit unions grow and better serve their members.”