Credit unions are the original challenger banks, but can they take collective action?

Following a series of high profile setbacks, it seems like we’re approaching the end of the road for the Co-operative Bank after its board put it up for sale.

The co-operative ownership (by the Co-operative Group) was drastically reduced to 20% after the discovery of a £1.5bn capital hole five years ago.

Customer campaign group Save Our Bank was – and still is – hoping for the bank to be mutually owned again. Its goal is for the bank to “succeed as an ethical, customer-owned and led bank”.

The Bank is unable to meet its capital requirements, and this is where the campaign group thinks co-ops and individuals can step in.

Co-operative sources of capital (either from customers or co-ops) can enable a customer/co-operative ownership structure, according to the group. It also says it has over 10,000 members who support this action.

Related: What’s next for co-op banking in the UK

In the banking sector itself, industry insiders, according to media reports, think the bank will struggle to sell itself whole. The chief executive of Metro Bank has already said he wouldn’t buy the whole bank, but would be interested in cherry-picking parts of it.

Co-operatives have traditionally supported business ideas that disrupt sectors for public interest. So, do we put the Co-operative Bank down as a failed experiment? Or is there still room for a co-operative-backed ethical bank? Or do we start again with something different?

Alternatively, we can work with what we have. There are over 300 credit unions across the UK. Do we focus on growth and co-operation between these mini-co-op banks?

They are already facing the fallout from the Co-operative Bank’s (and other banks) fallen profitability and low interest rates. Many credit unions have reported an increase in fees.

There is already work behind the scenes to tackle increasing fees by uniting the back-office structures and marketing efforts of credit unions. But should they go one-step further?

An ideal world will be credit unions owning a stake of the Co-operative Bank – they would then own all the processing facilities and substantially reduce costs.

But with credit unions having collective assets of around £1.5bn and only capturing around 3% of the market, it’s unlikely this is a sustainable option.

Is there inspiration in Australia? There almost 60 credit unions amalgamated to form what is now known as Bank Australia, which trades as a customer-owned bank.

Credit unions are the original challenger banks, but if the Co-operative Bank loses its identity there is a gap for a truly co-operatively owned bank.