The Role of Credit Unions Today | Part 1 | Mambu’s Banking Insights for Growth

Mambu’s Banking Insights for Growth is back!

This time, we’re looking at Credit Unions. What makes them special, the role they play and how they can continue to present a unique, market beating offering, particularly in the US. 

To uncover these insights, we gathered a panel of experts including Sue Mitchell from Mitchell Stankovic and Associates, Karan Maini from Persistent Systems and Anshul Verma from Mambu.

A Unique Cooperative Model

Sue Mitchell who is founder and CEO of Mitchell Stankovic and Associates, opens the discussion by highlighting the unique position of credit unions within the financial sector. These not-for-profit entities were originally designed for people to come together and offer each other financial services such as loans and savings. This cooperative model, which has existed for over a century, sets credit unions apart from traditional banks and is particularly popular in America.

Karan Maini, Head of Banking and Capital Markets for Persistent Systems, builds on this by discussing the distinctive membership model. Unlike banks, which serve “clients” or “customers,” credit unions have “members,” reflecting their cooperative and community-centric nature. They could also provide a first point of contact for immigrants or individuals without credit histories to enable them to access loans and other essential services. In areas where large financial institutions may be scarce, particularly in rural or underserved regions, local credit unions provide an accessible alternative for individuals seeking a trustworthy place to manage their money. 

The Place of Credit Unions in the Modern Financial Landscape

In the discussion, Maini also points out that credit unions face significant pressures from the rapidly changing financial landscape. Despite the rise in digital banking, which diminishes the need for localized institutions, there is still a need for them. After all, credit unions offer a level of trust and personal service that many find lacking in large, impersonal financial institutions. Not only that, but in a fluctuating economy where interest rates shift, the ability to offer products like certificates of deposit and other savings instruments enhances their attractiveness to a broader audience. 

But the threat from technology remains. There is also the increasing consolidation of financial institutions. The number of credit unions in the U.S. has dropped dramatically from around 12,000 to approximately 4,000. Digital services have simply vastly increased the scale and efficiency of larger players. However, by focusing on their cooperative roots and emphasizing member ownership credit unions could find a way. With over 85,000 credit unions globally and a strong presence in the U.S., Mitchell notes the sector’s commitment to growing its membership base to one billion globally. This strategy includes deepening intergenerational relationships to ensure credit unions’ relevance in future decades.

Financial Inclusion at the Centre

Anshul Verma​​ who is Head of Partnerships for Mambu in the US, is also keen to focus on financial inclusion, noting that credit unions consistently offer more favorable rates, lower fees, and less predatory loan terms compared to for-profit institutions. There’s also something to be said for the localized nature of credit unions in allowing for a high level of personalization, which Verma argues will become even more critical as digital tools and technology advance. By leveraging data and analytics, credit unions can tailor financial products to meet the specific needs of their members, offering services that bigger financial institutions may not be able to replicate. He also emphasizes the importance of financial literacy, which is integral to the member-driven model of credit unions. Advocacy for member-friendly regulations further aligns with the overall mission of credit unions to promote financial well-being within their communities.

Technology and Digital Transformation

All the panelists agree that the future of credit unions will heavily depend on their ability to embrace digital transformation. There’s no question that this needs to happen and Verma highlights how credit unions are increasingly collaborating with fintechs to offer seamless, omnichannel experiences, ensuring members can engage with their financial institution through multiple platforms. Be sure to watch the video to find out more about how emerging technology could be used to further the success of this corner of financial services. 

There are also a number of thoughts on the social impact of these institutions and how this can be a key differentiator for credit unions. As the world increasingly values corporate social responsibility, Mitchell points out that this is something credit unions have always championed. This includes supporting environmental sustainability, diversity, equity, and inclusion (DEI), and political engagement within communities. Mitchell argues that while credit unions are good at telling individual member stories, they need to do a better job of quantifying and showcasing their broader social impact. Creating detailed social impact reports, which track investments in communities, financial accessibility, and employee involvement, could help credit unions emphasize their role as “social financial institutions” in ways that resonate with today’s socially-conscious consumers.

And there is more to come from this panel. Be sure to watch Part 2 right here on the FF News website.