National Credit Unions

The Canadian federal budget last week contained the intention to allow federal or national credit unions to be established in Canada, something that has been lobbied on for a number of years. Our neighbours in the USA have had federally chartered credit unions for sometime but with a more advantageous tax treatment. But, don't expect that to happen here! Perhaps, the American credit unions will face a change in their tax situation more closely resembling ours in the not too distant future.
So what would the new legislation do to the Canadian financial service industry in the short run? Probably, not much. Although we have some large credit unions, such as VanCity in British Columbia, which is also the largest in North America, except on the armed forces payday in the USA when the Navy Credit Union has its peak position for 24 hours. Still the majority of the remaining credit unions are average in size with some small entities in specific cultures or communities. Today the productivity ratios are quite a bit weaker than, say, their bank competitors and their service satisfaction levels higher, which has not developed a tidal wave of switches to credit unions,
In the long term, there will be an evolution to amalgamations and new collaborative structures such as the CUSO and the Corporate Credit Union we find in the USA. Also there will eventually be pressures on consolidating provincial and national umbrella organizations to try and obtain synergies and competitive strengths. A major area of difference will be in Quebec where the Caisse movement has been integrated for years and represents a major financial force in that province.
Just how well will this improve credit union competitiveness against the dominant banks and the evolving expanse of Internet options which continue to attract more and more consumers ever day. No doubt the banks will demonstrate a little push-back on the new legislation but this could be negative for them in terms of political and social realities. If credit unions continue their mandate under which the movement was founded there will be a differentiation. On the other hand, should credit unions decide to leave those principles behind and go head-to-head with the banks, the long term outcome could be disastrous financially.
Still the new status of federal credit unions can be used for business and brand advantages if the leadership uses the opportunity to work cooperatively for their communities and members. There will be winners and losers.

Pat Palmer | Monday, March 08, 2010 | Comments (0) | Trackbacks (0) | Permalink