What Is Holding Back the Development of Comprehensive Businesses Services in US Credit Unions?

17 Pages Posted: 11 Nov 2018 Last revised: 1 Feb 2019

See all articles by Adam Szymanski

Adam Szymanski

Post Growth Institute

Donnie Maclurcan

Southern Oregon University; Post Growth Institute; University of Technology, Sydney - Institute for Sustainable Futures

Date Written: October 18, 2018

Abstract

The credit union movement has experienced rapid growth across the United States in recent years. After the financial crisis of 2007-2008, US credit unions emerged more resolutely as trusted financial partners, able to maintain lending during the credit crunch and offering better loan and deposit rates, greater investment security and superior customer service. Credit unions are known for their focus on consumer banking. Yet this has obscured their changing relationship with businesses.

This paper seeks to discover the state of US credit union capabilities with respect to business banking services. After creating a classification for the level of US credit union business banking capabilities, we conducted informal, semi-structured interviews with a small sample of key stakeholders from the US credit union industry in order to provide insights into the nature of existing US credit union business banking capabilities.

Since US credit unions have been shown to provide direct economic benefits from consumer banking, along with a positive track record for small businesses, we are interested in credit unions’ potential to serve larger businesses beyond the provision of loans. Given that businesses have higher average deposits than consumers, there is potential for shifting significant resources from banks to credit unions.

Our findings suggest that while many US credit unions offer Basic Business Services, and some US credit unions offer Semi-comprehensive Business Services, no US credit union offers Comprehensive Business Services. We discovered three main factors holding back the development of these commercial capabilities: mission constraints; lack of apparent business demand; and lack of a strong business case according to a cost-benefit risk analysis. These factors appear to reinforce each other in a vicious cycle.

However, these factors may also present points of leverage for those seeking to expand business service capabilities within the US credit union system. For example, if weak business demand stems from an absence of targeted marketing to the private sector, a campaign to document pledged allegiance could reverse this phenomena. Indeed, we see strategic interventions at one of the three points offering the ability to shift the system from a vicious cycle to a virtuous one.

Keywords: Credit Unions, Banking, Move Your Money, Commercial Services

JEL Classification: G21, P31, D22, D31

Suggested Citation

Szymanski, Adam and Maclurcan, Donnie, What Is Holding Back the Development of Comprehensive Businesses Services in US Credit Unions? (October 18, 2018). Available at SSRN: https://ssrn.com/abstract=3269580 or http://dx.doi.org/10.2139/ssrn.3269580

Adam Szymanski

Post Growth Institute ( email )

156A Union St
Ashland, OR 97520-5022
United States

Donnie Maclurcan (Contact Author)

Southern Oregon University ( email )

1250 Siskiyou Boulevard
Ashland, OR 97520-5022
United States

HOME PAGE: http://https://sou.edu/academics/economics/faculty/

Post Growth Institute ( email )

156A Union St
Ashland, OR 97520
United States
5416318680 (Phone)

HOME PAGE: http://postgrowth.org

University of Technology, Sydney - Institute for Sustainable Futures ( email )

Broadway, Ultimo
PO Box 123
Sydney, NSW 2007
Australia

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