Not only have we been working with de novo credit unions, we’ve also been interviewing and working closely with small credit unions that are “at risk*” for merger. It doesn’t matter if we start two new credit unions a year if we are losing over 150 to mergers.
Two of the hurdles that a de novo credit union has to overcome are exactly the same hurdles most credit unions under $100M face:
- Lack of capital
- The high cost of keeping the doors open and being competitive.
As of Jun 30, 2022, 86 credit unions have merged this year. 72% (or 68 credit unions) did so for expanded services.
0Out of existence
So far this year
One common key issue we've found is that many at-risk credit unions are literally being held hostage by their legacy core processor. Sometimes they have no choice but to enter into 7 to 10 year contracts to keep the price down, pretty much sealing their fate. They don’t have the capital to make big investments in up-to-date technology.
The CU De Novo Collective Foundation will also have a grant program for “at risk” credit unions*. Again, similar to the CDFI grant program we will have two categories:
- Technical assistance - one idea is to offer a “cut the cord” program to buy them out of their bad contract so they can move forward.
- Capital - to provide them with enough capital to ensure they can remain competitive and avoid merger.
Another solution lies in the sixth cooperative principle: cooperation among cooperatives.
Revolution CUSO is a new CUSO (Credit Union Service Organization) currently in the development phase that will provide leading-edge back-office, technology, and other services to small and startup credit unions at sustainable prices. (Keep your eyes open for more Revolution CUSO news in the coming months!)
*"At risk" is defined as any credit union under $250M in assets with a declining capital ratio that has fallen below 7%