Credit Unions and Transparency: Obligation or Risk?

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The credit union, at its very foundation, has an obligation to include, educate, and be open and transparent with its members. After all, the credit union member is the physical owner and investor in the institution. Being open, direct, and transparent to those members really gives that true ownership translation to the marketplace.

While there is certainly an opportunity for open and direct sharing in all aspects of the credit union, where does one begin? What facets of the credit union offer the largest amount of benefits for both the member and the institution and what is the ultimate goal of this openness?

Share what makes your credit union unique

First, while being transparent is a credit union’s obligation, it is also what sets credit unions apart from the crowd. A clear differentiator in credit unions versus what a consumer might see at a bank or other financial institution is the latter often does not publish their general information for consumers to understand what they do and how they do it. Whether it is a business plan, a prospectus on what the future looks like, or how they might invest as an institution, all of this clarity makes a consumer either feel better about their financial choice or inspires them to look for another credit union that might better match what their desires and life approach are.

Are there other institutions with unique fields of membership, which directly match what the member is looking for? Are there credit unions with unique products and services the member might benefit from? Certainly, in the business market we operate in today, where members have an abundance of choices, being transparent will only help them make a more informed choice. Credit unions should use this opportunity to showcase their goals, vision, and core beliefs. I have never heard more frequently, often from young adults I have the opportunity to interact with, that they are much more likely to do business with an institution which aligns with their vision, cause, or focus in the world.

Thus, the benefit of being open and transparent is serving both the member in finding a credit union that aligns with their vision and the credit union in attracting members to their vision. Providing this clarity and transparency allows members to make the choice for themselves. The opportunity to attract and retain members who have similar focuses can be really successful. Because ultimately, the closer credit unions can connect their business plans to the reality of the member being served, the better they will do on any given day.

Offer members financial education

Second, on the educational front, being open and sharing information can offer indirect financial education to members. By making items such as a budget and business plan more accessible to members, they are able to learn from those materials and acquire ideas for managing their personal finances. Although we are comparing a business versus an individual, there are many aspects which are fairly similar.

To take it a step further, I have even seen an institution or two tie the financial well-being of a member to how they structure and go about organizing as an institution, publishing documentation and the information behind it. How they develop their plan, how they talk about strategy, how they talk about their large investments, and how they talk about the larger, global business considerations—all of it comes back to the member and their financial education.

While not every credit union might be excited about doing it this way, there is certainly real value in transparency. Even having the ability to compare one to the other is an interesting approach as you talk about financial health and well-being. In this way, credit unions are given an opportunity to share what they are doing with what the members own, how they approach the business of being a credit union, and how they consider big purchases and all those fine items. This transparency brings together what the credit union is physically doing but then gives some practical application as well.

The other interesting item to consider is how to get a member excited about wanting to read or understand a budget or business plan and the reasoning behind it. Just because a credit union puts the information out there, does not mean a member will read it. So, how does a credit union draw member interest? If a credit union can relate this information to an individual on a more personal level, members will be more invested and willing to spend time researching and asking how they might be able to translate this information into their own lives.

Regulatory and competitive concerns

Some may argue against transparency. Freely divulging what many see as private information can seem risky. After all, what about competition? What about the institution across the street?  Certainly, competition is one of the largest challenges in the transparency dialogue. The fear credit unions have in being open with their budget, planning, and strategy, is that they are giving away their secret sauce. 

However, I would argue a credit union’s first duty is to its members, not the competition. If transparency can benefit a credit union’s member base, that outweighs the concern of competition. But if this is not enough to sway the doubtful, perhaps part of the conversation should include which confidential items should be removed before anything is made public. Of course, there are always items which should remain private for a business. Do not let that be a deterrent. A credit union’s information can be made reasonably and easily understood while educational without having all the fine details of its strategy and planning.

The primary challenge in publishing this information then would be to adapt a formal business plan and budget into a stripped-down, public-facing version. One containing all the basic ideas without the would-be “secret sauce” credit unions might fear letting slip. Keep all the aggregate detail specifics behind the scenes.

Regulatory concerns should not be overlooked either. There is a likelihood of pushback during audit exams wherein a regulator may question or challenge the amount of information being shared. The concern is what potential opportunities are being given away by sharing too much. Credit unions seeking to increase their openness with members should be prepared for these regulatory challenges by ensuring their confidential items remain so.

Members are the credit union

That being said, we should not let the concerns outweigh the positives. We cannot let the fear of extra regulatory work or the bank down the road keep us, as an industry, from committing to transparency. Creating a direct and open dialogue with members is not just an obligation we have as credit unions, it is a competitive advantage. Transparency can open many doors, provide educational opportunities, and let members know what a credit union’s priorities are.

Members do not equal customers. They are the owners—there is no better way to put it at the end of the day.

Author


  • Geoff Johnson was appointed CEO of CU*Answers in 2021, following roles as Chief Operations Officer in 2014 and President/COO in 2018. He brings a wealth of practical lending experience and industry knowledge to the table with sixteen years in credit union leadership roles that oversaw the strategic direction of lending and sales in the following areas: commercial, consumer, credit card, indirect, participation, real estate and all aspects of collections. Since joining CU*Answers in 2005 as the Executive Vice President of Client Interactions, Geoff has worked closely in the growth and development of the Management Services teams including Earnings Edge, Lender*VP, AuditLink, Web Services, SettleMINT, and Imaging Solutions.

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