Looking to reverse decline in membership, financial institutions stress their differences from the banksIt’s a non-profit organization owned by its customers. Better rates but limited options? Maybe. Fewer locations? Perhaps. Your local credit unions – the natural adversaries of conventional banks in the jungle of finance – are fighting to ensure their evolution by trying to entice more customers.
In the face of province-wide declines in membership and increased taxation, Ontario credit unions, including the Mennonite Savings and Credit Union (MSCU), launched a comprehensive campaign this week.
“The basic thrust is that the people of Ontario in general don’t know enough about the credit unions, don’t see us as a credible alternative in the financial services space,” said MSCU chief executive Brent Zorgdrager.
Credit Unions are not-for-profit institutions offering a financial cooperative to members, with services similar to banks such as providing loans and bank accounts. They are owned by the members as opposed to separate shareholders, but are generally smaller operations with fewer locations. The MSCU, for instance, has its head office in Kitchener and a total of nine locations in southern Ontario, including Elmira, Waterloo and New Hamburg.
“It’s not that we need to change the channel on what our brand is or what we stand for, it’s that people don’t know that we exist,” said Zorgdrager.
The growth of credit unions in the United States spurred banks to lobby against their competition’s yearly tax breaks, Politico reported last year. Originally put in place so that credit unions could better represent the interests of smaller communities with smaller financial means, banks argue the breaks are no longer fair.
“Credit unions’ tax exemption was originally linked to their mission to serve people of modest means. But there is evidence that the tax subsidy is going to individuals who clearly do not need subsidized financial services and benefits the largest credit unions,” a statement from the American Bankers Association reads.
In Canada the perk is being phased out over a five-year period, the federal government announced prior to rolling out the 2013 spring budget, to bring credit unions in line with banks. Though a Deloitte Canada report cited by CBC found tax rates for credit unions were raised to 28 per cent over five years instead of the promised 15 per cent (from 11 per cent); a technical error in Bill C-60, the news agency reported.
With the tax exemptions gone, Canada’s credit unions are in for a tough time, The Financial Brand reported in May 2013, sourcing stats from the Provincial Credit Union central database.
As Ontario’s population grew 5.7 per cent between 2006 and 2011, credit union membership dropped by 7.1 per cent, the second highest decline in Canada behind New Brunswick (down 14.6 per cent in membership with a 2.9 per cent population increase). Credit unions reported an overall 0.8 per cent decline in membership across the country with a population increase of 5.9 per cent.
Conversely, Newfoundland with a population growth of 1.8 per cent, British Columbia (7.0 per cent), Manitoba (5.2 per cent) and Alberta (10.8 per cent) saw a boost in credit union membership: 17.6, 9.0, 7.8 and 3.8 per cent respectively.
The MSCU is going against the general downward movement, said Elmira branch manager Brad Martin.
“It is a bit against the trend as far as credit unions … this community certainly is supportive of what we are doing,” he said on Tuesday.
From 2006 to 2011 the MSCU grew at a rate of 16.2 per cent in membership, according to their records and continued at a rate of seven per cent from 2011-2013.
“Some of the spike in growth occurred in 2010 when we began to welcome members beyond our traditional membership from Mennonite, Amish and Brethren in Christ groups. In addition, much of our growth occurs in younger age groups – another example of where we are unique compared to many other credit unions” said MSCU spokesperson Pamela Fehr.
One of the issues specific to the MSCU, Zorgdrager admits, is its name, a sometimes effective tool for garnering trust in clients, but at times also a deterrent.
It’s true that MSCU’s values coincide with many traits prevalent in Mennonite culture as the name would suggest. While the public has been receptive to the connection, an often positive affiliation, he said, the downside is it can also keep more secular customers away.
“Does it help? Or does it cause people to not even look into us because they pre-assess they don’t qualify? In general people think positively of Mennonites and what they do and how they partake in society and contribute to communities … but they say ‘I guess wouldn’t be able to apply, or wouldn’t fit because I’m not a Mennonite.”
Still Zorgdrager says about 1,500 members of the 19,500 clients that have joined the MSCU in the past three years are not from traditional Mennonite roots.
“We describe ourselves as understanding our faith from a Mennonite perspective but if knowing that what we believe is close enough to what you believe, and you are looking for a place where your faith and finances can connect, you are welcome to join us.”