Four ways credit unions can balance mission and margin
Credit unions face a unique challenge: balancing their mission-driven approach with margin-focused business needs. Banking lobbies repeatedly point to the latter as an example of credit unions losing their identity. So is it possible to strategically grow while being financially inclusive?
As credit union event season kicks-off with America’s Credit Unions’ Governmental Affairs Conference, it’s likely that retaining certain tax-exemptions will be the focus of countless speaker sessions, hill-hikes and after-hours meet-ups.
The federal income tax exemption was established in recognition of credit unions’ not-for-profit, cooperative structure. The thesis being that serving the underserved rather than pursuing profit should be rewarded with favorable regulations; encouraging and enabling financial services focused on those who need it the most.
Over the years, banking lobbies have often misrepresented the exemption as a sweeping free-pass. In fact, there’s rarely a legislative session that doesn’t present lawmakers with the opportunity to remove it, arguing that as many credit unions grow in asset size and scope of services, the system en masse is disconnecting from its original mission-driven roots.
As ever though, the truth is somewhere in between both sides. Yes, credit unions are growing, but improving yesterday’s services to meet the needs of today’s consumer is no bad thing. Innovation, fintech partnerships and scale are, in fact, critical to serving the underserved—because the gap between the haves and the have nots has never been greater. What credit unions need to improve is how they articulate this growth.
Keep mission at your core
At the heart of every credit union is its mission to serve members and communities. This tenet continues to help credit unions differentiate themselves from big banks and other financial institutions.
As Brent Rempe, CEO of Minnesota’s $267.8M-asset First Alliance Credit Union explained, “If your financial institutions is just focused on making money, it’s not a credit union.
“Credit unions work on combining mission and margin, people and profit. One without the other is simply not a credit union.”
Another industry veteran, Chad Helminak, owner of Purpose to Impact Consulting, echoes Rempe’s sentiment.
“A credit union’s unique mission helps to differentiate them in a financial services market full of solutions,” said Helminak, whose credit union career boasts leadership roles at credit unions, leagues and associations, and system partners.
“So there's a business imperative for a credit union to leverage its mission, and find ways to use it to energize the employees within their walls.”
To put it simply, mission needs to remain central to a credit union’s brand identity.
Define what balance looks like
For both Helminak and Rempe, lending is a stage where the “mission versus margin” tension often plays out.
“There really is a balance that every organization needs to establish for itself,” said Helminak.
“If a credit union is exploring new products to reach new audiences, those efforts can create tension and stall if organizational priorities—such as membership growth and risk management—are perceived as competing.
“By using their mission as a north star to explore the complementary middle ground, credit unions can find creative ways forward.”
The tension is understandable. Serving the underserved frequently means working with individuals who might be in challenging financial situations and potentially performing story-based underwriting rather than traditional credit-based underwriting (or some combination of the two). This type of lending brings inherent risk, but—at least according to Rempe, who held a CLO role at another credit union prior to taking over at First Alliance—it’s a required risk.
“When we commit to mission-driven lending, we've got to be more willing and more comfortable with some increases in delinquencies and charge-offs,” Rempe said. “It’s imperative for credit unions and their leadership to embrace progressive underwriting practices.
“Certainly, we need to mitigate risk. Certainly, we need to manage delinquencies and charge-offs. Certainly, we need to work with members in some of those challenging situations where they're struggling to repay. But we have to be more comfortable with embracing these risks as a necessary aspect of fulfilling our credit union's mission.”
Get organizational buy-in
If mission is central to a credit union’s brand, fostering a culture where everyone is aligned with that mission is critical to the brand’s long-term manifestation. This means actively inviting employees to define and live the organization's core values.
“There's a psychological connection when you've helped build something collectively,” Rempe explained. “So as far as living the mission, it's really important to involve team members across all levels, tenures, departments. This can be done through surveys, town halls, workshops. But it can’t be a one and done thing. There needs to be a systematic, intentional effort to engage and involve employees in the strategic vision and execution of the credit union.”
Helminak added, “When people feel seen and heard and you put different parts of the business in the same room to have these kinds of conversations, it leads to everyone feeling really good about their contributions to their colleagues’ work and the greater good done through the credit union.”
For credit unions looking to advance a mission-driven agenda, organizational buy-in from all levels is a critical success factor—people believe in what they help create.
Learn how to articulate impact
In every credit union today, in the halls of GAC, at the next League chapter meeting … wherever it will be, if there are credit union people in a room, these ten words will be spoken:
“We need to do a better job telling our story.”
The ability for the credit union system to articulate its impact is regularly pinpointed as a weakness. The commoditization of services is a banking playbook, and the great deposit flight of 2023 showed member-loyalty isn’t quite as robust as many credit unions thought.
This is precisely what Mission Brands Consulting exists to do. To help mission-based organizations go beyond the transactional to build deep relationships based on impact, rather than APRs.
“From my point of view, successful credit union storytelling is pointing to numbers and facts and sticking to the facts, but also bringing in the human story,” said Rempe. “When you combine the two, that creates a very powerful deliverable that employees can get behind regardless of role, and members and potential members can see and recognize themselves in.”
Helminak added, “Most employees appreciate learning about the big picture. It’s dignifying and empowers them to carry your credit union’s banner forward.
“Word of mouth is still very effective at generating new business. It's a longer-term investment but well worth it for the value it creates for both your employees, your members and the credit union.”
Reach out to discover how Mission Brands can help your credit union realign its brand strategy, amplify impact and attract and engage new members.