Reinventing Credit Unions for the 21st Century: A Conversation with Kirk Drake 

By Robert McGarvey for Credit Union 2.0

For two decades Kirk Drake has immersed himself in credit unions – as CEO of CUSO Ongoing Operations in Maryland and also now as an author and speaker on what he calls CU-2.0. What Drake is mulling is the how to of insuring credit union relevance in a new century with new, global competitors and a new generation that, increasingly, wants everything to be as easy as buying a book on Amazon or streaming a TV show on Netflix.  

New eras call for new thoughts and that’s Drake’s metier. Here he shares some of his pointed advice. 

 

Why didn’t credit unions successfully capitalize on the bad press given banks circa 2008? Market share remained essentially stagnant. Why? 

Drake: I think there are three primary reasons. Individually many credit unions had success during this time – but most credit unions measure success in the single digits. We don’t tend to look at what market share do we want, who are our banking competitors, and how do we get there quickly. Consequently, a lot of credit unions growing doesn’t really add up to much since the bases are small. 

Second, I don’t think we have the ingredients in place to grow faster. Digital / E-commerce can create great scalability. Most credit unions I talk to are worried about growing too fast. I get that from a balance sheet/ALM perspective. But if you get the digital commerce experience working well it can alleviate many of those issues. For example, if you got your platform able to generate a lot of leads, you can then use your platform to filter the leads and ultimately to fulfill the leads. The more you do that, the more people get to spend their time on service instead of transactions. 

Lastly, I don’t think as an industry we have figured out how to speak with one voice.  In my mind, credit unions should really be more like Subway sandwich franchises. They of course should differentiate at a local level, but if we could get the industry to at least standardize on one thing and push that – we could really have a lot of impact and leverage that strength when banks are helping us out by being banks.  

What’s a typical credit union’s biggest competitor? 

Drake: In my mind the competition right now is actually coming from fintechs. Paypal is huge in this space. Most credit unions do more transactions with Paypal then the big banks.  They just bought a bill pay vendor. As that continues, they will keep adding on services and quietly stealing your members’ eyeballs and mindshare.  

More broadly, with billions of capital going into fintechs and PayPal showing the way, there are new startups daily.  Consumers want e-commerce based financial services, traditional banks and credit unions aren’t doing enough to solve the little problems….we are trying to do what we always did – online. 

Do most credit unions do a good or bad or no job in differentiating themselves in the market?  

Drake: For some reason, I find that as credit unions get bigger and have more scale – they just look more bank like. We tend to think of sophistication as sterility in this industry and we remove personality and the little things that keep us relevant in local communities.  

In 1975 there were over 22000 credit unions. Now there are under 6000. How many will there be in 2025? 

Drake: My guess: probably about 5k. I am seeing less consolidation for two reasons – 1. As credit unions try to grow through consolidation they realize it doesn’t create more value and is a lot of work. So unless it is a strategic merger that gives them a new market, a lot of credit unions are starting to move away from that strategy. 2. New leaders are taking over credit unions every day. As the generation of leaders shift to Gen X instead of Baby Boomers – I think we are seeing more digital first and data driven models emerge and we will see a ground swell that helps keep some of the smaller ones in the game. 

What percentage of credit unions have truly embraced a digital first business model?   

Drake: My guess is about 5% are investing heavily in this transition. There are lots that think they are stuck in the how do I let my members do branch transactions online…that isn’t really the same thing! 

Why do CU leaders cling to the mythology that they win because of face to face branch contacts – when more and more consumers do not want to set foot in a branch? 

Drake: I think it is because it is what they know and it feels tangible. E-commerce can feel very unhuman. It is weird to see people transact business with your website, research things, buy them, talk about them, and most of all trust you without ever having met you. It feels like you are somehow cheating. Shaking a member’s hand in a branch simply feels more human. 

* What are three steps every credit union has to take to be a 2025 survivor? 

Drake:

  1. Begin using data in every part of the business. 
  2. Embrace your credit union heritage and look like a credit union, not like a bank
  3. Go buy some marketing automation software (like hubspot) and start seeing what you can do with it.