From: CUNA’s Undercover Speaker

San Diego is known as “America’s Finest City” for a number of reasons—mostly because there’s so much to see and do along with the perfect weather to enjoy it year round. (Pete Wilson, a former mayor came up with the moniker “America’s Finest City” after we were snubbed for a major convention in the early 1970s.) Now millions come to visit our fine city annually. We’re thrilled CUNA is coming to town and taking over the Convention Center for America’s Credit Union Conference—but it wasn’t always this way.

Several years ago locals started sporting bumper stickers that read: “Welcome to San Diego . . . now go home”. Our city was getting inundated with new residents and bursting at the seems—and locals were very protective of their secret spots. That’s changed in recent years with more people visiting and less moving here. So this is the perfect time to share some of the spots us locals love (and few tourists ever see) so your trip to San Diego is one to remember. (And if you want to relocate, that’s okay, too.)

Since most of you will be spending your time in and around the Convention Center (which is conveniently located near Seaport Village, the Gaslamp District, and several attractions) we won’t worry about things to do downtown—although, East Village Tavern and Bowl is a cool place to go if you get a chance. (Think: Upscale bowling.) We also won’t cover the obvious tourist destinations like SeaWorld and The San Diego Zoo—but both are worth experiencing. Instead we’ll focus on more obscure places for those of you who want to get away from the crowds.

For each locale we’ll look at what to see, what to do, and where to eat. We’ll head out from Downtown San Diego in all directions so depending on what you decide to do and how far you want to go, you’ll find something new.

MISSION BEACH

Mission Bay is a big part of Mission Beach. It’s the largest man made recreational body of water in the country. On your way into Mission Beach you’ll see a roller coaster. There are rides and games here along with the Wave House. If you want to surf but don’t want to actually go into the ocean, this man-made wave is for you (or just have bite to eat, listen to live music and watch others attempt to tame the Flow Rider.) Also in Mission beach is Santa Clara Point which has free parking (something hard to find here) as well as stand up paddle board rentals (very popular) and sailboats and other watercraft you can ply in the calm waters of the bay. Wind and Sea Surf Shop rents bikes, boards, and beach chairs if you plan to spend the day. For surf lessons, the Surfari Surf School is the place to go. For a nice dinner in Mission Beach, Saska’s is a must. If you just want to party like a local, try The Pennant or the Surfcomber—which you can ride to on your rental bike—using the lengthy boardwalk. Lastly, a great place to hang out for coffee and cake is Cafe Mono (and they serve breakfast, too.)

PACIFIC BEACH

Just north of Mission Beach is Pacific Beach. One of the best breakfasts can be found next to Crystal Pier (which you can walk out on and see the surf) at a place called Konos. (Tip: Order your food and sit in the seats overlooking the ocean.) For the best view of San Diego drive up Lamont Street to Kate Sessions Park. It’s the perfect place for a picnic on the grass as you take in the stunning scenery. Pacific Beach has so many bars up and down Garnet Avenue it’s hard to recommend just one. But the best burger at the beach is an easy call, you’ll find that at Rocky’s on Ingram. It is no longer legal to drink alcohol on the beaches in San Diego, but it you go to Lahaina’s your feet are almost in the sand and you can legally have a cocktail . . . or three.

POINT LOMA

San Diego has a strong military history (visit the Midway Museum and see) but it is a former military base that has become a park that holds a special place for San Diegans. It’s called Liberty Station which has the one and only Navy training ship that never went to sea. (You’ll understand if you make it here.) There is a walking path along the water that is perfect—plus at one end is the Corvette Diner and the other end is home to several eateries. In the middle of your walk you can visit the brand new Stone Brewing Bar and Bistro. (San Diego is a hotbed of micro breweries and this is the best.) Point Loma is also home to Shelter Island and the Bali Hai restaurant. The Polynesian design makes it a local landmark—and the food makes it a local favorite. (Try a Mai Tai at the bar. You’ll see what I mean when you do. Wow!)

CORONADO

We all love Coronado. The main street is Orange Avenue and it’s worth seeing. But to really enjoy Coronado like a local visit the Old Ferry Landing. You can take a boat across from downtown San Diego or drive over the Coronado Bay Bridge. Once there, rent a bike, a kite, or just walk along the waterfront. There are several places to eat in the Landing, and a few more at the north end of Orange Avenue (away from most tourists.) If you want to see the famous Hotel Del Coronado, it’s hard to miss—and the beach out front is spectacular. But for real scenery take Orange Avenue and drive past “The Dell”, past the base where the Navy Seals train, and past The Strand State Beach to Imperial Beach. Follow the signs until you see pier. The best bar here is the Ye Olde Plank as well as IB Forum—the most south westerly bar and grill in the USA.

LA JOLLA

Now that Mitt Romney owns a home in the Bird Rock area of La Jolla, it’s becoming more known. Everyone has heard of La Jolla Cove and Prospect Avenue (try Brockton Villa Restaurant if you go) but Bird Rock was a hidden gem of a town. One of the best beaches that nobody knows about is there, (Wind an Sea), the coolest coffee house in the area (Bird Rock Coffee Roasters), and Beaumont’s, the perfect place for dinner.

SOLANA BEACH

North County encompasses a lot of land, but if you want to see the coast and get there in style, take the train from downtown to Solana Beach. From the train station there are several places to walk to for a bite to eat—especially Pizza Port. The Belly Up is where locals go to hear live music and it’s within walking distance. There is an excellent beach and park at the end of Lomas Santa Fe that is well worth the short walk. If you drive to North County take Highway 101 and go past Solana Beach to Encinitas. If you are inquisitive, visit the Self Realization Fellowship and Gardens. If you are just interested in a good, healthy meal visit Swami’s Cafe. Walk down to Swami’s Beach and on low tide take a stroll along the coast and witness the best surf in San Diego. Just up the coast is Moonlight Beach and beyond that is the town of Leucadia.

Comment for your chance to win:

We want to hear from all of you coming to this year’s America’s Credit Union Conference.  What San Diego hot spot are you hoping to check out while in town or would you recommend others don’t miss?  6 lucky commenters will receive a gift card to one of the local favorites mentioned in this post.

CONTEST NOTES: Contest begins today and ends on Wed., June 13th at 11:59PM (ct). Winners will be chosen by a random number generator. Make sure you leave an email address where you can be contacted.   The odds of winning depend on the number of entrants received.  No purchase necessary to win. Void where prohibited.     This competition is offered by Credit Union National Association (CUNA) and is open to anyone who comments on this post and is at least 18 years of age. Employees of CUNA and family members of such employees are not eligible to enter.   CUNA shall not have any liability for any malfunction of or damage to the prize. The award winner may be responsible for applicable state or federal taxes on the value of the contest prize

From Mark Arnold:

While micro-blogging site Tumblr may still be a junior partner to other social media giants like Facebook, Twitter and YouTube, a growing number of credit unions are jumping on the site with an eye towards attracting the attention of members and potential members.

Tumblr is described as a short-form blog website, where embers can start their own blogs and/or follow others. Tumblr now boasts over 46 million blogs and 18 billion posts.

What are credit unions doing to take part in the Tumblr movement? A quick scan of credit union accounts on Tumblr revealed interesting results. Lake Trust Credit Union in Ann Arbor, Michigan hosted an active Tumblr page with regular updates until deciding to move its blog efforts in-house in late 2011. 1^st United Services Credit Union in San Francisco, California maintains a vibrant Tumblr profile, with regular updates, embedded relevant video and a solid cross-pollination of other social media efforts. And a quick search of blogs and photos tagged with the words “credit unions” came back with interesting results, both pro and con.

The jury is out on the viability of Tumblr as a long-term social media platform and one that can particularly benefit the credit union movement. However, credit union professionals would be wise to study this social media avenue. If your credit union chooses to use Tumblr, it must fit right with your other marketing and online efforts that are already in place.

Mark Arnold, CCUE, is an acclaimed speaker, brand expert and strategic planner. He is also president of On the Mark Strategies, a consulting firm specializing in branding and strategic planning. Some of the services Mark provides include strategic planning, brand planning, leadership/management training, marketing planning and staff training. His web address is www.markarnold.com and his blog is blog.markarnold.com.

By Michelle Ruppert, CUNA Online Communications Intern

As an intern with the Credit Union National Association, much of my focus has been on the National Credit Union Youth Week™ campaign.  Now that Youth Week has officially arrived (April 22-28), I wanted to honor a great youth promotion which caught my attention — the Indie Money website from Torrance Community Credit Union.

Indie Money is a comprehensive program of financial services and education designed to teach financial responsibility and to help teens between the ages of 16 and 17 establish credit in a monitored, conscientious way with real-world credit and debit products.

Nancy Whitehead-Smith, Marketing Manager, TCCU

To ensure teens are armed with the knowledge and skills necessary to manage their new accounts, they must first pass the Indie Money Challenge and attend orientation with a TCCU staff member, as outlined in depth  in the online Indie Money brochure.

On the surface, the program seemed to be right on the money, but I wondered whether or not it had benefited both teens and the credit union. Fortunately, I was able to speak to TCCU Marketing Manager Nancy Whitehead-Smith to find out more about the customized program.  Here is what I discovered through my interview:

Michelle Ruppert (MR): When was Indie Money first established?

Nancy Whitehead-Smith (NWS): We first established the program in 2008.

MR: Who came up with the idea for Indie Money?

NWS: I came up with the idea for Indie Money after considering our board’s desire to increase financial awareness among our teen members. The board wanted to serve youth and provide youth education where they felt that it was lacking. They felt that that whole industry was not answering to financial education needs and that young people didn’t really understand credit. So, the goal was to find a way to start education at a young age and explain credit.

MR: Why did Torrance CU create Indie Money specifically for 16- and 17-year-olds? What’s different about it than what was offered to this age group before Indie Money?

NWS: It was sort of a gut feeling, but the idea was to prepare teens before they started getting bombarded with predatory credit offers. We also wanted it to be in collaboration with parents because it was crucial that parents be involved in several components. We wanted to be sure that parents could monitor activity.

We chose the name “Indie” from “Independent” [which often refers to art, music, dance, cinema, design, and lifestyle characteristics that are outside of the mainstream] and used a skater theme to reflect our demographic.

My daughter was actually the test subject as we developed the program. With her input, we picked credit limits of $250 on a MasterCard and put a daily withdrawal and purchase limit of $110 on VISA debit cards. Other decisions included teens needing a co-signer if they wanted car loans, and they also had to show proof of income for loan products. We also give participants a free subscription to a young adult financial education magazine.

MR: Who was involved in the decision process from idea to launch?

NWS: I was involved in the process, and Steve, our CEO, created parameters that were safe for the credit union. Park View FCU had a teen program, and they shared some of their experiences with us while we were developing Indie Money. As I said before, my daughter also helped us. After she had been in the Indie Money program, we pulled her credit report at age eighteen. It was very high.

We set low limits and established that teens must agree to grant parents access and complete orientations for all products. These orientation topics included seminars and safety for using ATM cards.

We know that teens are the busiest people in the world with active social lives, work, school, and everything that goes on. It’s hard to get their attention, so we want to make it as easy as possible for them to get information. For the future, we are considering using webinars and podcasts to make information more accessible to teens in the easiest manner possible.

MR: How has Torrance Community CU’s youth membership changed since Indie Money was implemented?

NWS: Overall, we’ve done campaigns to reach out to membership, and overall youth membership has increased tremendously over time. There are not a lot of our teens using credit cards, though.

MR: What has the turnout been like for Indie Money workshops and seminars?

NWS: We’ve had good turnout for our events. Lots of flavors of kids show up, often rolling their eyes and accompanied by their moms. We actually hand out ones and fives if they answer our questions. We’re essentially paying them for participation, but it is a good motivator that keeps them engaged. We try to stay on top of being sensitive to their needs and time.

MR: How have teens (and parents) responded?

NWS: Many are wary, but they’re grateful for the education and help. Parents especially are paying very close attention to the information in our seminars. Some think everything is a sales pitch, but as a result they are the ones who are very involved at the seminars.

MR: Has the credit union received any attention for Indie Money in the community or beyond?

NWS: Yes, we have received some coverage from a local cable channel.

MR: Are there any upcoming plans for Indie Money or other accounts?

NWS: We are looking into new avenues to communicate with teens. We had a lot of fun with our “Friends Don’t Let Friends Be Bank Zombies” video, so we are looking into the possibility of making a new video. We are also exploring podcasts and webinars as a way to give Indie Money participants access to financial education information.

With the focus this month being on youth, what programs are you trying at your credit union and what have you found success with?

From Beth Stetenfeld:

If you ask friends, neighbors, and colleagues to size up their lives, few say every aspect of life has been perfect—that they’ve had it all.

Some say they have no regrets. But the truth is, we all make choices and sacrifices. At some point, we have to set aside one personal goal or desire for another.

Whether it’s trading time with family for military service or setting aside a long-time cherished hobby for a more lucrative career, we all must choose paths along the way. Often this means subjugating selfish goals for the common good.

Many of the credit union movement’s leaders have made great personal sacrifices for the benefit of their members and communities. And four times each year, Credit Union Magazine highlights and thanks these CU Heroes.

Often these folks say they’ve received as much as they’ve given. While that might be true, they’ve all made credit unions and their members a top priority.

This year, we celebrate the contributions of four more CU Heroes:

• Rudy Hanley, president/CEO, SchoolsFirst Federal Credit Union, Santa Ana, Calif. His political involvement, work ethic, and integrity have benefited his own credit union and the credit union movement, overall.
• Ron Kase, CEO, Landmark Credit Union, New Berlin, Wis. One of his proudest accomplishments: leading his credit union through remarkable growth, including the creation of 450 jobs in southeastern Wisconsin.
• Frank Matous Sr. (posthumous), former CEO of Tandem Federal Credit Union, Warren, Mich. A credit union pioneer, he encouraged the next generation—including his four sons—to stay active in the credit union movement.
• Joe Robertson, retired president/CEO, Our Community Credit Union, Shelton, Wash. His credit union garnered a record $18 million increase in deposits during 2009 (doubling the previous year’s increase) during the slow recovery from the recession.

And now it’s time to select the CU Hero of the Year. Please visit creditunionmagazine.com to cast your vote.

Voting will take place through April 30. This year’s winner will be honored at CUNA’s America’s Credit Union Conference in San Diego, June 17-20.

So cast your vote and visit cuna.org to learn more about the conference.

From Lisa McCue:

Credit unions deserve a lot of attention for all the positives we bring to our communities.  It’s great when we get it.

Did you see this News Now this week? It takes a look at how communities across the nation have been recognizing credit unions as “the best of the best” in a variety of areas.  For instance, among the CUs highlighted is Northwest FCU (NWFCU), Herndon, Va.–and its NWFCU Foundation–honored as the Best Financial Institution at a regional Chamber of Commerce annual Youth and Education luncheon. This year, more than 190 students attended.

You’ll love this. At the luncheon, credit unions went up against banks to market their products and services to students and encourage the kids to open an account using play money. The students “voted” by opening an account with what they believed to be the best financial institution. They also evaluated each institution on products and services.  NWFCU and its foundation swept all three categories and were voted Best Service, Best Product and Best Overall Financial Institution.

There’s a lot more to read in the article found here.  And while you’re at it, you might want to sign up here  for News Now headlines to be delivered early every morning to your inbox.  And Twitter users can sign up for all-day news hits from News Now LiveWire here.

Lisa McCue is the Vice President of Editorial Communications for the Credit Union National Association.

This post originally appeared on CUinsight.com, where CUNA regularly provides articles related to credit union topics for their CU Community page.

From Joe Day:

Photodisk/Thinkstock

According to the most recent statistics from CUNA, the average age of  today’s credit union member is 47, and 69% of nonmembers age 18 to 24 know little about credit unions.* While these statistics don’t signal drastic change for credits unions at the moment, if the trend continues, the credit union movement is at risk of losing considerable membership ground.

April is Financial Literacy Month, so now is a great time to reflect on the role younger members play in the credit union movement.

Young members symbolize a fresh start. They are new to spending, new to saving, and even new to handling money. While these members may not immediately be prospects for large loans or investments, all this “newness” is not a bad thing. Credit unions have the opportunity to personally educate their younger members—to start them off on the right foot with their personal finance goals. By starting the conversation, credit unions can teach the next generation how to lead responsible financial lives, establish a deep and long-lasting relationship with their younger members, and demonstrate to the community that their credit union cares. If you lay a solid foundation of trust with your younger members, they will look to you first for financial solutions when they go to college, buy a car, or move into their first house.

Reaching out to youth is also a great strategy to build on existing member relationships. A parent or guardian will likely accompany younger members to the credit union, providing a perfect opportunity to get to know and engage with adult members as well.

Here are just a few ways you can reach youth in your community:

• Celebrate National Credit Union Youth Week™, April 22-28, 2012, or celebrate throughout the entire month of April.  “National Credit Union Youth Week gives credit unions the opportunity to reach out to the youth in our communities, teaching them about financial literacy in a fun and exciting way. It allows us to build a strong foundation for the financial future of our communities,” said Kendra Handke, marketing coordinator at Oregon Community Credit Union.

• Participate in the National Youth Saving Challenge ™, a free contest aiming to jump-start smart savings habits at an early age, using the unique service commitment that defines the credit union movement. Last April, 305 credit unions joined the Challenge and engaged 146,002 youth who put a collective $28.5 million in their credit union savings accounts, including more than 9,000 participating new accounts. Last year the challenge also reached a new milestone, bringing the total amount deposited since its start in 2004 to over $100 million dollars.

• Reach youth in the ways they communicate. If your credit union is active on social media platforms, focus some of your messaging on youth topics, such as saving tips, budgeting, and responsible use of credit.

• Reach out to local schools to hold events to educate youth about budgeting and personal finance.

 If credit unions want to ensure the success of our movement for the years ahead, efforts to engage with today’s youth need to increase. If we do nothing, the average age of our members is likely to increase outside of prime lending years. Investing time and energy today is not only sound business practice, it will eventually lead to loyal members who make smarter financial decisions.  These members will also be well-versed in the services your credit union offers and inclined to spread the good news about the credit union they’ve known since childhood.

* http://www.creditunionmagazine.com/articles/print/37070

Joe Day

Joe Day, Director of Business Development at CUNA, pursues opportunities for expanded personal finance offerings and audience development advice to help credit unions and industry vendors maximize their exposure and increase their market share.

From Jill Stevenson:

Were any of us expecting the surge of public outcry against big banks when Bank of America made that little announcement of charging a monthly $5 fee on debit cards? Come on, really…it’s not like they haven’t added new fees or increased fee charges before.

I think not…

When opportunity knocks, when our rivals really get it wrong, credit unions aren’t fortune’s fools.

This is the credit union movement’s “national branding campaign we have been waiting for,” Pat Keefe, CUNA VP of communications and media outreach, so aptly proclaimed during a recent interview on CU Chat Up.

I think he is right.

Credit unions did not have to design it, manufacture it, nor pay for it. But, we will certainly benefit from it. And may our new credit union members be content with their switch.

Now, whoa Nelly, BofA backed down and nixed the fee…

Too late!

The actions of big banks have sent their customers searching for credit unions to join. Will everyone find a credit union to join via the credit union locators that are being promoted throughout the news and Internet? Since the BofA announcement, over 68,000 successful searches have been conducted via the CU locator on the consumer website ASmarterChoice.org.

Don’t overlook the power of social media, either. Geez, just look at the reaction from that event page posted by Kristen Christian. That’s what has gotten us to this countdown to Bank Transfer Day on Saturday, November 5.

A Smarter Choice’s Facebook page had reached 1,014 “likes” during its first 6 months. Now, four weeks after the BofA announcement, that number has climbed to over 6,283 as I edit this blog, again. Oh, and according to Facebook, 2,124 people are talking about this (us). How they know, I really don’t want to think about….

Here are a few of the most recent Facebook comments:

“Buy local everything. The extra money you may spend will end up in your pocket.”

As to whether the BofA fee reversal changes your plans to switch?

“No. Switching has never been easier…”

“No. Too little too late…”

Here’s a comment on the posts about The Disclosures song “Tired of Your Big Bank?”

“Love the song and love my credit union!!! They have taken care of me for 40 years and have never done me wrong!!! Get smart people and move your money to a credit union where you and people like you are in charge!!!” (3 people “liked” what she said.)

Thank you, big banks!

Jill Stevenson is the consumer website coordinator for ASmarterChoice.org.

Brent Dixon

From Brent Dixon:

The cooperative movement has a problem with aging. Average age of cooperative members and employees is over a decade older than the average age of people in the US and in Canada.

We feel this pain in the credit union industry. The average age of a credit union member is 47, and 75% of credit union board members are over 50.

Because of economic, technological, and cultural changes, financial services – and many other business sectors – have hit what the smart folks at McKinsey & Company call a “Structural Break,” which is:  “…the moment in time- series data when trends and the patterns of associations among variables change.” (via)

What does that mean? It means things have changed and we cannot continue to do things the way they’ve always be done.

If you went to business school you remember the chart that appears with this post on the life-cycle of an industry.

All signs point to credit unions, and many of our cooperative brethren, being right smack on X. This means we can go one of two ways, and have to fight for the future of a model we know is better for our communities. And if we don’t inject new blood, new energy, and new ways of solving problems into our cooperatives, they will die.

We need to recruit and invest in young talent.

At the Filene Research Institute, a think-and-do-tank for credit unions, we learned that the top reasons young people work for credit unions include:

•   The opportunities to influence strategy immediately

•   The opportunity to work with and learn from top leadership from day one

•   The opportunity to help their community

In talking with young people across credit unions, we also learned that because young credit union employees are somewhat rare, many of them feel like an island while at work. They were starved for ways to connect with other like-minded people their age.

Ed Filene, father of the U.S. credit union movement, once said, “Youth is too serious to become obedient.”

That in mind, a group of young credit union people, myself included, decided to take the problem into our own hands. Through a series of small grassroots meet-ups that spun wonderfully out of control, we’ve nurtured and grown The Crash Network, a growing community of close to 200 young credit union professionals. The community is designed to enable:

•   Ongoing connections and support from like-minded people through an online network at http://crash.coop.

•   Opportunities for professional growth and development through action (One example is: The Collider, an innovation tournament designed to improve the problem of affordable housing).

•   Mentorships with seasoned industry veterans.

A year and a half in and we’ve initiated countless development projects, sparked spin-off youth development organizations across the U.S, piloted a mentorship program, and given a voice to a growing number of young credit union employees who are ready to step up, get their hands dirty, and create the future themselves.  You can watch a short video on some of the voices of The Crash Network here.

We have a lot to learn, and can’t wait for what’s next.

Brent Dixon, Young Adult Advisor for the Filene Research Institute, will be presenting on building a younger cooperative at the upcoming CUNA Community Credit Union & Growth Conference.  This post was originally published for the National Cooperative Business Association (NCBA).

This post comes to us from Josh Allison, Relationship Development Manager for Horizon Credit Union in Spokane Valley, WA. Josh will be presenting at CUNA Community Credit Union & Growth Conference, October 24-27 in San Francisco, CA.

It’s a recent email Josh sent to the Credit Union Development Educator email list serve. After reading the post—and the subsequent email discussion it generated—The CUNAverse team thought it would be great to share Josh’s thoughts with you, our readers…

From Josh Allison:

Josh Allison

Good morning CUDE network!

Last night I saw a commercial for Lending Club. The premise? Simple. Some people deposit money so others can borrow at better rates. Or, as the website says: “Companies like Lending Club are cutting out the middle man − banks − to offer consumers the opportunity to lend money directly to others and obtain a higher return.”

Sound familiar?

A few weeks prior to that, I saw a TED video from the founder of Kiva. The premise? Simple. Some people deposit small amounts of money so micro loans can be made for budding entrepreneurs around the world. So, some people loan money so others can borrow it at more favorable rates. By the way, in her TED talk, Jessica Jackley mentions that she saw an “unmet need” for lending, which is why she started Kiva.

Sound familiar?

And a few months ago, I saw an article on a new program called ride share. The premise? Simple. Members “pool” together and share a ride. You become a member and benefit from the “ride community”.

Again, sound familiar?

Key words being used in all of these ideas include:

• Community
• Need
• Club
• Membership
• Pool
• Join
• Together
• Benefit

These words have historically belonged to the credit union movement. And now we’re sharing them with trendy new companies? Lending club explained their “club” concept in 31 seconds and I got it. Are our members “getting” our concept?

Two questions:

1. Are we articulating our CU difference and community concept, as well as these companies are…and in a way that resonates with a growing number of consumers who value this type of “community”?

2. Are we leading this new consumer trend for “mutual self help” or following from behind?

Josh Allison, CUDE

Relationship Development Manager | Horizon Credit Union

Interested in hearing more from Josh Allison?

You can learn more about this topic from Josh and many others at the CUNA Community Credit Union & Growth Conference, October 24-27 in San Francisco, CA.

In this, the second part of a two-part series, Matthew Cropp outlines his opinion on how peer-to-peer lending may help credit unions capitalize on the the social capital of their members. Don’t miss Matthew’s first post on the topic, here.

From Matthew Cropp:

When Alphonse Desjardins and Edward Filene began spreading credit unionism in North America at the beginning of the twentieth century, their primary motivation was to stop loan sharks from preying on those of modest means.

Have you seen The True Story of Credit Unions comic book?

At that time, most banks felt that small consumer loans were too risky and costly to be worth providing, and so, when they needed credit, working people often had to turn to loan sharks who would charge hundreds, or even thousands, of percent interest. Such debts could quickly spin out of control and immiserate borrowers, who would often end up paying many times the loan’s principle.

Thus, to bring affordable credit within reach of millions of people, the early credit union model functioned to leverage the social capital of members by requiring that credit unions have a narrow common bond. In practice, this often took the form of a workplace, church, or neighborhood; essentially, any community in which people regularly interacted with each other in roles other than that of “credit union member.” The social knowledge generated by those relationships was then used by the organization’s credit committee to determine whether or not to approve a loan.

The volunteers on the credit committee were respected community members who were elected democratically by the membership as a whole, and they generally viewed their role as an important trust. Thus, while commercial banks shied away from borrowers of modest means, credit unions were able to leverage the social capital of their “host” communities in order to fill the gap by providing low-interest loans to their members.

However, as the banking industry grew and became more sophisticated following the Second World War, the consumer credit niche that credit unions had dominated became more and more competitive. Pressured to provide increasingly complex and capital-intensive services in order to remain relevant, the nexus of the credit union movement’s growth shifted from the creation of new credit unions to increasing the size of existing credit unions through mergers. In 1969, the number of individual institutions peaked at 23,761 before beginning a steady, continuous decline.

At its core, this transition from small, tight-knit organizations to the large, community-based credit unions that form the bulk of the contemporary movement represented a profound trade-off.

On the one hand, the new credit unions could leverage economies of scale in order to provide newly developed services that would be far beyond the means of a traditional credit union to offer. Conversely, as they added an increasing diversity of membership groups to their common bonds, the social capital that the new credit unions could leverage for the accurate provision of credit rapidly declined, and the responsibility for determining credit-worthiness shifted from the volunteer credit committee to the professional loan officer.

On net, however, the benefits of economies of scale seemed to trump the losses that came with decreasing institutional social capital, and so the trend towards larger and larger credit unions has persisted down to the present.

The recent (re)emergence of p2p lending suggests that, for credit unions, the economies of scale vs. economies of social capital trade-off may no longer be necessary.

This does not mean a return to the simple credit unions of old; indeed, the nature of “community” has radically changed for many people since the first half of the twentieth century. Back then, there were numerous institutions that people expected to remain part of for large parts of their lives: the life-long employer, the church parish where one was both baptized and laid to rest, etc.

In the modern, globalized, intensely interconnected world, however, the flexibility of many people’s careers and lives means there are few large, geographically stable communities in which they are deeply invested that can be tapped by credit unions for social capital. Community still exists, of course, but its webs of trust and obligation are widely distributed and far more protean than in previous eras.

As such, fully leveraging the social capital of credit union members while also retaining the benefits of economies of scale requires a re-examination of a subtle aspect of credit union identity. In the past, credit unions were founded as institutions that provided their host communities with the infrastructure necessary to financially reinvest in their constituent members. However, as credit unions grew in size through mergers, the institutions’ identification with any particular community decayed, and with that identification went the ability to mobilize that community’s social capital.

What has remained is a commitment to serving the member as an individual rather than as a member of a specific community.

It is this contemporary commitment that provides a powerful opportunity for credit unions to re-engage with the social capital of their members. Instead of being devoted to the development of an already existing community, credit unions might see their current mission as facilitating the development of the plurality of communities in which their members are participants.

There are a variety of ways to approach this goal. In my opinion an obvious one is for credit unions to construct infrastructure that allows their members to lend directly to each other on a peer-to-peer basis. By providing expert guidance and systems designed to make originating, receiving, and collecting such loans a relatively simple process, credit unions would be empowering their members to fully leverage their idiosyncratic social knowledge of each other to increase the availability of credit, especially for people in their communities for whom loans at reasonable rates are currently out of reach.

Though utilizing a novel approach, I would argue that such a program would, in fact, be carrying on the vitally important work, begun by Desjardins and Filene more than a century ago, of credit unions harnessing the power of social capital to improve the lives of under-served and marginalized populations by making available affordable credit.

Matthew Cropp is author of the blog Credit Union History and earned his MA in History at the University of Vermont.