Understanding Credit Unions’ Unique Offerings

One of Paul Kelly’s hopes for the International Year of Co-operatives is more understanding of the differences between mainstream financial institutions and credit unions.

The president and CEO of First Calgary Financial notes a key difference between credit unions and mainstream financial institutions is “we don’t have a conflict or a dichotomy.”

“The customer across the counter, across the desk, is also the shareholder and owner of our company, so what’s right for them is all we have to worry about,” Paul tells Axiom News.

	Paul Kelly

This differs from a mainstream financial institution which is ultimately beholden to their shareholders and investors such as institutional investors and hedge funds, he notes.

Because these institutions are driven by stock price, there is a daily conflict as what is right for the shareholder is likely not best for their customers, says Paul.

The ownership aspect of co-operatives and credit unions is something many people don’t understand, he says.

Credit union members can vote and run for the board of directors, and are entitled to company profits.

Any funds accrued and profits made as a company are either retained for the company, given back to members as dividends, or invested into the community.

Paul notes other financial institutions would be sending the dividends out to institutional investors.

Another key difference is that credit unions are local, both in that they are locally owned and have local employees.

While all organizations have staff moving and turnover, First Calgary doesn’t have staff being transferred between cities.

“When people deal with us they have the comfort of knowing they are dealing with a local organization. We all work here, we all live here, we pay taxes here, we are all part of the community,” says Paul.

“We’re primarily a retail banking organization and as such we deal with mainstream Canada and individuals,” he says, noting big banks do more international and underwriting activities.

A challenge for the sector is attracting new people to join co-operatives and credit unions, says Paul. Though the businesses are growing through the existing membership base, there aren’t enough new people becoming members, he says.

“We are one of those best-kept secrets,” he says.

Paul says it’s a true “David and Goliath” scenario with the size differential between credit unions and the big bank competitors.

“We need to figure out a way to get our message out there (and) get people to understand, especially the younger generation.

“We’re a grassroots organization, we’re very sensitive about the environment, we’re community-based, community oriented, a lot of what we do — the whole ownership model — I think is very appealing to a lot of people,” says Paul.

“Once they get through the door I would suggest that our service levels and the sincere way we greet and treat our members is something that would keep them with the credit union.”

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