You ask anyone, and they could name you at least two Australian banks that operate in New Zealand, but what about credit unions?
Credit unions have been around since the 1850’s when they were started in Germany by a man called Franz Harmann Schulze-Delitzsh. They operate on a much smaller scale to banks as they are often set up to be regionally bound or community-based. Although their member bases may be small, we quite often see them punch well above their weight with their product offerings, with interest rates matching those of the big international banks. So how is this so? Surely economies of scale come in to play, and the price of organisational overhead causes credit unions to have higher price mark-ups on their product offerings in order to keep them afloat. This, however, is not the case.
Credit Unions Are Not-For-Profits
We have said it before, and we will say it again, credit unions work as not-for-profit organisations where all profits they generate are reinvested back into members in the forms of better rates for loans and savings. Credit unions don’t have overseas shareholders that they have to please. Their members are the owners, and all decisions are made with the interest of the members at heart, not shareholders. Credit unions are run by people, for people, meaning profit margins are cut, and the best possible value is offered for its members all year round.
Thanks for the advancement of the digital space, credit unions can compete more effectively as the operating cost of running a not for profit organisation has decreased. The shift from bricks and mortar stores to the digital platform means there are costs for the business to incur, translating to less costs being put onto the owners, aka, its members. Transferring to a digital platform has allowed credit unions to operate on a larger scale at minimal costs. Members can be assisted on a national level now, making credit unions accessible to more kiwis around the country.
People Helping People
In the end a credit union is simply, people helping people. The funds and capital that is used to lend money to its members is the same funds that its members put into their savings. Members coming together to help one another is what allows credit unions to compete with the big overseas banks. Credit unions competitive product offerings are only possible due to their member’s active contributions and willingness to support their community.
Credit unions may only be a small fish in the big pond that is financial banking, but they are here to stay. If you wish to learn more about credit unions and how they are able to compete so efficiently, we recommend checking out the following articles: