CU Mag: What are some differences in products?
Sponem: Fixed-rate mortgages are rare because credit unions keep them on their books and they need to manage interest-rate risk. Also, first mortgages have a redraw option.
People can withdraw funds from their mortgages, like a home equity line of credit. Many Aussies apply their entire paychecks to their mortgages and withdraw money as needed.
Australia doesn’t really have checking accounts anymore. You can have a debit card or checks with any account. There’s no Regulation D, an outdated regulation that creates a transaction account versus a savings account in the U.S. There isn’t that distinction in Australia and there doesn’t need to be.
The typical mecu member writes one check per month on average. Australian consumers are much more into electronic payments than we are, partly because it’s so easy for consumers to attach debit/ATM cards to their accounts.
One difference in consumers’ financial behavior is that Aussies will give up anything before they fail to make their house payment. There’s a strong commitment to not being delinquent or being foreclosed on.
CU Mag: What sets apart successful credit unions in Australia?
Sponem: The really successful credit unions in Australia focus on return on assets (ROA), giveback to members, profitability, and managing expenses. That’s their fuel for growth. Less-successful ones rationalize having higher-than-average expense ratios. They’ll say, “Our expenses are higher because we’re serving our members.” But successful credit unions in Australia believe that’s just an excuse for poor management.
Another success factor is having a clearly articulated value proposition that speaks to a segment of the market in a strong way—not just “we serve our members well.”
CU Mag: What’s mecu’s value proposition?
Sponem: Sustainability is a huge concept at mecu. This is defined as promoting sustainable behaviors.
For example, living paycheck to paycheck isn’t sustainable for members, or anyone for that matter. Therefore, the credit union’s mission is to eliminate that habit and make members’ financial positions sustainable by, for example, not raising credit card limits to encourage borrowing beyond members’ means.
Also, mecu contends that how we’re living isn’t sustainable for the environment, so it has taken “eco friendly” to a new level. It measures its carbon footprint as a business and incorporates that into what it does for members.
For car loans, members get the best rate if they finance a car with very low carbon emissions. The less environmentally friendly the car, the higher the rate. And for every car financed, mecu will plant enough trees or vegetation to counteract the emissions from the car for the term of the loan.
The credit union won’t do mortgages on homes of a certain size because of the carbon footprint the house emits. Also, mecu offers the lowest-cost credit card in Australia, and it’s made from environmentally friendly plastic that’s chlorine-free.
Next: Are there similar applications for Summit?
Bill Merrick is deputy editor of Credit Union Magazine. Follow him on Twitter via @CUMagazine.