CUs Should Embrace Their ‘Bags Fly Free’ Moment

The time is right for CUs to grow market share.

March 18, 2011

Consumers’ disgust with banks’ predatory practices and the recent taxpayer-funded banking industry bailout gives credit unions the perfect opportunity to build market share, says Patrick Adams, president/CEO of St. Louis Community Credit Union and master of ceremonies at the 18th Annual CUNA Marketing & Business Development Council Conference in Las Vegas.

 But it’s up to credit unions to seize the day.

“This is our ‘bags fly free’ moment,” says Adams, referring to Southwest Airline’s popular brand differentiating practice of not charging passengers for their first piece of checked luggage. “If we can stay here and hold our costs, we’ll gain market share. Don’t lose this opportunity.”

Credit unions overall have sufficient capital to grow, he says. Before the Great Recession, credit unions’ average capital-to-assets ratio was 11%. As the nation begins to recover, this ratio remains at a healthy 10%. “We can take on more growth.”

Lack of growth was one reason former beer monolith Anheuser-Busch was taken over by a Belgian beer company, Adams says. He says the failed suds supplier serves as a cautionary tale for credit unions, having made a “six pack” of mistakes:

1. It underestimated its competition. “A 900-pound gorilla eats an 800-pound gorilla every day,” Adams notes. Apparently, “too big to fail” doesn’t apply to beer makers.
2. It underestimated the importance of relationships. Anheuser-Busch’s founder had a poor relationship with the conglomerate that eventually took it over.
3. It believed its own public relations. The beer maker’s CEO was surrounded by yes-men who didn’t challenge his decisions.
4. Lack of expense control. Severe inefficiencies played a big role in the decline of Anheuser-Busch. Companies today must partake in “expense management on steroids,” Adams says.
5. Lack of board independence. Like Anheuser-Busch’s management team, the company’s board didn’t raise important questions and issues.
6. Lack of growth. The company was complacent and lacked innovation. As a result, it didn’t grow.

“You can never be satisfied,” Adams says.