Fact or fiction: CUSOs are the innovation engines for the entire credit union network? That’s easy, of course!
Question: What product, process or delivery channel looks or operates today the same as it did in 1933? Autos, airplanes, radio, telephones, tabulation devices, farming techniques? Not so much, but how about federal deposit insurance?
Other than the amount insured for all financial institutions and the unique features of the recapitalization of the credit union fund in the ‘80s, deposit insurance looks today exactly like it did during the Great Depression. That’s the Great Depression of 1928 thru the late 1930s, not the Great Recession of 2008.
Do you believe in innovation? Are you willing to take on a challenge? Let’s take on this dinosaur and reengineer it for the 21st century and beyond. Ask yourself this: Why is there over $1 trillion in uninsured retail money market funds? Why is there another $2 trillion in uninsured commercial money market funds, much of which are the deposits of small business? When is the last time you asked yourself about how important deposit insurance is to today’s consumer? Do you think a millennial has the same attitude towards it as a 40-year-old, a 70-year-old?
Has there been any current research on consumer attitudes about deposit insurance? Why is the insured amount $250,000 when the average credit union member never approaches that deposit amount? Why does every credit union pay the same premium? What about risk-based premiums, or what the ability of a credit union to offer both insured and uninsured products? What about asking the member who wants insurance to pay for it or take a lesser rate for coverage? Why does the U.S. continue to be the only country with government backed insurance, when there are many, many alternative quasi-governmental and private insurance models being used in other countries around the world?
That’s a lot to think about, but where better to study, build and execute alternatives to the 90-year-old model used by the NCUA than in our innovative CUSO community? Where better to find solutions that will give our credit union owners and partners an advantage over the rest of the financial institutions?