understanding de novo credit unions
TRANSCRIPT
v2_BMA_Understanding De Novo Credit Unions_WP copyDe Novo Credit
Unions IN 2020
While traditional financial institutions have seemingly been around forever, credit unions have more recently found their place in the financial community and continue to grow in popularity year after year. While credit unions are financial institutions, the biggest difference between them and banks is that credit unions are member-owned, not-for-profit organizations and have a membership
requirement to join. There are also additional benefits that help credit unions stand out from regular banks.
Better Interest Rates
Credit unions are nonprofits, meaning they can offer better interest rates on services. The interest that members can
If you’ve been considering opening a de novo credit union within your field of membership, take the time to ensure that you understand every aspect of credit unions as a cooperative and how to make a de novo (new) credit union successful in 2020. BMA has created this helpful guide to teach you what you need to know.
What Makes Credit Unions Different?
While traditional financial institutions have seemingly been around forever, credit unions have more recently found their place in the financial community and continue to grow in popularity year after year. While credit unions are financial institutions, the biggest difference between them and banks is that credit unions are member-owned, not-for-profit organizations and have a membership
requirement to join. There are also additional benefits that help credit unions stand out from regular banks.
Better Interest Rates
Credit unions are nonprofits, meaning they can offer better interest rates on services. The interest that members can
earn on deposits, including savings, money markets, and checking accounts, can be 4–10 times1 greater than what can be offered at traditional banks.
Interest rates also apply to loans and, potentially, credit cards. At a traditional bank, borrowers can expect to have rates that are 1–2%2 higher than if they were to get the same loan at a credit union. Annual percentage rates on car, mortgage, and personal loans will almost always be better at a local credit union.
Personalized Service Credit unions are member-owned, meaning each person that banks there becomes a partial owner. This means that every customer is treated to more focused and personalized service when they do their financial transactions. Credit unions have a more streamlined approach to service. This service that focuses on helping members as quickly and efficiently as possible.
Membership Requirements One of credit unions' biggest differences is that there is a membership requirement to join. While banks are open to anyone, credit union field of members are usually bound by some commonality, such as employment, church, school, or community involvement. Perhaps the most popular requirements are employment- and community-based, with roughly 25% of 8,000 credit unions3 utilizing the communal condition.
Insurance Coverage Many people trust traditional banks because of the afforded insurance protection through the Federal Deposit Insurance Corporation (FDIC), which covers deposits up to $250,000. However, what many may not know is that credit unions have the same protection. The National Credit Union Administration (NCUA) also insures deposits up to $250,0004, so credit unions are just as protected as banks.
2
The interest that members can earn on deposits, including savings, money markets, and checking accounts, can be
4 – 10 TIMES
GREATER THAN WHAT CAN BE OFFERED AT TRADIT IONAL BANKS .
1 https://www.moneycrashers.com/why-credit-unions-are-better-than-banks/ 2 https://www.moneycrashers.com/why-credit-unions-are-better-than-banks/ 3 https://www.bankrate.com/banking/savings/can-you-join-a-credit-union/ 4 https://money.usnews.com/banking/articles/the-pros-and-cons-of-a-credit-union-versus-a-bank
3
Strong Community Presence Since credit unions are generally made up of community members, they usually have strong influence and ties to the area in which they are located. Credit unions often offer grants and scholarships to local students, donate to or sponsor city initiatives, and partner with other local businesses to help the community thrive.
Potential Finance Courses Some credit unions give back to their members and the community by offering educational classes and workshops on common financial and credit matters. Credit unions can even go beyond that by offering additional lifestyle classes, such as a self-defense class or writing workshops — whatever appeals to their members.
How to Start a Credit Union There are a few steps that you will need to get through when starting a de novo credit union. We have broken them down into phases to help you
understand each part and ensure that you are able to complete each step.
Phase One
Much research goes into the preliminary work of starting a credit union. You need to research the Federal Credit Union Charter, choose a name for your de novo credit union, and create membership requirements, like a single common bond (SCB) charter, multiple common bond (MCB) charter, or a community charter. Take the time to truly understand the charter and work through this phase to ensure that you are prepared to move forward.
Phase Two Now is the time to secure funding for your start-up costs, find the perfect location for your credit union, and gather feedback from potential members. Survey people in your desired area and field of membership to see what they want and expect from a credit union, so that you can ensure you are providing the services they are looking for. Use the survey results to help you formulate your business plan in phase three.
• Mission Statement • Market Analysis • Products and Services • Credit Union Goals (shares, loans, number of members, etc.) • Management and Staffing • Recordkeeping • Source of Funds • Independent Operating Plan • And More
You also need to create financial statement projects and assumptions, develop a marketing plan, complete all required NCUA forms, and establish credit union bylaws. Don’t forget to draft your policies and procedures, which should include:
• Lending and Loan Policies • Collection Policy • Cash Policy • Bank Secrecy Act • Asset Liability Management • Security Program • Privacy Policy • Cyber Security Policy • And More
Phase Four This is where all of your thorough and in-depth preparation pays off. Schedule a meeting with the NCUA staff once you have completed phases one through three. If everything is satisfactory and in order, the NCUA will sign a Letter of Understanding and Agreement (LUA)5. The LUA remains in effect for at least 24 months.
4
5 https://www.ncua.gov/files/publications/resources-expansion/Federal-Credit-Union-Charter-Application-Guide.pdf
5
After all prep work is completed and the LUA has been signed, the NCUA will issue a Charter and Certificate of Insurance so that you can move forward with your de novo credit union. Once you have the charter and certificate, you have 60 days to open your de novo credit union or you will be in violation of the Federal Credit Union Bylaws.6
Stand Out in 2020 Now that you have a better understanding of what makes credit unions different from traditional banks, and know the steps to start one, it is time to figure out how to make your de novo credit union stand out in 2020.
Consider Different Lending Requirements According to CreditUnionTimes, there are nearly 30 million non-citizen residents7 in the country that struggle to find traditional financing options due to the lack of a social security number. Credit unions can change this by utilizing individual taxpayer identification numbers (ITIN) to help people get approved for mortgages, car loans, or small business loans.
Offering this lending option helps you stand out from traditional banks as well
as other credit unions that do not provide this service in your area.
Cater to the Masses
As technology changes and advances, so must banking. People tend to use their cellphones for everything these days, including bill pay, investing, and general banking needs. Many credit unions provide a website for computer users, but no mobile app to make things easier for phone users. Take your de novo credit union to the next level by investing in a high-quality mobile app that will make financial transactions much more convenient.
Increase Communication
To provide your customers a superior banking experience, make sure they can reach you when they need to. Whether that is a 24/7 chat feature online or through the mobile app, a customer representative line, or in-person service, be available to your credit union members. You could also consider creating an omnichannel to combine every communication interaction in one convenient place. Roughly 65% of members8 use multiple digital channels to interact with their credit union, so it is best practice to make all options available.
6 https://www.ncua.gov/files/publications/resources-expansion/Federal-Credit-Union-Charter-Application-Guide.pdf 7 https://www.cutimes.com/2019/08/23/3-innovations-to-power-your-growth-in-2020/ 8 https://sharpencx.com/blog/4-key-trends-for-a-better-member-experience/
Credit unions are quickly increasing their presence in the financial industry. Claim your slice of success with a de novo credit union in 2020. If you need additional help or want to have a professional team on your side, you can request a discovery meeting with BMA.
Working With BMA
Our highly experienced banking experts have over 30 years of reputable experience in all aspects of traditional financial institutions. You can trust that our team will be a valuable partner through high-quality customer care, advanced technology, and the leading core processing solutions on the market. When you are ready to start the process of creating a de novo credit union, we are the team to call. Contact us at www.bmabankingsystems.com to begin this new journey.
Begin Your De Novo Journey
While traditional financial institutions have seemingly been around forever, credit unions have more recently found their place in the financial community and continue to grow in popularity year after year. While credit unions are financial institutions, the biggest difference between them and banks is that credit unions are member-owned, not-for-profit organizations and have a membership
requirement to join. There are also additional benefits that help credit unions stand out from regular banks.
Better Interest Rates
Credit unions are nonprofits, meaning they can offer better interest rates on services. The interest that members can
If you’ve been considering opening a de novo credit union within your field of membership, take the time to ensure that you understand every aspect of credit unions as a cooperative and how to make a de novo (new) credit union successful in 2020. BMA has created this helpful guide to teach you what you need to know.
What Makes Credit Unions Different?
While traditional financial institutions have seemingly been around forever, credit unions have more recently found their place in the financial community and continue to grow in popularity year after year. While credit unions are financial institutions, the biggest difference between them and banks is that credit unions are member-owned, not-for-profit organizations and have a membership
requirement to join. There are also additional benefits that help credit unions stand out from regular banks.
Better Interest Rates
Credit unions are nonprofits, meaning they can offer better interest rates on services. The interest that members can
earn on deposits, including savings, money markets, and checking accounts, can be 4–10 times1 greater than what can be offered at traditional banks.
Interest rates also apply to loans and, potentially, credit cards. At a traditional bank, borrowers can expect to have rates that are 1–2%2 higher than if they were to get the same loan at a credit union. Annual percentage rates on car, mortgage, and personal loans will almost always be better at a local credit union.
Personalized Service Credit unions are member-owned, meaning each person that banks there becomes a partial owner. This means that every customer is treated to more focused and personalized service when they do their financial transactions. Credit unions have a more streamlined approach to service. This service that focuses on helping members as quickly and efficiently as possible.
Membership Requirements One of credit unions' biggest differences is that there is a membership requirement to join. While banks are open to anyone, credit union field of members are usually bound by some commonality, such as employment, church, school, or community involvement. Perhaps the most popular requirements are employment- and community-based, with roughly 25% of 8,000 credit unions3 utilizing the communal condition.
Insurance Coverage Many people trust traditional banks because of the afforded insurance protection through the Federal Deposit Insurance Corporation (FDIC), which covers deposits up to $250,000. However, what many may not know is that credit unions have the same protection. The National Credit Union Administration (NCUA) also insures deposits up to $250,0004, so credit unions are just as protected as banks.
2
The interest that members can earn on deposits, including savings, money markets, and checking accounts, can be
4 – 10 TIMES
GREATER THAN WHAT CAN BE OFFERED AT TRADIT IONAL BANKS .
1 https://www.moneycrashers.com/why-credit-unions-are-better-than-banks/ 2 https://www.moneycrashers.com/why-credit-unions-are-better-than-banks/ 3 https://www.bankrate.com/banking/savings/can-you-join-a-credit-union/ 4 https://money.usnews.com/banking/articles/the-pros-and-cons-of-a-credit-union-versus-a-bank
3
Strong Community Presence Since credit unions are generally made up of community members, they usually have strong influence and ties to the area in which they are located. Credit unions often offer grants and scholarships to local students, donate to or sponsor city initiatives, and partner with other local businesses to help the community thrive.
Potential Finance Courses Some credit unions give back to their members and the community by offering educational classes and workshops on common financial and credit matters. Credit unions can even go beyond that by offering additional lifestyle classes, such as a self-defense class or writing workshops — whatever appeals to their members.
How to Start a Credit Union There are a few steps that you will need to get through when starting a de novo credit union. We have broken them down into phases to help you
understand each part and ensure that you are able to complete each step.
Phase One
Much research goes into the preliminary work of starting a credit union. You need to research the Federal Credit Union Charter, choose a name for your de novo credit union, and create membership requirements, like a single common bond (SCB) charter, multiple common bond (MCB) charter, or a community charter. Take the time to truly understand the charter and work through this phase to ensure that you are prepared to move forward.
Phase Two Now is the time to secure funding for your start-up costs, find the perfect location for your credit union, and gather feedback from potential members. Survey people in your desired area and field of membership to see what they want and expect from a credit union, so that you can ensure you are providing the services they are looking for. Use the survey results to help you formulate your business plan in phase three.
• Mission Statement • Market Analysis • Products and Services • Credit Union Goals (shares, loans, number of members, etc.) • Management and Staffing • Recordkeeping • Source of Funds • Independent Operating Plan • And More
You also need to create financial statement projects and assumptions, develop a marketing plan, complete all required NCUA forms, and establish credit union bylaws. Don’t forget to draft your policies and procedures, which should include:
• Lending and Loan Policies • Collection Policy • Cash Policy • Bank Secrecy Act • Asset Liability Management • Security Program • Privacy Policy • Cyber Security Policy • And More
Phase Four This is where all of your thorough and in-depth preparation pays off. Schedule a meeting with the NCUA staff once you have completed phases one through three. If everything is satisfactory and in order, the NCUA will sign a Letter of Understanding and Agreement (LUA)5. The LUA remains in effect for at least 24 months.
4
5 https://www.ncua.gov/files/publications/resources-expansion/Federal-Credit-Union-Charter-Application-Guide.pdf
5
After all prep work is completed and the LUA has been signed, the NCUA will issue a Charter and Certificate of Insurance so that you can move forward with your de novo credit union. Once you have the charter and certificate, you have 60 days to open your de novo credit union or you will be in violation of the Federal Credit Union Bylaws.6
Stand Out in 2020 Now that you have a better understanding of what makes credit unions different from traditional banks, and know the steps to start one, it is time to figure out how to make your de novo credit union stand out in 2020.
Consider Different Lending Requirements According to CreditUnionTimes, there are nearly 30 million non-citizen residents7 in the country that struggle to find traditional financing options due to the lack of a social security number. Credit unions can change this by utilizing individual taxpayer identification numbers (ITIN) to help people get approved for mortgages, car loans, or small business loans.
Offering this lending option helps you stand out from traditional banks as well
as other credit unions that do not provide this service in your area.
Cater to the Masses
As technology changes and advances, so must banking. People tend to use their cellphones for everything these days, including bill pay, investing, and general banking needs. Many credit unions provide a website for computer users, but no mobile app to make things easier for phone users. Take your de novo credit union to the next level by investing in a high-quality mobile app that will make financial transactions much more convenient.
Increase Communication
To provide your customers a superior banking experience, make sure they can reach you when they need to. Whether that is a 24/7 chat feature online or through the mobile app, a customer representative line, or in-person service, be available to your credit union members. You could also consider creating an omnichannel to combine every communication interaction in one convenient place. Roughly 65% of members8 use multiple digital channels to interact with their credit union, so it is best practice to make all options available.
6 https://www.ncua.gov/files/publications/resources-expansion/Federal-Credit-Union-Charter-Application-Guide.pdf 7 https://www.cutimes.com/2019/08/23/3-innovations-to-power-your-growth-in-2020/ 8 https://sharpencx.com/blog/4-key-trends-for-a-better-member-experience/
Credit unions are quickly increasing their presence in the financial industry. Claim your slice of success with a de novo credit union in 2020. If you need additional help or want to have a professional team on your side, you can request a discovery meeting with BMA.
Working With BMA
Our highly experienced banking experts have over 30 years of reputable experience in all aspects of traditional financial institutions. You can trust that our team will be a valuable partner through high-quality customer care, advanced technology, and the leading core processing solutions on the market. When you are ready to start the process of creating a de novo credit union, we are the team to call. Contact us at www.bmabankingsystems.com to begin this new journey.
Begin Your De Novo Journey