Why aren't all credit unions doing current accounts ?

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Bridget1984

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My local one hasn't joined in yet. I think it's a shame because I think lots of older people would love to do their everyday banking at the local cu office. I don't know the ins and outs of it, I presume that it's some sort of white label product? www.currentaccount.ie
 
Credit Unions are either individual or small groups unlike a bank where all branches are under Head Office, some don't have the size/staff/funds to implement IT and processes as necessary for things like that. I'd imagine that's the main reason in most cases, same as the way some do mortgages and some don't.
 
Bridget1984 said:
My local one hasn't joined in yet. I think it's a shame because I think lots of older people would love to do their everyday banking at the local cu office. I don't know the ins and outs of it, I presume that it's some sort of white label product? www.currentaccount.ie
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Introducing an loss-making service to cater to a small amount of older members is pretty bad business. There's a bit more to offering current accounts than just buying in a white label product. I don't really get why credit unions are bothering with them at all to be honest - the take up has been fairly meagre to-date. They should be focusing all their attention on increasing their very small loan books.
 
ClubMan said:
Why don't you ask them?

Doesn't the link explain the ins and outs of it?
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I've asked a couple of Tellers but they just said "maybe someday"... What i meant is I don't know who's actually providing the product, I presume it's a similar set-up to the an post credit card that's really advent card using the Anpost label.
 
24601 said:
Introducing an loss-making service to cater to a small amount of older members is pretty bad business. There's a bit more to offering current accounts than just buying in a white label product. I don't really get why credit unions are bothering with them at all to be honest - the take up has been fairly meagre to-date. They should be focusing all their attention on increasing their very small loan books.
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Is it loss making? Have any figures been published about the total take up so far? The main reasons given for credit unions going into the current account business was the withdrawal of Ulster Bank as well as BOI and AIB closing branches around the country. The amount of people who ever switch current account provider is said to be very low tho.
 
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Bridget1984 said:
Is it loss making? Have any figures been published about the total take up so far? The main reasons given for credit unions going into the current account business was the withdrawal of Ulster Bank as well as BOI and AIB closing branches around the country. The amount of people who ever switch current account provider is said to be very low tho.
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Credit unions decided to get into current accounts long before Ulster or KBC announced their exits. The guidance was updated by the Central Bank to allow for them in 2016.

Not sure about total take-up but the 2 credit unions I'm a member of offer them and I can see they are loss-making from their annual reports with very limited take-up. I've scanned through a few other reports and the pattern is the same. There were big set-up costs when they introduced them too so even if they do break even it'll take years. Most appear to be charging €48 per annum so I'm not really sure how they even could be making money from them.

Current accounts are also historically loss-making for banks so I don't know how CUs could be making money at such low volumes and economies of scale. The fact that there are 2 providers of current accounts for credit unions is even more mind-boggling. I just don't get what's in it for them really. I don't think any of them could have really believed they would gain significant market share or that current accounts were going to help them in addressing their main issue i.e. that they can't lend enough of the money the take in as savings from members.
 
24601 said:
Most appear to be charging €48 per annum so I'm not really sure how they even could be making money from them.
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Add on top of that, most CUs waive fees for students, and members over 65, so the members most likely to take it up aren't generating any income but the provider is still charging! It's the usual approach with Credit Uions - solve what isn't the problem!

Lots of credit unions have SEPA payments without this service.
 
24601 said:
Credit unions decided to get into current accounts long before Ulster or KBC announced their exits. The guidance was updated by the Central Bank to allow for them in 2016.

Not sure about total take-up but the 2 credit unions I'm a member of offer them and I can see they are loss-making from their annual reports with very limited take-up. I've scanned through a few other reports and the pattern is the same. There were big set-up costs when they introduced them too so even if they do break even it'll take years. Most appear to be charging €48 per annum so I'm not really sure how they even could be making money from them.

Current accounts are also historically loss-making for banks so I don't know how CUs could be making money at such low volumes and economies of scale. The fact that there are 2 providers of current accounts for credit unions is even more mind-boggling. I just don't get what's in it for them really. I don't think any of them could have really believed they would gain significant market share or that current accounts were going to help them in addressing their main issue i.e. that they can't lend enough of the money the take in as savings from members.
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Do you think the an post current account is in the same boat, low take up/losing money ?
 
24601 said:
I don't think any of them could have really believed they would gain significant market share or that current accounts were going to help them in addressing their main issue i.e. that they can't lend enough of the money the take in as savings from members.
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I think that this might be the point.

If you have a credit union account and no bank account, if you do want a loan you will go first to your credit union.

Now that interest rates have risen, can the credit unions put their money on deposit and avail of ECB rates?

Brendan
 
Brendan Burgess said:
Now that interest rates have risen, can the credit unions put their money on deposit and avail of ECB rates?
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Open to correction but I don't think CUs can leave money overnight with the ECB.

From the latest Central Bank Report it seems CUs mainly leave surplus cash with the retail banks.

Chart 15| Composition of credit union investments
Sep-22 (%)
Accounts In Authorised Credit Institutions68
Irish And EEA State Securities5
Bank Bonds25
Other2

Same report says that the average return on CU investments was just 0.7% in September 2022. As the interest rate environment turns positive this will start generating more income for CUs I assume.
 
Just checked with a CU.

They can't put money with the ECB.

They can put it with banks but they can't get the ECB rates. But it's much better than last year, when they had to pay to put money on deposit.

They can get about 3% for 5 years fixed.

Brendan
 
Brendan Burgess said:
I think that this might be the point.

If you have a credit union account and no bank account, if you do want a loan you will go first to your credit union.

Now that interest rates have risen, can the credit unions put their money on deposit and avail of ECB rates?

Brendan
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They were getting negative rates on liquid funds up until relatively recently but now it's a couple of percent. If interest rates settle somewhere around where they are now this will actually return a lot of struggling credit unions to a fairly healthy place, but this will obviously only be papering over the cracks since their underlying lending business model is so anaemic.
 
24601 said:
but this will obviously only be papering over the cracks since their underlying lending business model is so anaemic.
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Or maybe it will leave them fundamentally healthier. If CUs managed to survive nearly a decade of zero interest rates they will clearly do better in a higher interest rate environment.
 
NoRegretsCoyote said:
Or maybe it will leave them fundamentally healthier. If CUs managed to survive nearly a decade of zero interest rates they will clearly do better in a higher interest rate environment.
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Yes, possibly. If they use the breathing space afforded to them by higher investment returns to focus on fixing the lending business they will be in fairly good shape, but they have a fairly significant balance sheet mismatch with lots of environmental risks over which they have very limited control.
 
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