I got a random payout from my building society which I wasn't expecting, just for being a member. Separate to interest on savings.
this post was submitted on 17 Jun 2024
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Banks provide a lot more services than credit unions or building societies. Banks also provide B2B services. So there's no scenario for everyone to move away from banks. I'd say that Britain has one of the most advanced financial markets with many different players like building societies, challenger banks etc, but traditional banks still have plenty of business to do. What usually happens here is that people actually use multiple service providers for different purposes. Having 5+ accounts is normal here.
This sort-of happened in the USA, in a small way, during the fallout of the 2016 Wells Fargo scandal. Public sentiment of the big-name, national retail banks was awful and credit unions capitalized on the moment with advertisements contrasting profit-centric national banks with local, cooperatively-owned credit unions.
In this article where consultants to credit unions were queried a year later, there's still some questions as to the long-term effects that may have benefited the credit unions.
I once came across a comment somewhere online that suggested -- sadly without hard evidence -- that the scandal may have been a win-win, since the sort of customers willing to uproot themselves from Wells Fargo tended to have smaller balances while still incurring the bookkeeping costs. And that credit unions were able to scale up to take in new customers while saving on advertising dollars.
It's a plausible idea, that a new equilibrium would be found in the banking market. Logically extending the idea further, though, would lay bare how much additional integration credit unions would have to do with each other to achieve a truly seamless customer experience. Of course, with more young people mostly sticking to online and mobile banking, this might come in the form of backroom operational improvements, rather than a revamped brick-and-mortar experience.
Banks would go out of business and credit unions would look a lot more like banks. This is assuming both business and personal accounts move. If just personal accounts move, not much happens.
One of the main things I kinda ran into recently, credit unions are set up for private accounts and don't do business accounts very well. I bought a car recently and the business owner was telling me that it was a hurdle to deal with large amounts of money on a regular basis with his credit union, and he didn't have issues with his conventional bank in that regard. I don't know the specifics unfortunately but it does make sense.
If you want your answer, have a look at Desjardins in Quebec. They have something like half of the total marketshare.
Desjardins Group ranks 4th among the Safest Banks in North America according to Global Finance, and its capital ratios and credit ratings are among the best in the industry.
We have both and the differences are no big deal at all.
So I guess your question was very specific to one region of the planet's surface.
Completely? No, banks do a lot more than the retail accounts everyone is familiar with.
Side effects? ATM ownership? Usually the privately owned ones are much more expensive, borderline scams. Credit card processing?
Depending on how liberally you take the intent of the question, I haven’t directly used a traditional bank in decades. However my online bank has more capabilities than my credit union. And who would put investments in a bank when there are so many better investment options? My mortgage was started with a bank but sold to a loan processing company: if I had gotten it through my credit union, they don’t sell mortgages. I suppose car loans are typically a Main stream bank: my credit union offers poor terms for those, can’t compete
Funny, I just commented elsewhere that my credit unions have always offered great rates on auto loans. Where are you located? I'm in the states.
I previously had a dealer be like "let me see if my guys can give you a better financing rate" and they did (slightly) than a bank rate I had secured. But since then I've financed a few times with a credit union and they've never been able to beat the rate.
I’m in Massachusetts, but I think I’m “cheating”. When I’ve had to finance, I’ve gotten a promotional rate. As far as I know you can only get those by letting the dealer find financing, so the credit union can’t match the promotional rate
Edit: my credit union is currently offering 6.84% loans for new cars. It’s hard to get the info to compare but the latest I found from my car manufacturer was 5.6%, but this spring they had at least two promotionals for 0% and 1%. Most importantly, it’s not like you can opt out of the financing and get a rebate of equal value
IDK why people are interpreting your question about the mechanics of everyone switching at the same time. It sounds to me like you're asking more about the bigger picture problems it would solve with society, not whether the sudden change would be able to be handled by the banks. Is that what you're looking for?
Moving to a credit union is a great idea. I did a long time ago and haven't looked back.
There are some things they don't offer, sure, but then for stuff like investments I use dedicated platforms for those which is a better experience anyway.
Thanks for your answer. You're right, I was hoping to get more answers on the bigger picture change that would happen to society. Particularly since coops and credit unions are more democratic in nature, I wonder how different society would be with more direct control of how they money is managed.
Real scenario: you wouldn't see that happen.
Hypothetically it could cause economic collapse because now there wouldn't be money to back up all the loans that are outstanding. Followed by mass layoffs of people and all the other fun stuff that comes with it.
I'm not saying you're wrong, just expressing my confusion: Don't CUs also provide loans? Isn't that their primary purpose?
CUs will issue anything that can help their maintain the required returns on the owners of shares (read: you). They can issue loans, but because they are not issuing on speculation but on a clear expectation of a return to the owners of the shares (read: you) they cannot loan as much. Your shares are the dollars in your account, the interest gained is the returns from loans.
These have to be guaranteed by someone, either the NCUA or another CU or bank. In fact, you can go to a Credit Union that doesn't insure via the NCUA. I wouldn't recommend it.
It's the idea that bank A wrote a loan and is required by the government to maintain a small amount of cash to back that loan. So if all the money goes to Credit Union B, Bank A would be declared insolvent.
However that wouldn't cause any economic collapse. Banks bundle and sell off their loans all the time. If Bank A no longer had deposits to cover a loan, they'd sell the loan to Bank B who did.
If you get paid via direct deposit and pay with everything via a card or a mobile app, a cu can replace your bank.
If you want complex investment options than I doubt all CU can do that, but I am sure there are some that can.
If enough retail depositors withdraw all their money and moved it to a CU I suspect they may trigger bank run limits which would cause other banks to preemptively limit withdrawals.
Do you need complex investment options in your bank? I'm sure some banks offer that here, but there are also dedicated services specifically for gambling on the stock market, which I think more people would be drawn to as they are focused on that specific niche. The bank investment options are more for long-term savings rather than proper investments.
Major banks do have their own trading platforms which allow CID, long and short positioning. I doubt a CU would have trading in general, they would have a partner company to do that with.
Thanks for the answer!
You mentioned paying for everything via card or mobile. Does that mean credit unions offer no options to withdraw cash?
Also can banks permanently limit withdrawals or transfers?
In the U.S. most credit unions are regional, if you go to a branch you can withdraw cash easily, or they'll have agreements with ATM networks where you can withdraw cash for a fee, just like banks do.
In my daily life my credit union is indistinguishable from a bank, with the exception that I've had a few auto loans from my credit unions and they've always offered a lower interest rate than anything a bank or car dealership can beat. They also gave me a discounted rate because I was buying an electric car.
I'm going to answer the last part of the question, banks and credit unions and these institutions absolutely can, will, and do limit withdrawals. When you don't physically hold your money and it is in an institution, it is no longer your money, it is an IOU with conditions that can be rescinded at any time for any reason.
Entirely depends on the CU
I know the ones in Australia would let you withdraw in person , if you were in a town with that CU or via an ATM.
I believe banks are able to pause transactions out if they approach their solvency thresholds.
There are typically agreements with ATM operators to allow no-fee withdrawals, and you can usually do cashback at the register when making a purchase in many stores, but beyond that you'd need to find an office that can handle cash and not all credit unions have those.
Thanks for your answer!