Members of Innovation Credit Union have an important decision to make in a matter of months.
That decision is whether to become a federally-regulated credit union, headquartered in the province of Saskatchewan, or continuing on as provincially-regulated.
At the Innovation office in North Battleford on Tuesday during the noon hour, CEO Dan Johnson held a panel discussion with members, outlining the whole proposal.
“We want to talk to each and every one of our members who have the ability to vote, and explain why becoming a federally-regulated credit union is very important to the future of our organization,” said Johnson.
According to Johnson, the federal regulation is needed so Innovation Credit Union can operate in a changing financial services environment.
They face challenges from various “disruptors” as Johnson referred to them. Those include greater online competition for banking services, possibly from the likes of even Google, Amazon and Apple.
They also face rapid changes in consumer behavior as they deal with an aging membership as well as the consumer habits of Millennials. And they must deal with the impact of rapidly changing technology, with more people doing banking online or on mobile devices instead of going to a branch location.
“We believe that our organization needs to have a prudent level of growth going forward,” Johnson said.
“As a growing organization, it gives us a better ability to line up with all of those things that we’ve built so far - things like patronage and free accounts, and our commitment to the community. By growing and evolving we have a better chance of sustaining those programs.”
But being limited to the western region of Saskatchewan is a big challenge for the organization right now, he said.
“We’re in a region currently that is experiencing flat or declining population growth, as well as an aging membership,” said Johnson.
That is putting some pressure on the organization, but Johnson believes those can be addressed by moving to federal regulation.
“Having a federally regulated credit union allows us the flexibility to grow beyond our provincial walls. So right now we don’t,” said Johnson. “So in order for us to grow our membership in the right places, having the flexibility as a federal credit union gives us that flexibility to grow our organization.”
But it doesn’t mean you’ll suddenly be seeing Innovation Credit Union branches set up all over Canada.
Their main aim is to be in a better position to serve customers looking to do banking online or using mobile devices, particularly those located beyond provincial borders.
“Our first play would be primarily digital,” said Johnson. “We’ve built a really strong digital offering and a really strong value proposition and those two items allow us to be able to grow digitally across provincial borders.”
Innovation Credit Union would be the third credit union in the country to go this route. A credit union in the Atlantic region and another in British Columbia are also going this route. Johnson also told those in the boardroom another three are considering going this way as well.
There would be some distinct changes that would happen with federal regulation.
It means Innovation Credit Union would be regulated by the same regulator the chartered banks currently have. As well, deposit insurance would transition from the provincially-based Credit Union Deposit Guarantee Corporation to the Canada Deposit Insurance Corporation.
This will also mean that instead of all deposits being guaranteed 100 per cent, with CDIC it is $100,000 per category. Innovation Credit Union is encouraging big depositors to meet with them to discuss the impact and on how they could maximize their coverage.
The credit union is also noting that they have never drawn on deposit insurance in their history.
Right now, the effort is on to inform members and hold meetings so they can vote in November. Approval of 75 per cent is needed for the proposal to go through.
Information meetings have been held in a number of different locations already, and more are to come.
In addition there have been phone calls and one-on-one visits with members to explain the implications.
The general feeling from members is “primarily supportive,” Johnson said.
“They believe that all organizations need to grow and evolve and it looks like what we’ve positioned with them makes sense,” he said. But they also want to make sure it’s being done in “a logical and prudent fashion,” he notes.
Assuming a “yes” vote passes in November, the intention is to get the credit union federally-regulated by 2020.
A formal application would need to be submitted. From there, “we’ll continue to work with our new regulator to see what things they’ll be looking for,” said Johnson. The credit union will also be in contact with their current regulator and the federal government with what they needed to do moving into the new environment.
He doesn’t forsee any major issues for Innovation in meeting the federal regulator’s requirements. Johnson notes the credit union is very stable and financial strong: two items the new federal regulator will find extremely important.
“We believe we line up extremely well with that new environment, those new standards.”
The CEO stressed the importance of getting a big turnout for the vote in November.
“We don’t want to have this important decision voted on by just a small percentage of our membership,” said Johnson.
“That would provide us with better direction than just having a small membership turn out and vote.
