Private equity is creeping into the role typically taken on by traditional financial institutions like credit unions and banks: business lending. The Wall Street Journal estimates PE firms loans to midsized business jumped from $300 billion in 2012 to over $500 billion in 2017 and this trend is expected to continue.
Private equity firms, like fintech startups, are less heavily regulated and more willing to take on risk that credit unions and banks may wish to avoid. As these new players seize the opportunity in the credit union sector, credit unions must think of creative ways to best serve current members through their current product/service mix, while also brainstorming innovative ideas for adding value to members.
Today’s market dynamics are why credit unions are partnering with fintech startups, acquiring new capabilities, investing in mobile and digital services, and focusing on enhancing member experience.
While private equity firms are traditionally more aggressive and competitive, credit unions have an advantage that private equity firms do not: their members. Credit unions have always and will continue to focus on how to best serve members through all the various stages of their lives – whether it’s a business loan, savings account, mortgage, insurance or other services.
So, do not despair in the face of competition, instead get excited! Today is a challenging, but opportunity-filled time for credit unions that are willing to take action whether it’s by developing a new solution to engage members, investing in a CUSO, or executing a strategic acquisition.