Fintech

Tribal Banking Part 2 – Credit Unions

The way we work is changing. The idea of a co-worker is changing. And lastly, the way we see companies as facilitators of a lifelong career is changing.  I recently read an article in the Atlantic about how McKinsey destroyed the Middle Class and the downfall of the lifelong full-time employee. It was eye-opening and

BY 07.04.2020 5 minutes read

The way we work is changing. The idea of a co-worker is changing. And lastly, the way we see companies as facilitators of a lifelong career is changing. 

I recently read an article in the Atlantic about how McKinsey destroyed the Middle Class and the downfall of the lifelong full-time employee. It was eye-opening and got me thinking about what this means for the likes of my generation and the generations to come. It got me thinking about the gig economy, my professional career compared to my parents, and, naturally, how this will impact banking. 

One of the most striking statements for me in this article was: 

“In effect, management consulting is a tool that allows corporations to replace lifetime employees with short-term, part-time and even subcontracted workers.”

This concept of being a lifetime employee is something that seems alien to the Millennial generation. My parents were lifelong employees of the US Postal Service and throughout their 30 plus year careers had consistent feelings of security, friendship and companionship. For us who regularly move to new organisations, for the gig workers, or the growing workforce of freelancers, obtaining this security, fellowship and friendship is difficult for us to achieve in the workplace. But, just because we do not have this readily available, does not mean that it is something we do not value. We are still obtaining this, only in a different way from say our parents’ generation, instead of through our many micro-tribes. 

The lifelong employee concept, and all the feelings of security and belonging that went along with it, goes hand in hand with the idea of the Credit Union in the US. My parents’ bank with the US Postal Service Federal Credit Union. I bank with a handful of banks that I am loyal to based on price, customer service and the digital experiences they offer me. I don’t know one person my age who banks with a Credit Union. And this is why the Credit Unions may be in trouble. 

credit union is a member-owned financial cooperative, democratically controlled by its members, and operated for the purpose of promoting thrift, providing credit at competitive rates, and providing other financial services to its members. As of 2016, there were 5,757 credit unions, with 103.9 million members, comprising 45.5 per cent of the economically active population. 

Credit Unions are therefore unique for two reasons: once you deposit money, you become a member, and a large number of credit unions serve members working in a particular industry. There are credit unions for Employees of Harvard, NASA, and Teachers Unions. Credit Unions are also highly localised; for example, there is a credit union in the town I grew up in, that has a population of 25,000. They also support Scholarship programmes for their members. I remember applying for a scholarship offered for children of US Postal Service employees. 

credit unions

To become a member of the US Postal Service Federal Credit Union, a member has to be an employee or retiree of the USPS, or a household/ family member (e.g. me or my mom), or an employee of Select Group. Select Groups include smaller companies ranging from Trash Removal to Detective Agencies. 

The US Postal Service Federal Credit Union offers every type of financial product or service you can imagine would be needed by their members. They provide financial advice, lending, credit cards, mortgages, multiple types of credit cards, and of course, branches. They even offer information on Stamp collecting. Speaking to my parents (they are not stamp collectors), they have been members for over 30 years. It is their bank, and I can’t think of anything that would lead them to switch. This tends to be the case with most credit unions in the US, and as a result, they have incredibly high NPS scores and a highly loyal customer base. USAA, the bank for those in the Armed Services and their families is the envy of any bank in terms of customer loyalty and share of wallet. 

Credit Unions may be in trouble with their existing business model. What if the US Postal Service hires contracted Uber-drivers to deliver the mail? What if the mail sorting becomes entirely automated by robots? Who will be the employees? Will they stay at the US Postal Service for life given this amount of automation? As mentioned, the gig workers, freelancers, and those of us on our third or fourth job are still in need of belonging and security. 

Our numbers are only growing, and I do not believe that people will continue to bank with Credit Unions. Instead, we will look to the support of our micro-tribes for everything from financial aid, events and even forums to support their family with issues like health care and education. This is where Tribal Banking will come in. In the absence of lifelong full-time employment, Tribal Banking will either augment or replace the traditional Credit Union. 

Let’s think about how Tribal Banking can fill the void. My parents were lifelong employees of the US Postal Service. I am on track to be a lifelong employee of the fintech and or digital financial services industry. Here are five possible things the bank of the fintech industry could do for its tribe members. 

  • Forums that help us understand the best product of service for our needs. Let’s be honest; most people in the fintech tribe use a whole host of fintechs, traditional banks, and mobile-only banks for testing and experimenting. 
  • Most of these fintechs and new banks acquire new customers based on referrals. The bank for the fintech industry could help its members get that extra $5 for referring to a fellow tribe member. 
  • Crowd-sourcing platform for new ideas. This could be anything from new fintech products or services, or membership groups supporting a sub-tribe, for example, Women of Color in fintech. 
  • Access to scholarships for those looking to pursue higher education in a fintech-related area
  • Peer to peer lending amongst the tribe

These are just a snapshot of how a bank for the fintech industry could support its members both in terms of highly niche financial products but also forums, scholarships, and general support. This type of bank could surely help fill the gap of security, companionship, and friendship that was traditionally acquired from life-long full-time employment. With a little help from the new wave of Tribal Banking, the fear around the changing workforce ( due to not just the role of management consulting, but a much more connected world that facilitates gig workers and freelancers), can be subdued. We can have the same safety net and feeling of belonging that our parents and their parents had. 

User image for Meaghan Johnson
Fintech Researcher

About Vacuumlabs

Vacuumlabs provides teams of flexible software engineers and designers with years of experience building fintech, online marketplaces, and digital products. Every step of the way, Vacuumlabs experts collaborate with clients, so that they can move fast, learn and iterate as they build world-class products together.

See how we helped our clients succeed