Credit unions to take on high street banks

Credit and debit cards of the high street banks. Picture: Phil Wilkinson

Credit and debit cards of the high street banks. Picture: Phil Wilkinson

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SCOTLAND’S credit unions are preparing to take on the high street banks by launching services such as online accounts and mortgages.

Leaders of the growing sector met in Edinburgh last week for their annual conference, and topics under discussion included the possibility of collaborating on software platforms allowing them to offer fully functioning current accounts.

Paul Walsh, chief executive of Cuna Mutual – which insures hundreds of credit unions around the world – says the move would mirror the progress the industry has already achieved in other countries, most notably the US.

He said Scotland has by far the best established credit union culture among the home nations and is leading the way in terms of offering a real alternative to the banks.

He said: “Credit unions are growing in popularity and importance. People have been disappointed by the behaviour of the banks and probably even more disappointed by the behaviour of high-cost credit firms, so we are seeing people gravitating towards the credit union model.

“Now some [foreign credit unions] have introduced online banking, mortgages and transaction accounts, and we are looking at the next stage of growth. Some credit unions will create a creditable alternative to mainstream banking.

“Scotland is the beating heart of credit unions in the UK. If they are going to take a big step forward this is where it’s going to happen.”

Walsh insisted that such growth would not change the fundamental model which makes credit unions different to banks – they don’t leverage their balance sheets and are controlled by their members. Even Cuna is owned by the credit unions it serves.

Credit union membership has grown by more than 70 per cent in Scotland over the last decade, with Glasgow in particular building a strong member base. About one in four adults in the city are part of a scheme, compared to less than 2 per cent in the UK as a whole. Cuna currently protects the savings and loans of more than 250,000 Scottish savers, worth more than £500 million.

The Scottish institutions are still small by global standards – America’s Navy Federal Credit Union has more than $60 billion (£38bn) in assets. But Walsh says the biggest strength of the Scottish schemes is that they have many young members, who crucially want to borrow as well as save.

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