Ontario Credit Union Reform Opens to Non-Members
New legislation includes expansion into insurance
Modernizing the Ontario Credit Union and Caisses Populaires Act has been a long time coming. Over the last two plus decades since the act was originally passed, other financial service providers have updated, digitized, and adopted mobile solutions to better serve customers and gain competitive advantage. Now Ontario credit unions have the leeway to do the same.
As the pandemic continues to apply pressure on both personal and business finances, the Canadian Credit Union Association, that has pushed for credit union reform for a number of years, reinforced the need for change as a way to play a role in the province’s economic recovery. The results are several historic updates to the Credit Union Act.
Three important changes are:
- Credit unions will be able to offer services to non-members
- Credit unions will be able to offer property and casualty insurance in branch
- Credit union legislation will sunset every five years
Providing services to non-members
The most impactful change in legislation is expanded business power that now gives credit unions the option to sell to non-members, a major shift from operating as a member-only organization servicing local communities. Under the new rules, credit unions will be able to cast a wider net to anyone wishing to open an account, purchase insurance, or avail themselves of other services, without the burden of membership acquired by opening a chequing account, for example.
With loosened restrictions to attract non-members, credit unions will need to make up for lost time modernizing their businesses to compete with banks. It’s worth noting that just two years ago, credit unions were not allowed to use banking vernacular to promote their services. They could not use the terms “bank” or “banking” to describe what they do until Canada’s federal Bank Act was amended in 2018. Helpful too, is that credit unions are no longer limited to operations within their province, which opens up possibilities for national expansion and service continuity if customers move away.
A move to modernity
Historically, credit unions have been the financial institutions of choice in rural and remote areas. And because they are non profit entities, they’ve consistently been able to offer favourable financial terms that often best the large banks – ranking the credit unions favourites among customers. But the competitive advantage of personal, local operations has eroded with the popularity of online banking, making it easier for the Big Five banks (that collectively own 85% of banking clients in Canada) to reach virtually anyone regardless of location.
New legislation boosts credit unions’ ability to tap into new markets, reach younger consumers and, importantly, service non-member remote customers. It allows them to vie for a piece of the web-based financial services pie formed by companies like WealthSimple and Tangerine. The change in credit union laws, however, isn’t enough to compete. Competing demands modernization. To do so, demands digital tools.
Consumers now expect digital experiences in every commercial interaction. And they expect to access services online. The good news is that credit unions, though a bit late to the game, can learn a lot from successful online service providers without being first through the wall. Infrastructure and cloud services are already built, ready, and easily accessible, simplifying production of processes like digital onboarding for account openings and commercial lending.
Expanding credit union product offerings to now include insurance opens a host of possibilities for new revenue streams. Digital rules apply here, as well. Remote, self-serve account openings with the ability to sign documents electronically empower the consumer and create paper-free efficiencies for the branch – and they’ll play a crucial role in reaching new customers further afield. Cloud storage ensures documents are digitized, secure and accessible anytime, from anywhere, on virtually any device including a mobile phone, whether by the account holder or credit union authorized rep.
The ability to digitally integrate new processes with existing ones will help credit unions streamline the adoption of both new clients and new product lines to take full advantage of the business opportunities now available to them. Digital solutions measurably lower operating costs, reduce errors caused by manual data input, and help financial institutions stay compliant with federal and provincial regulations.
Modern, digitized workflows that reduce reliance on paper will free up time for credit unions to focus on growth and expansion and help make them worthy competitors in Canada’s broadening financial services arena.
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