TORONTO — From the Tobacco Workers' Credit Union in Guelph to the New Community Credit Union in Saskatoon, the names tell part of Canada's history even as they’re now history themselves.
The two credit unions are part of a growing number that have been bought, merged or shut down over the years as a combination of pressures push increasing consolidation in the sector.
While credit union numbers have been on the decline since the 1960s, insiders say rising technology demands, which ramped up during the pandemic, have led to a spike in the trend.
"Over the pandemic, we've seen a massive shift in use of digital technology, mobile technology, not just for younger people, but through all demographics," said Jeff Guthrie, chief executive of the Canadian Credit Union Association.
The increasing technology demands of customers, whether it's improved smartphone apps or faster money transfers, combined with rising regulatory expectations, have helped drive increased consolidation, he said.
"It is a scale business, where you need scale to make investments in future technologies."
The pressures have helped drive six credit unions to merge with Winnipeg-based Access Credit Union in the past two years or so.
Access chief executive Larry Davey said consolidation started to pick up with the advent of smartphones, but has increased pace as credit unions look ahead and make tough decisions on whether they have the resources to adapt and survive.
"For the sake of their members, they're being more aggressive in those decisions and saying, you know, we want to pick our dance partner now."
Demographic trends and rising competition also mean some of the credit unions being absorbed are quite small.
Amaranth Credit Union, which will complete its technical merger with Access in June, had 1,200 members and $18 million in assets when the deal was struck. The credit union was incorporated in 1960, back at the peak of credit unions in Canada, when they numbered around 3,200.
At the time, many credit unions were closely linked to employers or ethnic groups, but as that closed system largely wound down, institutions like the Peek Frean Employees’ Credit Union and the Latvian Credit Union have been folded into larger unions over time.
There are still some so-called closed bond credit unions linked to an employer, notably for teachers and police, but others continue to fall away. Airline Financial Credit Union, open to anyone in the airline industry, announced on May 14 that it had approval for its merger into Luminus Financial.
Affinity-based credit unions are also dwindling. New Community Credit Union was the first for Ukrainians in Canada when it opened in 1939, but it merged into Synergy Credit Union last year.
The trend has meant that in the 10 years leading up to late 2022 the number of credit unions fell by 129, or 37 per cent, to 219, according to a report last year from the C. D. Howe Institute.
As credit unions go beyond local communities, there are risks of lower member participation rate and board capture by management, said report authors Marc-André Pigeon and Murray Fulton, noting the need for clarity of purpose and good communication.
However, consolidation doesn’t have to mean a disconnect with members, even as smaller credit unions get absorbed into larger ones, said Annette Bester, national credit union leader at professional services firm MNP.
"It just becomes a little bit more of a diversity of cultures," she said.
While consolidations can sometimes come with bad connotations around losing community roots, she said there’s still a local link and the alternative can be much more severe.
"If a credit union isn't sustainable, it closes its doors. If it closes its doors, there's no one that's supporting that community financially anymore by making those donations to the rink."
Credit unions have long co-ordinated on many aspects of technology without needing to merge, such as through a linked network of ATMs and pooling resources to secure online banking platforms, but there are still aspects that require individual bank resources, Bester said.
"They have to integrate it with their banking system, so that's where it gets costly for credit unions to do it themselves. That's where scale starts to matter."
The challenges of meeting the technological demands can be seen in the size of some of the mergers going on.
Servus Credit Union and connectFirst Credit Union, Alberta’s two largest, announced in March that they would merge to create a single credit union with more than $31 billion in assets under administration.
"They're two of the largest coming together. They're still looking at it and saying, you know, we still need more scale to be able to do everything we know we're going have to do for our members," Bester said.
In announcing the deal, board members emphasized the need to respond to competitive pressures, and to have the resources to invest in digital innovation and prepare for open banking.
The deal will leave the merged union with a similar level of assets to Vancity, while Desjardins, the first successful credit union in Canada after opening its doors in 1900, is the clear giant in the space with around 7.5 million members and $407.1 billion in total assets.
But while the trend is towards larger and fewer credit unions, there are those pushing against it, finding such models don't always fit their needs.
Lighthouse Credit Union launched in 2022 as one of the few new credit unions created in Canada in recent decades.
Chairman Harley Gold said in a release announcing the launch that Lighthouse was grateful the provincial regulator approved the credit union and that it recognized the need for a Jewish credit union.
"A credit union fits well within Jewish principles of community and giving back, and we hope that Lighthouse Credit Union can serve as a financial beacon for the community."
This report by The Canadian Press was first published May 28, 2023.
Ian Bickis, The Canadian Press
