Waterloo Banking Project

When I describe the idea of student-run financial services to people, many suggest exploring a partnership.

It is an attractive idea to be able to achieve our purpose as an independent credit union like at Georgetown, but achieving our goals doesn’t require strict independence and we would need help from other people and organizations along the way anyway.

The advantages of partnering with an existing financial institution include: greater stability, reputation, and avoiding need for direct regulatory approval.

By partnering we can focus more on our keys to success: investing in student staff & building our organization; raising capital; and recruiting member-customers. By taking this strategy building our partnership becomes another key.

One example I often give of a similar partnership PC Financial relationship with CIBC Direct Banking. PC can focus on marketing and customer service, while CIBC takes care of maintaining the deposit-taking institution.

Another example with more parallels is the student caisse system run mainly in Quebec by Desjardins caisses populaires — French for people’s bank or credit union.

A student caisse is a mini Desjardins caisse in a high school. It is managed and administered uniquely by volunteer students: a great student/school initiative! The caisse services are intended exclusively for the students and their associations. A student caisse operates under the authority and supervision of a local Desjardins caisse.
Student caisse: a cooperative for high school students Desjardins

Having models and examples helps people believe in our cause not only as sources of learning, but also as proofs of concept, so people will realize the possibility in the first place.

I visited the ACTRA offices last week. The actors’ union founded Ontario’s newest credit union, the Creative Arts Credit Union, which got its charter last year and is launching this year.

Megan and I had met with the CEO Steve Mumford, but he was hired about a year before they were granted their charter.

To get more of the story of the groundwork and another perspective, I set up a meeting with the union’s executive director Brian Topp. Before the eight years he has served so far at the union, he was a senior vice president at Credit Union Central of Canada. That experience made him a key player in the founding of the institution.

Brian described how early on he approached VanCity to see if ACTRA could partner with their then subsidiary Citizen’s Bank of Canada, to offer financial services to union members. They couldn’t come to an agreement, so when ACTRA member Peter Kelleghan approached them to push the idea of an actor’s credit union Brian said his response was: “Congratulations you’re the chair of the committee.”

Brian told me the story over the course of an hour. Steve came in part way through.

They described the process of doing their survey, develping their business plan, getting government approval, and selling investment shares.

Brian emphasized knowing the value proposition and what you want to accomplish.

For them, and he came back to it a few times in the conversation, they wanted a financial institution where “‘I’m an actor’ is the beginning of the conversation and not the end of it.” Many of their members found that banks would not deal with them because they were actors without even considering their finances.

After we talked for a while, they led me to the main floor of the building where they are renovating the office for the credit union and ACTRA member services and, as well, a foyer with an ATM. Even if your organization is virtual, you need physical presence Brian told me, “[...] even if it is a shelf on campus.”

• Talking to Steve from Creative Arts CU 27 Aug 2009

We are working on an audacious and worthwhile project. It is a business, a social enterprise, a startup, and it will have a meaningful impact on the lives of our fellow students.

We are working to create a financial institution that will provide education and experience to students at our university and offer financial services that make sense for students. You can help advance the Waterloo Banking Project.

Our project can benefit from a the contributions of people with different skills, types of knowledge, and time available. People who help further this endeavour will get experience in a new organization that will help students and make our university better.

The following picture shows the structure of the project organization and the path of succession. Interested volunteers would normally go from being a supporter to becoming staff, a director and then, perhaps, an advisor.

As can be seen in the diagram, everyone would continue to be a supporter regardless of other roles they accept.

1. Supporters
   
   People who agree that this is a worthwhile initiative are encouraged to become supporters, which entails joining our mailing list, learning more about the project, and being willing to help out with individual events or efforts lasting a few hours. Supporters will be informed of opportunities to volunteer for implementing surveys, give feedback on project initiatives, and contribute ideas.
2. Student staff
   
   Students who can work on performing market research, finding information for organizational planning, creating parts of the business plan, should become staff. The time commitment will be several hours over the course of a few weeks, depending on the specific assignment. This group will be the beginnings of the staff of the newly created institution.
3. Directors
   
   Those who are motivated and willing to make a commitment for the term and want to take a lead role in the project can become directors. This role entails managing staff in their assignments, coordinating market research, assembling the business plan and developing policies. The directors will be the leaders of the project and the core of the organization.
4. Advisors
   
   People who can advise the project including, alumni, university faculty and staff, and industry experts can become advisors to the project. The commitment will be at most a couple of hours per month to discuss, provide insight, or review plans or ideas. Being an advisor will not require much time but can have a big impact through your input and experience.

To step forward to help, find out more information, or sign up to the supporters e-mail list, send an e-mail to WaterlooBanking.com@gmail.com.

The main selling point that credit unions use to promote membership is the idea that members own the business. Not only does that mean that members have democratic control of the institution, but they are also entitled to surplus revenue or profit.

Banks have shareholders, who own it, receive a share of the profits, and have ultimate authority over the corporation. Because of this structure, banks have an additional obligation to their shareholders while they try to serve their customers.

The difference is illustrated in this graphic comparing a bank’s structure to that of a credit union.

(graphic created by Ben Kendall at Drive Creative)

In a credit union, the members are entitled to all profits, compared to a bank where others take a cut. That difference is one we will leverage in working to set up a student credit union and offer more value to students.

Waterloo actually used to have its own credit union. In 1965 professors and employees of the university got together and started the University Faculty & Staff (Waterloo) Credit Union.

According to the Daily Bulletin, the credit union had 715 members and $2.1 million in assets in 2000, when it merged with the Waterloo County Education Credit Union, which started serving local teachers in 1972.

The Education Credit Union has had a branch at the UW R+T Park since 2007, where it offers surcharge-free ATM services, even to customers from other banks. The ECU’s headquarters is at the public school board offices in Kitchener.

Megan and I have met with both the credit manager and the CEO of the Education Credit Union to learn more and get advice from them. I expect we’ll be talking to them more in the future.

• Businesses open at TechTown DB 4 Apr 2007
• Credit union will move to north campus DB 8 Aug 2007

Megan and I met today with Steve Mumford, CEO of the Creative Arts Savings and Credit Union. Hearing Steve’s stories and insights was exciting. He speaks softly, but is so energetic and passionate.

The Creative Arts & Savings Credit Union is the most recently chartered credit union in the province and grew out of a project at ACTRA, a union of actors and performers, but is pursuing the vision of serving all types of creative professionals.

Steve had worked at Rochdale Credit Union for more than 20 years when he was approached by ACTRA to become the founding CEO at the new credit union.

He recalled that at a meeting of other credit union managers they had laughed at the notion of a credit union for performers as an “impossible dream.”

Because performers work on productions and often supplement their income with other jobs, banks see them as not having stable income and as poor credit risks even though performers’ incomes are higher than average, Steve told us.

By considering the unique employment situation of their members they can make an accurate assessment of the risk. And if they do reject the application, they explain why.

They just got their charter last year, but they have already paid off the $800,000 loan from ACTRA for the startup costs and they are going to have a launch celebration in October.

We talked with Steve for almost two hours and at the end we asked him whether he had any more advice for us.

He said, “Don’t lose sight of the bigger picture. Don’t be deterred.”

Soon after I had encountered the idea of student-run financial services, I started typing a brief to describe the idea, the benefits, the process and some of the information needed to realize the plan.

Even now, just months later, we know so much more. For example, I no longer think it feasible to pay the student staff members. At Georgetown, as Justin would soon tell me, they are all students and all volunteer.

Here is an early draft of the idea for a student-run credit union at Waterloo.
Read the rest of this entry »

After deciding to pursue the idea of a student-run credit union at Waterloo, it makes sense to learn more about other schools where they have already achieved one.

Early on, I learned how much control students have at the Georgetown credit union.

In March, I had e-mailed the faculty advisor on the board and he downplayed the role he played and suggested that I direct my questions to the students.

We are very proud of what the alumni and student credit union has achieved at Georgetown. Please know that the students lead the effort and a few of us serve as advisors with whom they can brainstorm about current issues.

So, I contacted the student CEO, Justin.

He told me how they had recently done a round of hiring for 16 positions and received 230 applications. Though the staff are not paid during the school year, most of them stay with it throughout their time at Georgetown. Just told me that they retain almost 100% of their tellers.

Among other questions, I asked him for advice in founding a credit union at a university.

Starting a Credit Union as this time considering the current banking environment is very capital intensive.
[...]
That being said I think it is also very attainable if you present your university with a detailed plan. Your first steps would be to do focus groups of the current banking environment on your campus to determine the needs of your potential member base. This will also help you determine one of the most critical questions when establishing a credit union, who your charter will be serving.
[...]
For instance, GUASFCU’s charter allows all Georgetown Students and Alumni and their immediate family members to open accounts with our financial institution. You and your colleagues will have to determine, which member base your credit will most adept at servicing.

When some people hear about the Waterloo Banking Propject and our idea they question whether students can really run a financial institution.

I tell them that students already do, just not at Waterloo.

At least not yet.

• The idea for student-run financial services at Waterloo

“You. Really?” Larry Smith feigned surprise when I told him I had a bit of an interest in entrepreneurship. A few months after I encountered the idea, I was explaining to the enterprising professor why I was pursuing this project.

I also have an affinity for the University of Waterloo and its students. Student-run financial services could benefit Waterloo students in many important ways. It may be an audacious project, but I think it is possible and it is surely worthwhile.

In the Winter term I was researching for another project and I started looking at businesses operated by university students that have a big impact on those that run them and those they serve.

Those I found included Harvard Student Agencies, which publishes the Let’s Go travel guides; Queen’s University bookstore, which is the main textbook supplier to students at the university in Kingston; and University Venture Funds, where students do research and make venture capital decisions.

Then I found a reference to Georgetown University Alumni and Student Federal Credit Union.

Since 1983 students at Georgetown in Washington D.C. have provided financial services to their fellow students. Now over 100 student volunteers run the credit union, which has about $10 million dollars in assets.

Students provide the customers service, they make the investment and loan decisions, file the regulatory forms and everything else in between.

There are other student-run credit unions. Students at Miami University in Ohio can become members at First Miami University Student Credit Union and the University of Pennsylvania has the Student Federal Credit Union.

Students at these schools can get better student-focused services, they can learn to manage their finances better, and can get amazing experience operating a financial institution.

That leads to the question: Why not at Waterloo?

We have begun working on a plan to start a student-run credit union at Waterloo under the organizational name Waterloo Banking Project. It will be a lot of work and we will need a lot of advice and assistance, but it will be worth it.

• Georgetown University Alumni & Student Federal Credit Union
• UPenn Student Federal Credit Union
• First Miami Student Credit Union
• Student-run university businesses 19 Feb 2009