Wednesday 25th June, 2014
Project Credit Union - Day 1
We’re going to see whether we can start a credit union. We’ve been talking about this for a while and we’ve decided to use our current break from client work to see if there’s anything in the idea.
We started in earnest yesterday, Tuesday 24th June. We have no real idea how feasible this is but we figured that the best way to discover that was to start the process. We’re going to document our progress on this blog.
Even if we don’t end up with a credit union, we’ll hopefully learn a few things on the way.
James and I spent some time discussing our motivation for creating a credit union. There are a few different things that we’re interested in exploring:
- Building a “modern” banking website with good usability and functionality
- Creating a democratic and transparent bank-like organisation
- Offering banking services to freelancers/small companies who aren’t well-served by high-street banks
We decided that in order to achieve this we would need an entity that could accept deposits which we think limits us to a bank or a credit union.
Unfortunately starting our own bank seems to be out of the question, because there’s a minimum capital requirement of €5 million! So we discussed building an alternative interface to an existing banking website, and even building something entirely separate that streamlined the process of getting transaction data from existing bank websites.
We also considered partnering with an existing credit union to see if we could help with their current online banking offering. But ultimately we felt that we’d only really be able to demonstrate the functionality that we think should exist by controlling the the financial product too. To that end, we decided to focus on testing the feasibility of creating our own credit union.
Minimum Viable Credit Union
James had already been in touch with ABCUL (Association of British Credit Unions Limited) and they’d sent us over some information. Not to be put off by some of the obstacles mentioned in these documents, we decided to try to simplify things by working out what a minimum viable credit union would need to offer. Here’s what we think we’d like to start with:
- Electronic transfer in & out
- No debit/credit/ATM cards
- No dividend/interest payments
- No loans/mortgages
We’re thinking in terms of starting with a simple (and quite restrictive) Common Bond e.g. people whose occupation is “IT Professional”.
We’ve contacted ABCUL again to ask whether it’s even worth considering what we’re trying to do. If they don’t think that what we’re trying to do is crazy then the next step appears to be to register as an ABCUL Study Group so that we can use their knowledge to help us apply to become a credit union.
We’re keen to understand what are the unavoidable costs of setting up and running a credit union - hopefully ABCUL will be able to help us here.
Existing Credit Unions
We searched a list of London credit unions to see if there was anyone trying to do something similar. Of the 19 results there are 3 that both James and I appear to be able to join based on a common geographical bond.
One that stuck out was Group London that appears to have some crossover with what we’re thinking about. It doesn’t look like they’ve actually started yet so we’ve contacted them to ask if they’re still proceeding with creating a credit union.
We’d been told about a project called “Savemates” which Makeshift worked on a while ago. They were trying to do something a bit different - creating a Rotating Saving and Credit Association - but it was interesting to read about the legal/regulatory issues that they ran into and why they eventually decided to give up on the idea. We’re really grateful to them for writing up their experiences in so much detail.
Credit Union Application Form
We finished the day by going through the credit union application form which we found on a page of the Bank of England website. It’s a pretty lengthy form and contains lots of questions that we don’t have immediate answers to. It also states that they “are required by law to determine applications within the earlier of (a) six months of receipt of a completed application or (b) twelve months of receiving an incomplete application.”
There are lots of reasons why this project might not succeed but it feels good to be working on something tangible, something that’s not just software and something that could eventually help other people.