A transformative, sustainable growth programme for credit unions in England

Diane Burridge, Director of Innovation and Development at Fair4All Finance

Credit unions are a cornerstone of our financial system – locally rooted, member owned, mission led, but all too often an unsung hero. The credit union sector originated with excluded people supporting each other to get access to the financial services and products that they needed. With over 20m people in financially vulnerable circumstances today, their work has never been so important.

As a nation, levels of financial resilience are low – our research found that over 10m people in the UK are saving less than they used to, or have stopped completely, and 24% of people in financially vulnerable circumstances have no insurance products versus 16% nationally. There are also around 16m adults who are financially underserved and struggle to access affordable credit.  

Credit unions are one of the most strategically important mechanisms to improve the nation’s financial resilience and bolster inclusion. We are aligned with the credit union sector’s Credit Union Growth Plan to double the number of people using credit unions by 2035. We welcome the collaboration between all the credit union trade bodies to align around it. 

Fair4All Finance is delighted to be launching a credit union transformation programme in England: a bold initiative designed in conjunction with the sector, focused on building on its existing work to bolster longevity, and serve more people, more effectively. We will deliver this with HM Treasury, ABCUL and other partners, as part of the Government’s Financial Inclusion Strategy, underpinned by an additional £30m of dormant assets funding to accelerate the work.

Our work on the transformation is guided by our vision for 2035:

• Double the number of people in England saving and borrowing with a credit union, enabled by realignment across 8 to 11 regional concentrations and scaling of payroll and workplace credit unions
• Delivery following a ‘hub and spoke’ model aligned to devolved geographies so that mayoral and local leadership can convene partners along with key employment sectors
• Investment will be prioritised where there is long-term regional buy-in and will support our strategic priorities: technology and shared services, product innovation and marketing, governance and capital

We can also support the incubation of Credit Union Service Organisations (CUSOs) so that essential functions, from risk and analytics to member operations, can be shared efficiently.

We recognise the importance of mergers and also see a vital role for collaboration. There are already some great examples of collaboration in the sector to build on.

The SoundPound Group, a credit union cooperative in Greater Manchester backed by Mayor Andy Burnham, has developed partnerships including delivering a product with Transport for Greater Manchester helping people to make savings on annual bus travel.

London Mutual Credit Union, Serve & Protect Credit Union and Plane Saver Credit Union recently celebrated a 10 year partnership with the Ministry of Defence, that enables service personnel to save and borrow directly through payroll deduction. Together, the three credit unions now serve more than 28,000 members, reaching around 15% of the Armed Forces, with combined assets running into the millions of pounds.

These initiatives show what’s possible and we want to help replicate and scale that success.

While our dormant assets funding is for England only, we would like to collaborate across all four nations to maximise the benefit of the knowledge and experience that exists across the wider credit union sector.

Our work with the credit union sector to date

Since we were formed in 2019, we’ve supported and championed credit unions and community finance, having made investment in the credit union sector of over £20million so far.

During recent economic shocks, our funding helped stabilise institutions, protect members and maintain continuity of service. We have seen and supported organisations coming together in ways that preserve co‑operative identity while unlocking scale. We have also invested in leadership and technology preparedness and developed guidance to help institutions scope and deliver well.

Our new programme moves beyond piecemeal targeted grants to designing an ambitious single, coherent plan that removes financial barriers to smart change, allowing credit unions to act decisively without carrying the usual restructuring risks.

Why we are doing this

The need is large and growing. One in four UK adults have less than £100 in savings, 24% of people in financially vulnerable circumstances have no insurance products (v 16% nationally) and LEK estimate there’s up to £2bn of unmet affordable credit demand in the UK that could be met commercially and compliantly.

Credit unions are well placed to help people to build their financial resilience and have a history of serving people who struggle to access mainstream financial services. There are 350+ UK credit unions serving ~2.15m adult members, yet penetration remains low versus peers.  

Without coordinated change, with examples like the ReBo programme in Ireland that supported 212 credit unions in merger projects, institutions will risk shrinking their impact and their market presence. With targeted action, the sector can grow sustainably and meet much more of this need.

Members’ expectations have shifted decisively toward mobile‑first, near‑instant experiences. Many credit unions operate on legacy technology cores that slow decisions and hold them back. Modern platforms and shared services can reduce unit cost and improve risk, but the upfront investment is hard to fund alone and the fragmented nature of the sector with many very small organisations does not make it appealing for new supplier entrants.

The National Financial Inclusion Strategy calls for more payroll savings. Credit unions could play a vital role here with the potential to partner with local employers over delivery. These are precisely the issues that our programme will be designed to improve. Many credit unions are not focussed on a geographic common bond but instead have primarily been driven through a sector focus on working with employers.  This is a tremendous opportunity for them, but also a threat. We hope to support the sector in rising to challenge. To master the opportunity and prepare for potential payroll savings schemes on the horizon, credit unions will need to develop a commercially viable offering to compete with FinTechs as payroll savings providers.

Policy and regulation are increasingly enabling change, though uptake has been limited to date, reflecting capacity constraints and the need for product innovation that fits members’ lives. Proposed common bond reforms will ease structural barriers to mergers where locality caps currently impede viable combinations. A CUSO framework under consultation recognises the role of shared services in achieving scale and resilience.

Our programme can knit these developments together with practical investment and delivery support – the success of the credit union transformation and the growth of the sector depend on the proactive implementation of common bond reform and a stronger CUSO network. You can read more about our stance on CUSO reforms here. 

Place matters. Devolution and metro mayor leadership create a unique opportunity to align inclusive finance with local economic strategies and the available funding. A regional hub and spoke model lets us engage with councils and local institutions in a coherent way to secure strong, longer term support with co-funding enabling innovative product development partnerships, the expansion of a competitive payroll savings offer for employers and the opportunity to create a network of referral pipelines, all building a future landscape where a wider range of communities are connected to quality services.

Across financial services, the sad reality is that many people who seek credit are declined. There is an opportunity to mobilise the mutuals sector in partnership with building societies and banks to take these declines and refer them to credit unions who can help.

To make this slick, effective and impactful, joining up a range of alternative providers from CDFIs to credit unions and making the consumer experience seamless, is essential. This blended approach recognises the variety of consumer profiles and the need to be able to cater to different risk tolerances.

Fair4All Finance has been piloting these approaches for some time and recognises the potential through new price comparison websites and back office referral engines. Sorting out how consumers can be triaged between alternative providers seamlessly is an essential step to unlock greater shared marketing spend and communications reach.

Timing matters. The sector is already evolving. Our role is to help shape and strengthen that momentum, so we achieve the benefits of proactive and managed consolidation. Action here and now will protect members, and especially those in vulnerable circumstances, whilst sustaining a trustworthy cooperative alternative.

Our consultation

From 10 February to 23 March we will have a public consultation on our website, inviting feedback on our proposed outline for the transformation programme, from credit unions, trade bodies, regulators, local leaders and other stakeholders. We welcome as much feedback as possible to guide us on how best we can engage and work with the sector and start rolling out the transformation in the latter part of the year. 

Our roadshows

Throughout the Spring, we will also travel around England completing regional roadshows with credit unions, presenting the findings of our consultation, discussing our plans for the transformation, and inviting dialogue with local stakeholders. We will confirm dates and locations closer to the time on our website and in direct communication, so that all those who wish to attend are able to.

Welcoming collaboration

Transformation at this scale is a team effort and our partnership plans with ABCUL will closely align with the sector’s recently published Credit Union Growth Plan.

Where there is collaboration and shared use, our wraparound support can be tailored and configured to include technology and digital journey upgrades, leadership and governance development, product pilots, marketing that converts, capacity to deliver change, and aligned investment to reduce the financial risk of restructuring.

And where it makes sense, we can co fund proactive merger/consortium activity and focused regional groupings capable of sustained growth. We recognise that this will need to start with strategic planning and that funding is required for that initial stage too.

A final word

The UK needs a stronger mutuals sector and a more inclusive financial system. With a clear 2035 vision for England, practical partnerships and targeted investment, credit unions can become an even better connected, tech enabled network serving far more people at lower cost, and with greater impact.

This programme is a recognition of past effort, not a criticism of it – all of the hard work leading up to this moment has facilitated a great opportunity to go even further. The moment is here; together, we can seize it and go for more than double.