The rise of digital communities has become a catalyst for change in financial regulations. One of the types of financial institutions that’s feeling the aftershocks of these communities most keenly is credit unions. In the past, credit unions were empowered to grow their member base from specific communities that shared a common bond, such as a common geographic location or employer. However, the proliferation of digital communities has not only led financial regulators to take question the boundaries of the common bond — it’s led them to take action.
On October 27, 2016, the National Credit Union Administration approved a plan that relaxes the membership restrictions imposed upon credit unions. Part of the plan includes softening the geographic limitations on credit union membership. A driving force behind the NCUA reform, it would seem, are digital communities.
“The internet has changed everything for lenders, this only modernizes some arcane requirements,” Ryan Donovan, lobbyist with the Credit Union National Association, told Reuters.
It hardly seems likely that the NCUA will ever consider all internet users as one big community, thus freeing credit unions entirely from their membership restrictions. Special interest groups like the American Bankers Association and the Independent Community Bankers of America have already taken umbrage with the NCUA’s relaxed membership rules. “If credit unions want to eliminate the common bond requirement and operate like banks, they should be taxed like them and required to meet the same set of regulatory standards. They can’t have it both ways,” ICBA President and CEO Camden R. Fine said in a press release on the topic.
In spite of these roadblocks, digital communities could still lead to bigger regulation breaks for credit unions. “If lobbyists and advocacy groups can work to localize critical issues and messages to the targeted stakeholders that digital communities represent and cultivate, the NCUA could be strongly influenced to move to drastically relax membership,” argued Michael Barrio, managing partner & vice president of public affairs at Leverage Point.
And while digital communities may be shaping finance, fintech is concurrently shaping these digital communities. Crowdfunding in particular is providing people with a way to form meaningful groups based on, well, common bonds.
“I think an argument can be made that crowdfunding is seen within the community not just as a business tool to support innovation and creativity,” said Giancarlo Frosio, senior researcher and lecturer at the Center for International Intellectual Property Studies. Rather, crowdfunding is also “a revolution in social interactions promoting a new order based on disenfranchisement from centralized control of means and ideas.”
Crowdfunding, then, provides a platform through which people can build and join online communities united around a common goal or passion. It will be interesting to see in the coming years whether finance will have a bigger impact on digital communities, or vice versa.