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While CUSOs spark innovations for credit unions, they also must be innovators within their own organizations to compete against for-profit vendors (and in some cases other CUSOs) offering similar products and services.
Such thinking has led PSCU to reshape its business model, which it unveiled at CUNA’s Governmental Affairs Conference in March. Founded in 1977, PSCU is one of the oldest CUSOs. With 680 owners and more than 1,500 participating credit unions, it provides card processing, electronic banking, bill payment, mobile banking, contact centers, and strategic consulting services.
As part of its new business model, PSCU set up an “innovation lab” and a “credit union experience team.” PSCU uses these tools to collaborate with its credit union owners/participants to create solutions and bring them to market faster.
“There are a lot of smart people in our industry,” Kelly says, “and we have some of them here at PSCU. We want to have conversations with our credit unions so we can learn from them. Engaging in collaborative innovation with our credit unions and other CUSOs is the path forward.”
Possibilities exist for more collaboration among CUSOs, says Tony Boutelle, president of CU Direct—a CUSO that was launched in 1994 to provide an indirect lending platform and now offers several additional lending solutions. CU Direct has 1,000 participating credit unions; about 100 of which are owners.
CUs COLLABORATe ON TECH SOLUTIONS
Credit union and vendor experts are collaborating on CUFX (Credit Union Financial Exchange). It’s an initiative of the CUNA Technology Council to develop standards that would make the product and service integration process across the credit union movement easier and less expensive.
Initially, CUFX will focus on new applications or existing transaction sets that support new initiatives, such as personal financial management, membership applications, and online banking. Building on these key initiatives, CUFX will create new standards so back-end systems can speak the same language. Future initiatives could include re-engineering existing transaction sets.
Credit unions can get involved by providing expertise or financial support, or by adopting the established standards.
For more information, visit cufxstandards.com.
“We want to partner with other CUSOs to do projects with them,” Boutelle says. For instance, CU Direct provides the lending platform that CO-OP Financial Services, another CUSO, uses in its lending center.
Credit Union Student Choice, with more than 200 partners, is another example of collaboration among multiple CUSOs and credit unions. Founded in 2008, its stated purpose is “helping students and families finance a higher education, without a higher price tag.”
Similiar collaborations among CUSOs and credit unions could be a boon to the entire credit union industry, Boutelle points out.
“We’re seeing more of this type of innovation and collaboration today,” he says. “But it does require people to be more flexible in their approach to doing business.”
In the family
Using CUSOs is a way for credit unions to keep the money they spend within the movement. Earnings get channeled back to credit union owners. “That helps the movement grow and better serve members,” Antonini points out. “It’s a self-sustaining cycle.”
That said, getting more credit unions involved in CUSOs remains an elusive goal.
“The No. 1 challenge for any CUSO is getting enough credit unions on board to obtain scale,” Boutelle says. “Until you have scale, you have no economies, and economies drive CUSO success.”
Boutelle believes credit unions could use CUSOs more than they do now. Sure, CUSOs have to deliver strong value propositions to credit union clients, just as credit unions must weigh the CUSO option against an outside vendor or a do-it-yourself option.
“That’s only fair,” Boutelle says. “The CUSO option should be evaluated along with those other options. You leave a lot on the table if you just go with a vendor. You have no control over the delivery channel, and your prices are probably only going to go up.”
Many credit unions, however, don’t participate in CUSOs, Antonini points out, and only a fraction of those that do participate are owners. By owning a piece of a CUSO, rather than just participating, credit unions “have a vested interest,” he says. “They make sure the CUSO does the right thing—there’s a congruence of goals.”
Investing in a CUSO is not just for larger credit unions, as some might believe, he adds. Even a small investment gives a credit union a stake in the action. And having owner representatives on the board helps keep CUSOs accountable on pricing and performance.
The fact that credit unions have a stake in CUSOs is a major advantage for the industry as a whole, says Mark Zook, president/CEO of $410 million asset Maps Credit Union, Salem, Ore. Zook is also the CEO of Maps Service Agency—the holding company for the credit union’s four wholly-owned CUSOs.
“When we have strong industry-owned partnerships,” Zook says, “we have a better sense of our destiny. We have more control than if we each stood alone with our own vendor relationships,” where none of them are linked by the common characteristics that link credit unions.
NEXT: The flip side