SIOUX FALLS, S.D. – Size isn't everything. The nation's second smallest corporate credit union is proving that. Starting in early 2002, the $100 million CorpStar FCU will become the first corporate CU in the nation to begin offering core data processing services to natural-person CUs, bringing the ever-evolving corporate CU network into yet another new line of business. The corporate will deliver the product in a service bureau environment. In recent years corporates have expanded their product lines, offering everything from loan participation to Internet banking. CorpStar FCU President/CEO William Wood said corporates will continue to listen to their members and meet their demands, whether it be with traditional corporate products or not. "Corporates are working on a number of different things. Each will get to a point where they provide the best solution in a certain area. We see a significant amount of consolidation going on among corporates, with the thinking that size is everything. I still go with the old credit union adage that service is first, size doesn't deliver the better service," said Wood. The banking DP vendor CorpStar FCU chose to offer this new service could also be a sign of the times for the CU industry. CorpStar FCU will be offering ITI's Premier II core processing solution. ITI, a Fiserv subsidiary, has about 3,600 financial institution clients, with over 90% of them banks. Wood said one key reason for going with ITI's solution is that it is a traditional bank processing solution that can accommodate commercial lending accounts, an area credit unions are interested in getting deeper into and an area Wood expects credit unions will have to get into. "From the commercial lending side, it can handle the growing number of credit union members who want to set up small businesses. That was very important to me," said Wood. CorpStar FCU pays ITI a licensing fee to offer the solution to credit unions. Wood said the corporate will be able to deliver service bureau data processing at a very competitive price and give small CUs a break from rising DP costs. "If your credit union is $500 million to $1 billion-plus you may have the capacity to provide Net banking, bill pay, or aggregation over the Net, but it's becoming less and less cost effective for credit unions under $100 million to provide all of these services," said Wood. Wood believes this is a crippling disadvantage for these CUs because they miss out on bringing all these disparate parts together to paint snapshots of their members' financial lives through mining of data – data which can be used to match products to members. "The system has a lot of horsepower. It has maintenance reporting functionality to mortgage-passthroughs, a fully integrated general ledger. It interfaces with our COLD storage so credit unions can deliver share draft images off their wide area networks. There's a full array of e-com services," said Wood. The corporate will use four UNISYS Clearpath servers and a handful of NT servers combined with a frame-relay network to deliver the product in service bureau mode. Credit union clients will only need a network of PCs to run the system. "The frame-relay network with the fat client is nice because credit unions can continue to operate if there's a communications problem," said Wood. CorpStar recently expanded its FOM to be able to offer check imaging and service bureau DP in more states. Its FOM now includes 14 states. Kurt Kuhl, senior vice president of ITI, said service bureau processing is picking up steam right now, but processing goes in cycles. "Service bureau is beneficial because it allows the credit union to know exactly what their costs are going to be, and it leaves the technology to the technology people. Those using our software in-house like the higher level of control they get. It goes in cycles," said Kuhl. Kuhl said ITI will lock in a licensing agreement for about five years, meaning CorpStar's costs will be fixed for that time. It if passes a threshold of account volume, its licensing fee may go up after five years. CorpStar is also migrating off of the U.S. Central/EDS Corporate Credit Union Network system and onto ITI's PremierCorp product. Wood said this system will do all that CCUN does, including allowing its member CUs to access their accounts, conduct ACH transactions, and originate wires. "When I took the corporate over in October I knew going in I didn't want to work with CCUN because it's an old DOS-based system where you have to generate financials and reports on Excel," said Wood. CCUN may be getting a facelift soon, according to U.S.Central. "As a responsive service provider, we are always evaluating the competition and the marketplace to see what we can do to enhance our core account processing system. Currently, we are in our normal due-diligence process with regard to this evaluation," said Bob Amundson, U.S. Central senior vice president, payments and electronic commerce. Currently 26 corporates are full users of CCUN. Wood said the new system will save the corporate from $12,000 to $20,000 over CCUN, and the service bureau system can save CUs between 20-30% over their current systems. "I'm just a credit union serving my members. My price structure is based on my members. I don't have a level of profit to hit to satisfy stockholders," said Wood. Wood said he traveled the country looking for a data processing partner, including visiting a number of the larger CU processors. "The credit union providers did not have the things that we needed as a corporate available right now," said Wood, noting that he doesn't mind using a bank processor. "We're all dealing with money, the only difference between us and them is our ownership and philosophy. Handling a share draft account vs. a checking account is no different." Though new ground for corporates, the floodgates aren't necessarily open. "We looked at offering data processing through a service bureau in the early `90s. It wasn't our thing. We didn't see a value-add we could bring. If they (CorpStar) are bringing a value-added service of higher quality or better cost then for them that makes sense," said Jeff Stoner, vice president of electronic services for Mid-Atlantic Corporate FCU. Mid-Atlantic Corporate FCU also blazed a trail for corporates in a new product area – electronic bill payment. The corporate has had significant success thus far with 146 CU clients and partnerships with two corporates to offer the service to their member CUs. Stoner, however, said he doesn't see electronic bill payment as being far off the beaten path of corporates' traditional remittance processing services. "We looked at bill pay as a natural fit for our payment services. Along those lines there are always new services we are looking at. Obviously with more corporates marketing nationally, everybody is trying to carve out their niche," said Stoner. Empire Corporate FCU President/CEO Joe Herbst is an admitted traditionalist, believing that trade associations engage in lobbying and education, credit unions serve their members' financial needs and corporates stay focused on their core mission of meeting natural-person CUs' financial needs. "We can't be involved with every product and service out there. If we can't add value, if credit unions can go out and get these things elsewhere, then I don't think we should turn our energy and resources towards it. We would consider offering any product that we feel we could add value and if it seems to fit into the role of corporates," said Herbst. At press time, Empire Corporate was in the process of getting its own Internet banking/bill pay solution up and running for its member CUs. Herbst said he believes Empire is delivering a value-add there because it partnered with two other corporates to get price discounts from the solution vendors that the corporates can pass on to their members. "It's close to what we do. Electronic bill pay is another form of share draft processing, and Internet banking is related," said Herbst. Herbst said there may be other Net-based products, such as account aggregation, that may not look like a traditional corporate offering, but could make sense if the corporate on its own or working with other corporates could bring some economies of scale that could cut the cost of the solution for natural-person CUs. [email protected]