EDS, leagues invest in CUNA Network Services; CNS trying to raise $5 million

MADISON, Wis. – CUNA Network Service’s newest strategic tech partner has turned into a 5% equity owner. About a month ago tech giant EDS became a CNS strategic partner for Net banking and other online services, replacing FundsXpress which had a three-year relationship with CNS. At press time during EDS’ annual CU users conference, EDS announced that it was investing $750,000 in CNS, giving it a 5% stake in the company. “This positions EDS as an industry insider. EDS has been part of the credit union industry for over 25 years,” said Dave Selina, client executive for EDS. Selina said in the past EDS has been reluctant to form alliances in the CU industry, but that philosophy has obviously changed. “The strategic alliance agreement really reveals a wide open attitude at EDS of us doing business the best way, the most effective way. If we haven’t done it in the past, doesn’t mean we’re not going to do it in the future,” said Selina. The EDS investment in CNS followed a $250,000 investment by the California CU League and a $50,000 investment by the Colorado CU System. “We looked pretty carefully at this over a period of months and determined that we agree with the TowerGroup report that there is a need for these kinds of electronic financial service delivery systems, and they will become more important to credit unions,” said David Chatfield, president/CEO of the California CU League. Chatfield says critics of CUNA getting into the e-com business should wait and see. “I think CUNA’s focus is in the right place. They’re on the right track for being a very good trade association. That doesn’t mean they should be excluded from other business activities. I don’t think that’s what Renewal was all about,” said Chatfield. CNS was formed in July through the combination of Sunstar IP Communications and the e-commerce assets of CUNA Strategic Services, Inc., which owns 38% of CNS. Credit union leagues own 49% of CSSI. “We’re also the second largest shareholder of CSSI. We want to protect that investment,” said Chatfield. He noted that the California CU League has been successful in picking the right ventures to invest in over the years. Colorado CU League President/CEO Carroll Beach thinks the recognition of CUNA, along with leagues marketing to their member CUs gives CNS an advantage. “I think it’s good to have an organization at the national level to act as a catalyst to getting various business opportunities done, and making them available for credit unions. We felt the investment we made was appropriate to be involved in the research of these products,” said Beach. While together these three investments tally $1,050,000, that’s far below the $5 million number CNS is shooting for. Look for CNS to announce its second major tech vendor partner in the next 60 days. The firm is expected to follow the path of EDS: become a strategic partner and an investor in CNS. The company will come in to help CNS with its smart card objectives. “This is all tracking down our objective. We were looking at really getting two worldclass IT providers behind us and then building them into the equity model, so we’re all marching down the same path,” said Doug Benzine of CNS. Benzine said the investments are particularly important for CNS’ success given the problems Net firms have had. “Most of the calls I get now are from CFOs. They’re wondering if this is going to be the next `dot-bomb,’ ” said Benzine. He said given that mentality it’s important not only to have “ worldclass” IT firms like EDS involved with CNS, but a strong capital position. “The big advantage we have is the CUNA name to get us through the doors of credit unions. We’re going to be the sales force, and let the leagues be as well. We’re very excited about the foundation so far,” said Benzine. Benzine said having leagues as investors gives credit unions a stake in CNS’ success. At this point there are no plans for allowing natural-person CUs to invest in CNS. [email protected]