Embracing the Cooperative Principle of Collaborative CUSOs

Throughout their proud history, credit unions have been the most successful model of the power of co-operation and collaboration in the financial services industry. Through boom times and bust, this cooperative principle has retained its intrinsic value. This ethical structure has provided needed products, services and benefits to millions of American consumers. The model has since been extended beyond the credit union-to-member relationship to credit union-to-credit union as well, and now also encompasses the CUSO-to-CUSO relationship. NACUSO was formed in the mid 1980s when NCUA passed the CUSO regulation granting credit unions the power to form business subsidiaries, or Credit Union Service Organizations. In the years since, NACUSO became the premier professional association on which credit unions, CUSOs, vendors and other industry trade associations have relied for research, information and guidance in the formation, development, structure and operation of CUSO initiatives. Many cooperative CUSOs were formed to fulfill such needs as credit card processing, data processing and mortgages. But boom times in the 1980s and 1990s saw the prominence of CUSOs dedicated to the provision of brokerage and insurance services to their CU members and non-members alike. As this investment tide swept the country, credit unions and CUSOs prospered, and NACUSO sought to expand the reach of the CU/CUSO connection through the adoption of the Incidental Powers Regulation. Many industry observers, and many of our own members initially believed this to be self-destructive to NACUSO, as they saw in the adoption of Incidental Powers the idea that CUSOs would no longer be necessary. NACUSO never saw it that way. In fact, just the opposite is true. We see the opportunity for growth and expansion of a great idea, the continuation of the cooperative model. Change can be welcomed with an embrace or it can be met with stubborn denial. Those noisy crank-em-up infernal machines were never going to replace the reliable horse-drawn carriage either. People will always need transportation; that’s the constant. And the belief that with Incidental Powers, because these investment/insurance CUSOs now operate from within the CU proper, makes CUSOs a thing of the past is to deny the past and defy the future. The fact remains that any time two or more credit unions or a credit union and another non-credit union business partner want to collaborate in a new initiative, a CUSO will be born. We cannot emphasize enough that today, more than ever, economic scale, geographic diversity, speed to market and shared risk cry out for the creation of more CUSOs in the credit union community, not fewer. The collaborative CUSO is beneficial to credit unions of all sizes, but it may prove to be the saving strategic advantage for many small and medium sized credit unions. In today’s world size does matter, and being big enough to play the full service financial institution game requires large capitalization and more than a few years of patience before the returns stream in to justify such large expenditures. Credit unions today can chose to outsource to non-CU suppliers to enter new fields of business, or, they can collaborate and provide their own tailor-made solutions. They can choose whether they want to be a buggy whip or become a horseless carriage, so to speak. They control their own destiny. It is this melding of the entrepreneurial spirit and the cooperative structure that will fuel credit union growth in the decades to come. The collaborative efforts of many credit unions built the significant scale enjoyed at indirect lenders CUDL and CUILA. Similarly, multi-credit union CUSOs like CU Answers and Open Technology Solutions (OTS) are advancing responsive technology solutions for credit unions. The real estate/mortgage value chain has been greatly enhanced by a multitude of regional mortgage CUSOs supported by service providers Prime Alliance and CU Realty, both owned by multiple credit unions and operating as CUSOs. Helping members manage family assets was greatly enhanced when credit union capital was used to build brokerage and insurance operations like CUSO Financial Services and XCU. Multiple credit unions coming together to leverage their economic scale and share development risk was behind the creation of CUSOs that act as new product incubators Member Gateways and Members Development Corporation. Credit unions have always been admired (and envied) by those outside the industry for our willingness to share best practices and help each other enhance and expand the member service menu. This has led to a number of credit union owned consulting CUSOs being created, for example, Counter Intelligence Associates. As business services have grown as a significant member-driven product, we have seen a number of CUSOs formed to provide specific support for business lending solutions and associated services required by small business owners/CU members. Collaborative multi-owned CUSOs like PSCU, CO-OP and Shared Service Center operations represent millions of dollars of credit union investment. They are the tangible result of CU leaders who believe that working together is the best way to create and nurture innovation, reduce costs and bring greater value to members. The NACUSO Board sees limitless potential for credit unions, credit union vendors and yet-untapped entrepreneurial talent to leverage our cooperative history with our commitment to better the lives of our members. We’ll continue to support brokerage and insurance operations but will place an increased emphasis on driving collaborative solutions among credit unions. We’ll concentrate on providing strategic advantage to four distinct stakeholder groups: individual credit unions, wholly owned CUSOs, multi-credit union owned CUSOs and vendors/entrepreneurs who want to build unique collaborative business models. As the past chairman of NCUA, friend of the CUSO concept and Member Value principal Ed Callahan recently said, “Every American has a right to belong to a credit union. The CUSO side offers things that help keep the profiteers out, and that is certainly for the benefit of Americans.” We firmly believe there should be a credit union-owned solution for every product, service and delivery channel. If a credit union needs it, a credit union group can provide it. We believe that in every RFP process there should be a CUSO alternative. We want our business partners to be our credit union colleagues. The transformative power of collaborative CUSOs is still a too well kept secret, much as credit unions themselves remain undiscovered by the general public. The new NACUSO will change the former; in time, cooperative CUSOs will be topmost in the minds of credit union leaders whenever they think of new strategies for growth, savings and expansion Together, through this work we may craft the means by which the latter half of that statement -credit unions themselves remain undiscovered by the general public- may be reversed.