WOCCU Moving Toward International Shared Branching; System Up and Running in Ecuador

MADISON, Wis. – Credit union shared branching, a concept which is still coming of age among some CUs in the U.S., is up and running in Ecuador, and the World Council of Credit Unions says it is working steadily toward achieving a long-time goal – international shared branching between credit unions in the U.S. and Ecuador. Although WOCCU staff emphasized that the realization of this dream remains fixed in the future and that there are significant details still to be nailed down, the organization received a conditional go ahead from NCUA last week and said it has started to work with other banking and finance regulators to get their go ahead as well. “Right now I would call myself optimistically cautious,” said Steven Schaefer, technical officer with WOCCU who has been working on helping Ecuadorian CUs start shared branching. “We are aware of everything that needs to get done and of all our obstacles, but we were very encouraged by NCUA’s letter and plan to keep pushing ahead.” The Ecuadorian shared branching project grew out of a $3.1 million grant that WOCCU received from USAID in 2001. The grant was to fund WOCCU’s efforts in Ecuador from Sept. 2002 to Sept. 2006 to, according to WOCCU’s Web site, “provide increased access to microfinance services through credit unions.” Under that general goal were three more defined secondary goals: first, to help roughly 10 immature credit unions reach a degree of organization that they could be supervised by Ecuador’s Superintendency of Banks, the nation’s financial regulator; second, to help Ecuadorian credit unions establish their own shared branch network; and, third, to help establish a database for Ecuadorian CUs to use in their work. Each of these, Schaefer said, has been achieved as the grant draws to a close this year, an accomplishment that has brought WOCCU a great feeling. “Right now, the credit unions that are on REDCOOP are able to do the same sorts of transactions that credit unions in the U.S. can do,” Schaefer said. “Make deposits, transfers, withdrawals, accept loan payments, everything.” REDCOOP is an acronym for the shared branching network in Spanish, Schaefer explained. Currently, WOCCU says that there are 60 credit unions in Ecuador with about 1.5 million members. Of those 60 CUs, 13 are members of REDCOOP and provide roughly 90 points of service where their members can access shared branch services. Craig Beach, vice president with Credit Union Service Corporation, the nationwide shared branching network headquartered on the East Coast, said CUSC had been working with WOCCU for about the last two years on the project and has given REDCOOP the skeleton of its Next Generation System, a cutting edge proprietary switch which CUSC is just now implementing for its participating credit unions in the U.S. “We are very pleased to have been able to assist WOCCU to establish shared branching in Ecuador,” Beach said, pointing out that the assistance fit into CUSC’s mission of “connecting credit unions to their members around the world.” Beach said CUSC has already heard anecdotally about credit union members in Ecuador being able to use shared branching instead of having to travel through dangerous parts of some Ecuadorian cities with lots of cash without being robbed. “We think the shared branching in Ecuador has really helped change the lives of members,” he added. Schaefer said WOCCU worked on getting NCUA’s approval of the idea of shared branching for almost a year and was delighted to have finally reached the milestone. The milestone came in the form of a March 3 opinion letter from Sheila Albin, NCUA associate general counsel. In her letter she said that U.S. credit unions could participate in shared branching transactions with Ecuadorian credit unions, but added that they had to be aware of all the ramifications of doing so which might not have to do with financial services per se, such as the security aspects and dangers. According to the example provided to the agency, a typical transaction on the network would involve an Ecuadorian credit union member delivering funds to an FCU that is on the international shared branching network for the purpose of making a deposit or withdrawal at the member’s credit union account in Ecuador. The Credit Union Service Corporation will transmit the deposit or withdrawal to a U.S. corporate credit union. The corporate credit union will then send the deposit or withdrawal to Town North Bank, which holds an account for an Ecuadorian corporate credit union. The Ecuadorian corporate will, in turn, send the money on to the Ecuadorian member’s credit union. The agency pointed out that funds from nonmembers accepted at federal credit unions for transmission to Ecuador would not be covered by federal deposit insurance and that all the applicable money laundering laws would apply. These considerations are one reason that Schafer and other WOCCU staff want to almost downplay the international shared branching idea, to keep it from getting too much attention from the industry before WOCCU has had a chance to present it to other regulators, such as the Treasury Department, which is concerned with any security problems the idea might represent. “We have been very clear that we don’t want to do anything which might open this up to fraudulent misuse,” Schaefer said. “That’s one reason we don’t necessarily see this as something that unbanked Ecuadorians are going to be able to use, like remittances. We want people using this service to be credit union members and to be well known by their credit unions.” Schaefer said he expected the idea to continue to develop over the course of 2006. [email protected]