Is There a Business Case for a Single, National CUSO?

The U.S. Census Bureau reports that credit unions hold only 6% of assets among U.S.-based depository institutions. So, the industry has plenty of competition; 94% of the market belongs to the competition. Why would we create competition within our industry to further fragment the 6% market share we have today? It does not seem logical to fight over who will get what piece of the 6% pie when there’s 94% of the market to go after. We just have to figure out how to get the 94%. Maybe we are sitting on top of the model but have not fully realized its potential: cooperation as a business model. In these trying economic times, consumers are gravitating to their roots, which is in turn, taking our industry back to its roots. We are seeing phenomenal growth in auto loans. According to Callahan & Associates, at the beginning of 2008, we had 12.9% market share of auto loans. By January 2009, it jumped to a 22.7% market share. Through the efforts of the National Cooperative Business Association, we have evidence the cooperative model works and is increasing in popularity, but are we using it to its maximum potential? We cooperate within our individual silos of the CUSO’s walls or the credit union’s walls. But do we engage the value of the cooperative model by embracing what we could do if we had less competition within our industry? For example, fewer CUSOs offering the same service? Within our own industry, we can look to our friends in the north for a successful example of cooperation. In Canada, the Desjardins system uses the cooperative network to pool back-office functions and allow caisses to stay focused on member service. In a meeting last fall, top executives from the Desjardins system told a group of U.S. credit union leaders that the Desjardins’ remarkable market share of 70% is due to the dividend it gives back to members each year. Meaning 70% of Quebecers are members of a Desjardins caisse. This point was underscored when the manager of a caisse was asked why they did not keep some of the dividend as capital to build branches. He was shocked at the thought and responded that would be giving away their competitive advantage. The Desjardins system is efficient and successful because it does not duplicate the same services over and over. They work together using a single system to create a model that rewards the members. Some say multiple CUSOs in the same line of business, such as business lending or mortgage, keeps everyone honest, fair and competitively on their toes. But, do we really need competition within the industry to create this? We are, after all, founded on the seven cooperative principles, which should be enough to ensure we are living up to these standards. But if we need a little extra competitive push to keep us on our toes, what about all the competition from the 99,150 bank branches that own the larger chunk of the 94% market share we don’t have today? Perhaps a single national CUSO model as we think of CUSOs today is not exactly the right model. But what can we learn by looking outside our industry to the thousands of other cooperatives in the U.S.? What can we learn from the Desjardins model? What can we learn from purchasing cooperatives? Is a single, national CUSO for select services and back-office functions the right solution? One thing is for sure, if we don’t have the discussion, we’ll never find the answers. Credit union and CUSO leaders need to come together to discuss what the future business models of our industry will look like. NACUSO is hosting the first school to teach the design of networked business models. It will be held in conjunction with Pepperdine University faculty on their campus in Malibu this fall. Industry leaders ready to shape the next business model will emerge and engage in the dialogue. Whatever the venue, now is the time to engage critical thinking to uncover new models. We won’t have another economic opportunity like this one for a long time where consumers are flooding cooperatives in search of trust, comfort and security.