“[CUSOs] provide a means to an end – allowing credit unions the capability to fulfill the financial needs of their members in a cost effective environment through efficient delivery channels. Plus, they attract the brightest and most innovative minds to the board table, bringing best practices of credit unions across the country, which is a priceless experience.” – Doug Petersen president/CEO of Workers’ Credit Union.
A Credit Union Service Organization (CUSO) is an organization formed and/or owned by one or more credit union(s) to provide a specific product or service within the industry. CUSOs provide credit unions a method to spur innovation, increase efficiencies through specialization, and gain economies of scale. CUSOs leverage the power of collaboration that already exist within the industry to offer several benefits such as:
- Economies of Scale
Economies of scale are achieved when a company produces goods and services on a larger scale while simultaneously lowering average input costs. CUSOs achieve economies of scale by producing goods or services for several credit unions rather than having a single credit union attempt to replicate the same benefit. By utilizing the power of collaboration, CUSOs can specialize on a given product or service which enables them to provide higher-value products and services at a much lower cost.
- Competitive Advantage
CUSOs offer credit unions the ability to remain competitive by improving efficiencies and producing a wider array of products and services that would be unobtainable without CUSO collaboration. They enable credit unions to acquire scale and market power along with other resources such as capital and staff that far exceed their individual sizes. For example, A data warehouse takes about three years to build and has an initial cost of about $500,000 with an additional cost of $150,000 per year to support. With a Big Data and Analytics CUSO; however, credit unions can install a data warehouse for less than $50,000 and only $60,000 per year to support.
- Multiple Owners
The collaboration of several owners spurs more innovative products and services because there are several different viewpoints, many of which are from the most innovative minds in the industry. Unlike most other vendors in the credit union space, such as Symitar, D + H, and Fiserv, CUSOs are required, by law, to have multiple owners. “There can be some overlap with the credit union, but the management team can’t be 100% the same,” says Guy Messick, an attorney with Messick & Lauer and general counsel to NACUSO. This is incredibly beneficial because there are more eyes looking over the books, so if any problems arise, they will likely come to light before they become a serious threat. Because of this, it should come as no surprise that credit unions with a CUSOs outperform credit unions with no CUSO.
- For Credit Unions by Credit Unions
Owners’ of CUSOs are, themselves, credit unions, so it is in their best interest to do what is best for credit unions. Rather than focusing solely on profit, CUSOs also focus on the overall well-being of credit unions and their members. Credit unions, not shareholders, are in control of the CUSO’s product development roadmap and the CUSOs delivers on the roadmap by leveraging expertise of credit union executives. Using ideas from the best and the brightest in the industry ensures best practices are shared, resulting in the best products and services available.
- The Credit Union Movement
CUSOs, by nature, are focused on the overall health of the credit union movement. CUSOs care about the credit union movement because they are part of the credit union movement. Utilizing a CUSO ensures that capital investment stays in the credit union movement and is redistributed to credit unions and their members. CUSOs invest in technologies that ensure the long term viability of the credit union industry. CU Wallet is a great example. Without them the only alternative would be Apple Pay which has no stake or interest in the long term viability of the credit union industry.