Collaboration: The New Competitive Weapon

collab-illustration-gears-headerThat was the title of the January 4th article posted by Emily Waite on GonzoBanker. The article is geared to encouraging the 6,000 banks that share less than half the market to come together in the spirit of collaboration so they can compete.

Waite states “Today, banking executives are struggling to stay current in an industry growing ever-more complex with increased regulation, changing customer expectations and digital disruption.”

Sounds so familiar, which is why we are proud to have over 3 decades of collaboration history under out belts in the form of the CUSO. There are estimated to be over 1,200 CUSOs in the US and we’re excited to be able to confirm that number with data after the CUSO Registry is complete this week. Reminder: If you haven’t registered your CUSO, please do so before March 31st.

CUSOs have been formed for all sorts of reasons:

  • A revenue stream that would not be available within the confines of a credit union
  • To share and reduce costs
  • Provide avenues for innovation and creativity

Some CUSOs do all three! Next week at the NACUSO Network Conference we are debuting our new Partner Connection Sessions. We are known for the Next Big Idea Competition and we thought, let’s take it to the next level, and help like-minded people to connect and engage in collaborative conversations at the event.

In preparation for this new event we conducted 2 surveys. The first one was to get an idea of the challenges facing credit unions today. The top the reasons credit unions gave for investing and/or participating in a CUSO were:

  1. To gain efficiencies (cost savings) and improved expertise through collaboration
  2. To gain new streams of revenue
  3. To make new products or services available to their membership

We included an open-ended question at the start: “What are the biggest challenges facing credit unions and CUSOs in the coming year(s)?” It was no surprise that regulations, compliance, and the aging membership were the majority of the comments. But what did surprise us were these comments:

  • “The ‘competition’ for market share within the CU family hindering collaboration.”
  • “There is a non collaborative mindset that seems to continue to prevail with a large segment of the CU space.”
  • “Finding and onboarding the right partners and the right leaders drawn in to the CUSO environment that can grow CUSOs and interact with emotional intelligence with stakeholders.”
  • “Credit unions collaborating, credit unions using their CUSOs, credit unions fully funding their CUSOs.”
  • “Small credit unions merging into larger ones could threaten the CUSO model, as the credit unions get larger, some think they don’t need CUSOs.”
  • “Many credit unions look upon CUSOs as simply just another service provider. Credit unions are seeming to abandon the cooperative movement and are making decisions that are solely in their own best interest.”

These comments were very valuable and the reason we want to bring to light that the banking world is looking at the power of collaboration as a competitive tool. We’ve known that all along and have to keep working together, practicing the 6th cooperative principle: cooperation among cooperatives.

The second survey was specific to the Partner Connection Session format. We wanted to find out exactly which areas they were interested in collaborating. Over 100 of our 400 registered attendees completed the survey. The top 5 areas were:

  1. Marketplace lending – digitized lending platforms creating a credit union owned lending platform that produces whole loans to CUs while utilizing the digitized lending platforms that are similar to Prosper and Lending Club
  2. Mortgage lending – Making mortgage loans or assisting credit unions to originate and service mortgage loans – creating scale in the mortgage operations.
  3. Business lending – discussion on small business and commercial lending CUSO opportunities, making business loans or assisting credit unions to originate and service business loans and help CUs compete with Kabbage.
  4. Data analytics – collecting, storing and analyzing large scale data for credit unions to help them better serve their members.
  5. HR/Shared administrative services – Cost savings from shared HR, accounting, internal audit, bookkeeping, payroll, health benefits, HRIS, etc.

We will have CUSO experts on hand to facilitate these areas of discussion as well as IT/core processor services, compliance/legal, digital banking and payment systems (the next most highly rated areas for collaboration).

According to a recent CUNA report, the top 100 banking institutions hold 74.8% of the market share while smaller banking institutions hold just 18.2% and credit unions are left with 7% market share.

The financial services world is ripe for disruption. We believe the CUSO model can provide the disruption we need. So we hope you’ll join us in our passion for connection and collaboration. Even if you’re unable to attend this year’s event, we will be posting the results after April 7th on our website so you can engage with like-minded people and explore the endless possibilities of collaboration and cooperation.