Collaborating Competitors: The Future of CUSOs

The sixth cooperative principle is probably the best definition of a credit union service organization, specifically:

“Cooperation among cooperatives: Cooperatives serve their members most effectively and strengthen the cooperative movement by working together through local, national, regional and international structures.”

Early CUSO models, like CU Direct Lending and CO-OP Financial Services were extremely successful because it gave access to essential products/services at an affordable price. And I have to admit I have always been smitten with the shared branch CUSO model. In my opinion that should have been our “National Brand Campaign” about the credit union difference. We work together!

Then many of us became competitors with field of membership changes that included community charters that of course overlapped. In fact, one of the arguments I have heard against joining the shared branch network is, “I don’t want to send my members to my competitors.” But what if we collaborated with our competitors?

Earlier this year we honored two credit unions that are located less than a mile from each other that came to work together with the 2017 NACUSO Network Collaboration & Innovation Award. Though competitors within the East Tennessee market, the collaboration between ORNL FCU and Y-12 FCU is unique: The organizations recognize the power of working together to better serve their members and the community. ORNL FCU and Y-12 FCU formed CU Insurance Services of Tennessee and CU Community Title in 2015. The creation of the two companies allows the credit unions to offer the best mortgage services, title services, and insurance products to help fulfill the needs of members, and their members love it.

A few years ago 3 credit union CEOs (ASPIRE, United Teletech and Credit Union of New Jersey) met in a bar at the GAC and hammered out a plan to join forces and convert to the same core processor to achieve economies of scale without merging their credit unions. Member Support Services was born. Fast forward to today and they have already combined collections, deposit operations and IT systems (local network and data center). They are due to complete their loan origination and servicing center by end of 1st quarter in 2018. Their focus is not just on consolidating the operations but focusing on reengineering and process improvement along the way. Member Support Services received the 2016 NACUSO New CUSO of the Year Award.

CUNA, the Mountain West Credit Union Association, Best Innovation Group, and other credit union system partners are currently collaborating on a huge project that could be a real game changer for our industry.

CULedger is a research-to-action initiative that is investigating the viability of a private, permissioned distributed ledger (DLT) that can be used by credit unions. It is an effort to do for the credit union industry what R3 is doing for the banks: assemble a consortia of credit unions and CUSOs to build a ledger network dedicated the needs of credit unions.

The legal structure of the CULedger governing body is still being determined by the CULedger organizing group, which is raising funding from CUs and CUSOs to pay for R&D for CULedger. This group is spearheaded by MWCUA VP Innovation Rick Cranston; CUNA COO Rich Meade; and Best Innovation Group CEO John Best.

In order for CU Ledger to work, and for the technology to open up innovation, credit unions will need to collaborate,”John Best, CEO of Best Innovation Group said. “Our No. 1 weapon to avoid disruption is collaboration.”

And finally, Americans come together well in a crisis and 2017 will surely go down in history as a year of historic weather disasters that impacted not only hundreds of thousands of lives but the operations of many credit unions and the temporary displacement of credit union employees.

Those unprecedented natural disasters called for a unified response from organizations that service credit unions. That prompted Todd Clark (CO-OP) and Chuck Fagan (PSCU) to rally together with Jim Nussle, (CUNA) to build a system-wide disaster response for the credit union movement. Special toll-free numbers were put in place, dedicated to helping credit union members with access and branch information if they were displaced or their institution unavailable due to Hurricanes Harvey and Irma.

CO-OP and PSCU are both CUSOs, but even as competitors, the cooperatives are built and owned by credit unions and truly exist to serve credit unions. The two companies are rallying to support our industry because that’s what it means to be a CUSO.