News & Highlights

How a $10 Million, 5-Person Credit Union Created One of the Best FI Websites in the World

Over two years ago we wrote about this amazing credit union in Roswell, New Mexico.  And about a year later we interviewed their CEO in a Spotlight article. Both of these stories focusing on how small credit unions are vital and remain viable through collaboration. 

We were so excited to receive a story from the CU Service Network, that highlighted one of their members – this very tiny, very bold small credit union, The Florist FCU.  Enjoy!

Every year, the folks over at The Financial Brand publish a list of the top FI websites around the world. We at CU Service Network look forward to their listing all year because they showcase such beautiful and original websites, shattering the concept that banking is boring and dull. We also enjoy keeping up-to-date on industry trends and branding because it helps us serve as consultants for our clients.

Back in August, I was browsing their recent article 20 Visually Stunning Website Designs From Banks & Credit Unions and did a double take. My eyes weren’t playing tricks on me: $10M, 5-employee The Florist FCU was listed.

I wasn’t the only one that was shocked. Cisco Malpartida Smith, CEO of The Florist FCU, was as well. After spotting the listing, I immediately emailed the CEO to share with him the great publicity. “I had no idea,” he responded, bluntly.

“My first reaction was, ‘We couldn’t possibly be on a list like this. How does it even logically make sense?’ he said, laughing. “It’s very humbling.”

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A Loyalty Program for Good Times and Bad

By Annie Cox, VP, Loyalty Solutions, PSCU

PSCU prides itself on its loyalty program for Member-Owner credit unions. However, in the wake of recent natural disasters — specifically, Hurricane Maria and earthquakes in Mexico — program administrators used the Credit Union Service Organization’s credit card loyalty program to demonstrate the personal connection between credit unions and their members that distinguishes PSCU from other financial services providers.

PSCU’s credit card program offers a number of reward-redemption options for cardholders. For those enrolled in PSCU’s CURewards®, one of the most popular choices is applying points from purchases to travel expenses, including flights, hotel rooms and car rentals. PSCU has partnered with Montrose Travel for more than 20 years to administer this aspect of CURewards. As reports about devastating storms and earthquakes began to make headlines, Montrose Travel and PSCU began to realize that some of their credit union members might need “above and beyond” assistance.

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The Credit Union Member Experience: Why Digital is the Future

This article is printed with permission from CloudCherry, a Gold Partner with NACUSO. To read more about member experience subscribe to their blog! Enjoy.

Credit Unions across the US are focusing on Member Experience as their core reliable mantra to grow. Member Experience programs are being designed carefully and strategically to ensure that members and their needs are listened to and taken care of. In an attempt to understand why more and more credit unions are undergoing this change in mindset, we spoke to Ralph Cumbee, Chief Experience Officer of Solarity Credit Union, a Washington State-based Credit Union serving over 50,000 members.

Ralph has been in the financial services industry for over 25 years; we had the opportunity to catch up with him and understand the nuances of Member Experience in Credit Unions. He spoke about a lot of exciting and forward-thinking concepts, drawing some funny yet hard-hitting analogies along the way.

We’re happy to share with you all the wisdom that we gathered from our chat with him!

CloudCherry: Can you take us through how you started off on the member experience journey?

Ralph: Alright! So, it started about two years ago when we were having strategic discussions pondering how we would position the organization going forward. What would our one differentiator be? Because if you look at it, there are only so many differentiators in the market! We realised that digital is the way of the future and that in such a world it all really boils down to the experience. And we thought that member experience is going to be the most “beneficial” differentiator. All literature available out there suggests that organisations that focus on Member Experience performed better. People love them and they become the Amazons and Apples of the world. This is real differentiation.

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Don’t Miss the Boat – Why Credit Unions Need to Digitally Transform Now

The term “digital transformation” has been a very hot topic recently, creating new conversations and products across a wide range of industries. This chart below, via Google Trends, displays the worldwide popularity of the phrase “Digital Transformation” in web searches since 2004. As shown in the graph, after remaining stagnant for over a decade, the term’s popularity has exploded in just the last year or so, raising questions about what this means, and how it will impact your organization.

An accepted definition for digital transformation is, “the application of digital technologies to fundamentally impact all aspects of business and society.” The important part of this definition is to realize that digital transformation does not mean just building a website, a mobile app, or obtaining a data warehouse. It means using your digital technology to transform your business processes. It means shifting your company culture to take advantage of your digital data to make informed data-driven decisions and stay ahead of the ever-changing expectations of your members or customers.

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What Credit Union Directors Need to Know about CUSOs

Whatever your credit union’s past experience with and impressions of CUSOs, credit union boards cannot afford to ignore the benefits CUSOs bring to credit unions today.  Successfully using CUSOs requires change, and while change is difficult, it is essential to meet the challenges posed by today’s world.

CUSOs help credit unions solve problems and leverage opportunities.  CUSOs are essential competitive tools for credit unions. Your competition is no longer just other credit unions and banks within your area code.  There are hundreds of financial service providers that are chipping away at your payments, loans and deposit services.   Many competitors have lower operating costs, sophisticated data bases, and slick technology that offer members convenient and efficient financial services at low costs.   How will credit unions successfully compete against bank and non-bank competitors that can deliver mortgage loans approvals in less than an hour and unsecured loans in less than a minute?  If credit unions cannot find ways to meet the increasing expectations of consumers on speed and convenience, the traditional credit union model is at risk of becoming an historic footnote.   Does your credit union have the scale, capital and expertise to build competitive technology delivery platforms on its own?  If not, how will you obtain scale, through merger or collaboration?  CUSOs are a means for credit unions to increase scale and remain independent credit unions.  If you are not using CUSOs to help your credit union compete in this hyper-competitive marketplace, you are putting your credit union’s long-term survival at greater risk.   The benefit of CUSOs is not abstract theory.  There are numerous examples of CUSOs that generate significant net income through either lower operational costs or additional revenue sources.  Time is of the essence. Credit unions can no longer afford to say that they will get around to using CUSOs “some day”.

Decide what functions are open to collaboration.  In deciding what functions are open to collaboration, the board should decide first what functions you want to retain as exclusive functions of the credit union.   Many credit unions say they want to retain member-facing functions and everything else is open to the consideration of a collaborative solution.  Some credit unions may even consider some collaborative member facing functions such as call centers.  So decide for yourself what functions are open to the consideration of a collaborative solution (your “Collaboration Zone”).

Develop a collaborative mindset.  The collaboration model is a very powerful one but only if you are all in.  If the function or service is within your Collaboration Zone, consider joining an existing successful CUSO (you can find CUSOs offering the product or service you need using NACUSO’s CUSO Analyzer tool).  If that is not available, then consider the advantages and feasibility of creating a CUSO.  To effectively leverage the benefits of CUSOs, there will have to be changes.  If you expect the benefits to be significant, it is likely the changes in your credit union’s business model will have to be significant.  But for those credit unions willing to fully leverage CUSOs, the benefits to the credit union and its members can be substantial. It is not a coincidence that the most highly successful credit unions have multiple CUSO relationships.

Credit unions should develop policies on managing the CUSO relationships. Today’s credit union has multiple service provider relationships which include CUSO relationships.  Good vendor management requires policies on how to select, contract with and monitor the service providers.  Likewise, having a policy on the factors to consider when investing is CUSOs is desirable.   Creating a staff position to manage the third party and CUSO relationships is a highly recommended best practice.

As owners, credit unions should organize CUSOs and their credit unions to meet the business objectives of the CUSO.  If you are organizing a CUSO to grow scale to lower operational costs, obtain increased expertise and obtain leverage in vendor negotiations, you will need to make changes to make that happen.  A CUSO has to be given the authority and resources to be successful for the credit union owners.  These changes may mean that a credit union may share control of critical services with other credit union owners, a credit union may transfer ownership of IT licenses to a CUSO, and credit unions may have to significantly change its own internal operational processes to work efficiently with the CUSO.  You can learn how other credit unions have successfully done this by talking with credit union leaders who have developed successful collaborations/CUSOs (NACUSO’s annual Network Conference is an excellent venue to meet these collaborative leaders).

Letting go to grow.  Credit unions sometime start operational services CUSOs as solely owned and later decide to admit other credit union owners.  Additional credit union owners add capital and business to grow scale.  Additional scale can result in lower per credit union operating costs and more efficiencies that benefit all credit union owner/users, including the original owner credit union.  While a CUSO can serve non-owner credit union clients, larger credit unions that bring significant scale usually prefer/require a co-ownership position, especially if the operational service is a critical service where a credit union wants partial control over the services.  The tension is how much control is the original credit union owner willing to give up to attract and retain other significant owners?  If the CUSO is to attract large credit unions that bring scale, the original credit union owner will have to give up complete control of the CUSO and share control with the other owners.  If the shoe were on the other foot, the original credit union owner would want shared controlled of a CUSO providing a critical service.

IT ownership.  If the CUSO provides IT services, a CUSO that owns the IT license is much more attractive to potential credit union owners.  Why would a credit union want to pay significant capital and receive critical IT services from a CUSO that does not own the IT license and the improvements made by CUSO?  If the CUSO owns the license and the improvements, the value of the CUSO as an investment is greater and that increase in value can be reflected in a higher capital amount for the CUSO investment on the investing credit union’s books.  I note that the value of an IT license held by a credit union for its own benefit does not have any capital value.   If the CUSO ceases to do business, the CUSO can distribute the license rights to all of the owners so each credit union can use the IT moving forward and any improvements made by the credit union owners after disbursement will be part of the IT owned by that credit union.  In the unlikely event that creditors are not fully paid by the CUSO upon dissolution of the CUSO, the CUSO can either (a) sell the IT license to a third party with the proviso that the owners may also use the IT on a non-exclusive basis or (b) one or more of the owners can buy the IT license to pay the creditors.  The IT license agreement can provide these options.  The point is that credit unions can protect the ownership and control of the IT license when the IT license is transferred to the CUSO.

Credit union owners in a multiple-CU owned CUSO are in a relationship and not a transaction.   Trust and respect are the coins of the CUSO realm.  Find CEO’s and boards who you trust and respect.  Understand that perfect foresight and planning is not possible and it is normal to make periodic adjustments in the CUSO and business plan as circumstances change.  As long as the owners have the same goals and view the benefits in the long term, all will be well.   This means that the CUSO goals have to be discussed and agreed upon by the owners prior to joining the CUSO.

 

Guy A. Messick the CUSO Guru, is an attorney with Messick, Lauer & Smith in Media, Pennsylvania and General Counsel to the National Association of Credit Union Service Organizations.  www.cusolaw.com

 

 

Balancing Gender in the Credit Union Workplace

By Lynn Heckler, EVP, Chief Talent Officer for PSCU

Women’s Equality Day is celebrated on Aug. 26 each year. It commemorates the 1920 adoption of the Nineteenth Amendment granting women the right to vote and has been celebrated in the U.S. since 1973. While much progress has been made in the area of gender equality since that time, digging a bit beneath the surface unearths some telling trends.

The bad news

Here are some global stats, based on research conducted by Filene, to consider as it relates to gender parity:

  • Women generate 65 percent of consumer discretionary spending, but their presence in the economy and representation in leadership roles remains unbalanced
  • Women are 20 percent less likely than men to have a formal bank account and often lack access to savings, credit and other financial services
  • The World Economic Forum predicts the gender gap will not close entirely until 2186

When it comes to the credit union industry, some progress has been made, but not enough. Women are still very under represented in senior leadership positions within the industry, and the disparity becomes especially apparent when you look at credit union asset size. In the U.S., women make up 70 percent of credit union employees, yet only 53 percent of all federally insured credit unions have female CEOs and 20 percent have female board presidents.

The good news

Credit unions were founded on the cooperative principle, and nondiscrimination is a tenant of that principle, making credit unions inherently more likely to be receptive to ideas surrounding gender parity.

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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?

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Defining Credit Unions in the Upcoming Income Tax Debate, by Guy Messick

It looks like Congress will put the Tax Code in play and while it is unlikely the credit union income tax exemption is at risk, credit unions cannot take this for granted.   We must be careful not to let banks define credit unions when they lobby Congress. 

Credit unions are voluntary associations of people who organize a cooperative association called a credit union to pool their money to make loans to each other and the interest from the loans pays the depositors a modest return.  The credit unions, as non-profit cooperative associations, are governed by directors elected by the members and the directors hire professionals to manage the credit unions in the deposit taking and loan making functions.  There are no shareholders seeking a profit or management holding equity.  In a credit union there is no us or them, it is only us, people helping people.   Credit union members pay income taxes on the interest paid to them by the credit union.  To impose an income tax on the members through their cooperative association is double taxation on the members (called voters by politicians).

Credit unions are not separate from the members.  Credit unions are the members and the members are the credit union.   Credit unions are just the means for the members to organize and operate as a cooperative association.   This is the true difference between banks and credit unions and why they should be treated differently on income tax.   Taxing the members once on the individual tax returns for interest earned is fair.   Taxing the members once on the individual tax returns and once again through their cooperative non-profit association called a credit union is not fair.

Be a broken record on this point and the message will get through.

About the Author: 
Guy A, Messick, The CUSO Guru, is an attorney with Messick, Lauer & Smit, PC in Media, Pennsylvania and General Counsel to
NACUSO.

He can be reached at 610-891-9000 or gmessick@cusolaw.com

Advocacy Updates

Report on Advocacy Fund spending… NACUSO Working for You

Through the support of our members and partners, NACUSO raised approximately $273,000 in contributions toward its Advocacy Fund (and predecessor Legal & Litigation Fund) over the past 3 years.  The goal of the two funds together are to enable NACUSO to conduct crucial advocacy work on behalf of CUSOs and their credit union owners / partners.

In keeping with our commitment to be fully transparent and to regularly communicate our usage of these dollars (we provided detail of how the funds were spent from 2014-2015 last year, which is also included in the attached Report), we would like to provide you with the following information, which was provided in detail to each contributor in the first quarter of 2017.  NACUSO spent the following amounts from the Advocacy funds during 2016:

$24,000     Dollar Associates, LLC - paid for advocacy work with Congress and NCUA on CUSO issues
$24,000     Messick & Lauer, P.C. - paid for advocacy work with NCUA and meetings with Congress on CUSO issues
$   718     Travel to Washington DC for meetings with Congress and NCUA
$48,718    Total amount spent influencing Congress and NCUA for favorable CUSO environment

The remaining funds, out of the total $273,000 in combined contributions, equal $110,323.  This represents the balance in Restricted Cash as of 12-31-16, as per the NACUSO Advocacy and Legal Fund Analysis report (click link below).

The NACUSO Board and its Legislative & Regulatory Advocacy Committee is continuing to prioritize the advocacy of a regulatory environment that is pro-CUSO and pro-collaboration within our industry.  NACUSO needs your support for this initiative and to accomplish its purposes.  While strategies may change over time based upon circumstances and opportunities to advance the cause of CUSOs, the necessity for funding of such initiatives is essential if NACUSO is going to remain in a position to impact the decision-making process for CUSOs and the credit unions that invest in, or utilize them.

Click to Contribute

For a summary of how NACUSO has worked to maintain an environment that is supportive of collaborative investment, the following report entitled NACUSO Working For You (see below) provides a summary of the work we have done on your behalf.  To capsulize some of its key points, a summary of what we feel are the NACUSO “wins” this past year are:

  • Effectively opposing the costly extension of Vendor Authority to NCUA.
  • Worked with NCUA on the revised MBL Rule.
  • Advocating for the expansion of CUSO powers to originate loans credit unions are authorized to make, to help bring scale and expertise benefits to credit unions in all loan categories.
  • Encouraged NCUA to be transparent in its budget and rule making including the OTR calculation.
  • Working with NCUA to minimize adverse impact of the CUSO Registry and to correct the acknowledgements initially in the Registry.

To emphasize the last bullet above, initially, in its first version of the CUSO Registry documentation that CUSOs were required to submit with their data to NCUA in 2016, the agency’s acknowledgement form required CUSOs – when submitting their data – to accept responsibility under regulations that only apply to credit unions but were not intended to, apply to CUSOs.  These acknowledgments, if left unchallenged and signed by CUSO officials, could have exposed CUSOs to potential penalties under regulations that do not, and were never intended to apply to CUSOs.  Upon becoming aware of this inappropriate acknowledgement requirement, NACUSO worked directly with senior NCUA staff to bring our concerns to their attention.  NCUA agreed to the NACUSO position and made the needed changes to the acknowledgements for the CUSO Registry data submission process.  In addition, for those CUSOs who had already submitted their registration and signed the acknowledgements, NACUSO developed a letter with the appropriate wording for those CUSOs to send to NCUA to clarify this acknowledgement concern. (more…)

NCUA Meeting Provides CUSO Guidance 6/16/16

NACUSO Visits NCUA to Discuss the CUSO Registry and CUSO Reviews

On June 14, Jack Antonini, NACUSO President and Guy Messick, NACUSO General Counsel met with NCUA Staff on the results of the CUSO Registry and the thinking on how CUSO Reviews will be handled.

The CUSO Registry sign-up period and the follow-up by NCUA found there were approximately 900 CUSOs.   NCUA believes that there are more CUSOs that have not reported.  Under the NCUA Regulations (Part 712.1(d)), “A CUSO also includes an entity in which a CUSO has an ownership interest of any amount, if that entity is engaged primarily in providing products or services to credit unions or credit union members.”   So these subsidiary CUSOs are considered CUSOs and required to make annual reports to NCUA.   The NCUA staff believes that many CUSOs were not fully aware of this requirement and there are a number of subsidiary CUSOs that have not reported.   NCUA will be following up with CUSOs to obtain these filings.   NCUA is also scrubbing the data and asking for clarification if the data is indicating that there may have been a reporting error. (more…)

Report on Advocacy Fund spending…NACUSO Working for you

Through the support of our partners, NACUSO raised approximately $63,000 in contributions toward its Legal and Litigation Fund in 2014 with a primary purpose to develop strategies for the most effective way to seek the repeal and/or mitigation of the impact of the CUSO Rule that NCUA had adopted in November 2013.  Subsequently, NACUSO established an Advocacy Fund to supplement the Legal and Litigation Fund.  The goal of the two funds together were to enable NACUSO to coordinate legal decision making, with a crucial advocacy component that will have more impact than the always risky option of legal action.  In total, $190,600 was contributed to the NACUSO Advocacy Fund.  Combined these two related initiatives received total contributions from NACUSO partners of approximately $253,600 in 2014 and 2015.

In keeping with our commitment to be fully transparent and to regularly communicate our usage of these dollars, we would like to provide you with the following information.  NACUSO spent the following amounts from the two funds during 2014 and 2015:

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CUSO Registry Clean Up Period 4/22/16

As most of you know, all CUSOs are obligated under the NCUA Regulations to register certain information directly with NCUA on an annual basis.   Over 800 CUSOs did so in February and March.   NCUA is now in the process of making sure all CUSOs have registered.   Their new deadline is April 30.  They are taking CUSO information from the credit union 5300 call reports and sending out letters reminding “CUSOs” that they have to register.   Some credit unions may have incorrectly listed a company as a CUSO.  Other credit unions list their CUSO but use an acronym for the CUSO instead of the CUSO’s full name.   NCUA, not knowing better is sending letters to any and all companies listed on the call reports. (more…)

Regulatory Update 3/15/16

Letter to NCUA regarding CUSO Registry Acknowledgement: Yesterday, NACUSO informed you of a change we negotiated with our General Counsel (Messick & Lauer) with the NCUA regarding the CUSO Registry Acknowledgment each CUSO is required to agree to when submitting their CUSO registration in the NCUA’s CUSO Registry system.  As we pointed out in our Regulatory Alert yesterday, the acknowledgment required CUSOs to agree to be bound by statutes that only apply to credit unions and which imposed penalties that are not applicable to CUSOs.

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Change to the CUSO Registry Acknowledgement 3/14/16

During the process of assisting with CUSO Registry questions, it came to our attention that in order to complete the CUSO Registry, CUSOs were required to agree to be bound by statutes that apply to credit unions and which imposed penalties that are not applicable to a CUSO.  On behalf of NACUSO and the many CUSOs in this industry, Messick & Lauer (NACUSO’s General Counsel) have advocated and negotiated to revise this acknowledgement to more accurately describe the duty of CUSOs to respond to the CUSO Registry.  It is a contractual duty with the credit union and not a direct regulatory obligation to NCUA.   As NCUA continues to pay more attention to CUSOs, NACUSO will continue to take action to be the voice of CUSOs and to resist any attempts at regulatory overreach.  The NCUA has changed the acknowledgement text.  For your reference, the text of the previous and current CUSO Registry acknowledgments are below. (more…)

Regulatory Update 2/26/16

NCUA’s CUSO Registry Training & Demonstration webinar held on February 11 is now available to be viewed.  If you missed the webinar, or want to view it again, to help you in completing the CUSO Registry, you can watch it by clicking on the following link:  View 2/11/16 Webinar. You have until March 31, 2016 to complete your initial registration of all CUSOs.