Control, Innovation, Opportunity: The Evolution of the CUSO

Multi-credit union owned CUSOs have come a long way in the past several years

 
 

Multi-credit union owned CUSOs have come a long way in the past several years. Originally founded to help credit unions serve their members by getting involved in businesses that were outside their immediate operating scope, CUSOs are now giving credit unions new opportunities and control of product development, options once driven exclusively by vendors.

The multi-owned CUSO combines some of the best organizational advantages of a credit union with those of a private company. Some of the capabilities these ''hybrid'' organizations are achieving include:

  • enhanced market power through cooperative buying;
  • reduced costs from economies of scale and eliminating process duplication;
  • accelerated development through shared research and evolution of new opportunities;
  • expanded ownership of intellectual capital and business processes.

Some muli-owned CUSOs are using these capabilities to form a ''networked organization'' that significantly enhances their credit union owners' competitive position.

Our own CUSO, the Callahan Credit Union Financial Services Limited Partnership (CUFSLP), is one example this evolution. Founded in 1987, CUFSLP has transformed itself from a one product, investment focused group that was founded using economies of scale, to an action-oriented group whose focus spans multiple initiatives from investments to technology to credit union core business. CUFSLP's most successful initiative to date was the creation of the Trust for Credit Unions mutual fund family. This foundation has made it possible for our CUSO to spend resources exploring new opportunities for competitive advantage.

Scale for Cooperative Research
The need for collective action by credit unions is growing. Credit unions' share of the financial services industry is challenged by national competitors that can offer more comprehensive services to members. Maintaining strong relationships with members and using the latest e-technology requires scale and cooperative efforts.

Account aggregation was one of the first initiatives our group tackled under a new vision. The benefits of developing this type of opportunity through the CUSO instead of each credit union searching for its own solution were manifold. As general partner, the staff at Callahan Financial Services spent nearly a year researching this project. Vendor selection, contract negotiations, and implementation were a few of the areas in which partner credit unions pooled resources together to complete the project more efficiently. If code was developed by one credit union to complete an aspect of the project, it was shared with all the credit unions involved. Individual credit unions did not employ separate legal teams to finalize agreements, the general partner handled contract negotiations for the whole group.

For complex initiatives, multi-credit union CUSOs take much of the burden off of individual credit unions by pooling expertise and breaking work into more digestable bites. Many credit unions do not have the resources to research multiple opportunities, but the CUSO can steer several working groups at once. The financial advantages of using multiple credit unions, specifically the discounts that can be negotiated from economies of scale, continue to make CUSO working groups an effective option.

Non-Starter
Through CUFSLP we've found that even when opportunities do not materialize into core businesses or actionable projects, the benefits the credit unions derive from our research is still valuable. The idea of credit unions transforming their websites into ''Portals'' was an area the Partnership targeted for research. After several months, we found that there was not a solid revenue opportunity or a benefit to collective action at this time. This group research saved individual credit unions time, trouble and, in some cases, the expense of discovering the hard way what our group research had told us months earlier.

In addition to market scale that multi-credit union CUSOs can bring to the table, several CUSOs are transforming themselves into networks where information and advances can be instantly shared among credit unions. Retaining ownership of the business processes is one of the key benefits of working through a CUSO. Developing products and services in a CUSO as opposed to partnering with a traditional vendor, allows the credit union to be part of the strategic process and prioritize projects to truly meet their needs.

Networking through meetings, conference calls and working groups is a traditional way that CUSOs share information among credit unions quickly. Expanding this information sharing to a networked operation to deploy new services is an ability our CUSO is still working laugh.

As we move forward in the coming years to create a cooperative network, multi-owned CUSOs may be the force that keeps credit unions at the forefront of innovation.

Sharon Simpson is Director of Marketing and Administration at Callahan's Financial Services, Inc. Callahan Financial Services, Inc. is the co-distributor of the Trust for Credit Unions, the first and largest family of mutual funds designed specifically for credit unions. For more information, call 800-CFS-5678 or email Sharon at ssimpson@trustcu.com.

 

 

 

Aug. 27, 2001


Comments

 
 
 
  • what can a CUSO do that a CU can't?
    Anonymous