The CUSO Question: Are You Willing To Invest To Innovate?

Organizations that are willing to think ahead — and put time and money toward creating new solutions to old challenges — are often those that outperform their peers.

There’s something about the annual NACUSO conference that makes it interesting and energizing. It’s a reminder of the power of CUSOs in providing scale for innovation. That’s what makes them ideal incubators to produce the products that credit unions need to thrive.

The most recent NACUSO conference in late April in Anaheim, CA provided some great examples of the CUSO philosophy in action, in all its diversity and imagination.

The offerings of the year’s award winners ranged from turnkey mortgage services to leading-edge analytics solutions, all collaborative responses to marketplace challenges and opportunities.

CUSOs were created to provide answers. So, I have two questions:

  • Is your credit union willing to make a long-term investment in a CUSO that might not yield immediate return?
  • Do you have the appetite to fail before succeeding when it comes to new technologies?

It’s Time For Tough Questions

Asking tough questions helps the credit union movement flourish. Make Callahan’s Tough Questions commentary on a regular stop for insight on thinking differently about the movement and framing strategies for success.

I’m talking about investing in a CUSO, not just buying its services. There are approximately 1,100 CUSOs out there, and about 380 of them are multi-owned. Nearly 40% of all U.S. credit unions invest in a CUSO or have loaned one money. That means the majority have not.

What are 60% of credit unions missing? There’s no single answer. But a look at the data clearly shows at least one. Credit unions that invest in CUSOs outperform their peers across a lot of measures. In terms of ROA, credit unions that participate in CUSO ownership and financing have a 21-basis-point edge over those that do not.


So, what’s the correlation between CUSO investment and superior performance? The answer to that question varies with each institution, but Callahan’s experience as a consultant engaging with credit unions of all sizes around the country all year tells us organizations that are willing to think ahead are often those also doing well right now.

They’re figuring out efficiencies that make their operations less costly, and they’re supporting investment and deployment of solutions that help better serve their members. That might be why there’s such a differential in member and loan growth rates among CUSO and non-CUSO credit unions.

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Certainly, these successful credit unions put parameters around their appetite for risk and adjust those parameters to their ever-shifting realities. That’s true in their own delivery of products and services to their members and in their CUSO participation.

They’re keeping their eye on the prize, which in this case is getting out in front of the competition when it comes to understanding emerging technologies and taking them to market if and when the time is right.

CO-OP did that with shared branching. CU Direct with indirect lending. PSCU with card processing. These are just three examples. Right now, Callahan is staying tuned to the new wave, to CUSOs like CULedger in the blockchain space and OnApproach in advanced analytics.

Investors in those CUSOs are willing to experiment, and willing to possibly fail, with an understanding that in today’s environment, where change happens fast, you have to get out front to not fall behind.

CUSOs provide the platform for doing that. Are you willing to commit resources people and dollars to ride that ride? That’s not a yes-no question. But it’s one you need to ask yourself as each opportunity and challenge emerges, in your institution and in the marketplace alike.

May 14, 2018

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