Many times credit unions are confronted with problems that also have a hidden opportunity. In this presentation, I speak about a few examples of credit unions that have taken a problem and turned it into an opportunity as well as ways that credit unions can look into creating CUSO's of their own.
Problems spring up from time to time in credit unions, both good problems and bad problems. CUSO are a way of turning these problems into opportunities.
The stock market has volatility problems. This, potentially, is a good problem for credit unions as it increases the “flight to safety”. Watch out for those capital ratios however and make sure to using interest rates to attempt to control the influx of deposits.
An all-to-common problem
Hopefully you won’t have this problem. Nobody likes bank runs.
MaPS Credit Union had to classify their savings accounts as transactions accounts since debit cards, rather than ATM cards, were issued for most savings accounts. Being a transaction account, this doubled the amount of reserves required to be held at the Federal Reserve earning no return.
MaPS created their own software to meet our needs as the major player in the market had a technologically inferior product. MaPS, through their new CUSO fi-linx, to their Deposit Reclassification application and sold it to other credit unions.
Think of any pain point your credit union may be experiencing currently. They may be employee related, capital (and impairment) related, or any number of other operational or strategic things.
These credit unions needed a uniform and meaningful way to measure member service.
They created the Member Loyalty Group to help administer the Net Promoter Score, or NPS, to their membership and gauge the effectiveness by comparing their individual results with others in the CUSO.
These credit unions all realized that spending millions of dollars to build their own data centers and disaster recovery hot sites was not the most efficient. Nor was paying a third party vendor to accomplish this as most were priced above what any of these credit unions were willing to pay, including building the infrastructure themselves.
Enter Ongoing Operations, now one of the largest credit union disaster recovery companies in the nation.
Most commonly, problems that are experienced by credit unions come from within their organization and from their own membership base.
Member problems present a unique issue as credit unions are presented with fixing something in the member’s own life, outside of the control of the credit union.
Many credit union call centers field calls from members with computer problems. Initially, these problems start out as not being able to log into online banking and soon digress into problems with the hardware of the computer, the configuration, malware, or viruses.
Geek Squad is the computer repair arm of Best Buy, that national electronic retailer. Best Buy purchased the Geek Squad in 2002 to supplement their in-store sales and service of computers. Most credit unions already have a staff of IT professionals. Additionally, the concept of shared IT roles between credit unions and their call centers supports a model similar to this, without, of course, the in-store (in-branch) presence.
Credit union members already turn to the CU to provide them with safe deposit box services. In this day and age, most people’s important documents are no longer stored in a paper box, but rather in their computer.
Credit unions have the opportunity to leverage the trust that their members have in them and offer some type of online backup or online safe deposit box for their members to place their important electronic documents in as well.
Internal problems, on the surface, seem to be easier to deal with than issues with members, however, that is not always the case.
Due to many factors, including the poor economy, above average provisions for loans losses, and the NCUSIF impairments, income and capital are being taken away from otherwise healthy credit unions at an astonishing pace.
A REIT, or real estate investment trust, is just one type of vehicle that would assist credit unions in regaining some of their capital. Similar to selling a loan portfolio, a credit union can sell their administration center, a branch, or many of their branches in a REIT, LLC, or another similar device. The credit union may maintain partial ownership and sell the remaining shares to their members. Not only does this give the credit union members an alternative, and sound, investment vehicle, it also enables the credit union to book a tremendous gain on the sale of the asset directly into their reserves.
A handful of different ideas currently being discussed around the nation.
For profit CUSO’s generate their revenue by selling their product to other credit unions, member businesses, or directly to members. They must maintain a full staff of management, sales, product developers, etc. Shared expense CUSO’s share all expenses at the end of the month or quarter proportionally to their owners. The need not have a sales staff, only the technical experts required to deliver the product.
Nearly all of the ideas for CUSO’s will come from the employees of the credit union or from problems they experience with members.
If you don’t have any business lending experience, you won’t be doing business loans. Same goes for CUSO’s. If you have the most talented graphic designers in your city, maybe some of the members and their small business would use your marketing services. Maybe your credit union is incredibly skilled at accounting and tax processing that you have the inherent ability to offer payroll processing services to your members or other credit unions.
Sometimes, you don’t need the knowledge to get involved with a CUSO, but make sure that one of your CUSO partners does. Your credit union might not have hosting experience, but that doesn’t mean that you can’t start a CUSO with other credit unions to host websites, email, etc as long as they have the requisite skills.
A wise man once told me you don’t want to marry the person you can live with, you want to marry the person you can’t live without. An ideal CUSO starts with a few credit unions with a mutual goal who are all invested in the success of each other.
Robbie Wright | CU Innovators | 4676 Commercial ST SE #263 | Salem | OR | 97306 | 503-383-9308 | http://cuinnovators.com