SAN ANTONIO–In its first combined meeting since merging to form PSCU/Co-op Solutions, the company’s CEO offered an update on where things stand in terms of the big picture—how the integration is proceeding—as well as the small—it has heard loud and clear from CUs on the volume of dispute cases.
At its Member Forum event here, which previously was a PSCU event but is now to be the annual event for the merged CUSO, Chuck Fagan told attendees it’s “good for the industry we are now one company.”
The event drew a record 1,400 people, a reflection of the joint nature of the meeting. Fagan said Co-op’s THINK Conference, set for next month in Nashville and a popular annual event, will be its last.
Fagan reminded on several occasions the organization has just passed 100 days as a combined company.
“Please remember that we expect the full integration process to take approximately 18 to 24 months and we're just over three months in right now,” Fagan said. “While the work of the Integration Management Office, or IMO, is well underway, we're still operating separately in many areas right now.”
He said approximately 150 employees are involved in the IMO, along with McKinsey & Co., which has been retained to consult on the merger. The combined company has nearly 5,000 employees.
What Makes for a Failing Grade
Fagan said he would give the effort to merge the companies a “failing grade” if the company ever says it can’t accommodate a credit union’s project or initiatives. “We are focused on not corrupting what you're trying to accomplish and deepening your member relationships,” said Fagan.
Fagan touched on the financials of the combined company, as well as those of each company as of year-end 2023.
PSCU and Co-op Solutions had combined revenues of more than $1.3 billion, with each seeing record-breaking sales, Fagan said.
Individually, PSCU had 16% consolidated year-over-year growth and paid a patronage dividend of $30.1 million to its owner CUs, $19.4 million of which was returned in cash even as the level of capital spending continued to grow, he said.
Co-op Solutions, he said, had had planned losses since 2019 as the result of investments it had made.
“We now serve more than 4,000 financial institutions and we process more than 16-billion transactions and our future is bright as a combined organization,” said Fagan.
Fagan added that the combined volume of the two companies also makes it more attractive to fintechs that offer solutions that offer alignment with its objectives.
Other Trends
In his remarks, Fagan touched on a number of other key trends, including:
- Interest rates. He noted, as CUToday.info has been reporting, that the anticipated cuts in rates by the Fed are no longer a sure thing, as inflation remains a challenge.
- Higher rates have meant higher debt payments 37% of small businesses, which has resulted in delays in expansion plans and capital spending.
- PSCU/Co-op continues to work with America’s Credit Unions and other groups on the issue of interchange, including proposals by the Fed and the CFPB. “It remains a really active time on the legislative front in Washington with implications that have clear impact on credit unions,” Fagan said. “We'll continue to monitor developments and keep you informed on how we can use our collective voice to challenge potentially harmful legislation.”
- Fagan said credit union delinquency and net charge-offs have returned to pre-pandemic levels, but are expected to continue to rise through this year. “Delinquency is a concern across all loan categories. When households get behind on payments, many prioritize staying current with mortgages and autos, which means that delinquencies often hit credit cards first.”
- Fraud. “It's important now, more than ever, for financial institutions and consumers to not let their guard down in terms of fraud mitigation efforts,” he said. “We're having a nice conference here and the fraudsters are meeting over in Austin. They continue to become more sophisticated and look for the most vulnerable channels.”
Fagan noted PSCU/Co-op Solutions recently released its Link Analysis solution to fight fraud.
- Fagan said card dispute case volume remains high and it is a “pain point. We fully understand this volume and the effect it has on our credit unions and members. A detailed plan is in place to get this down to a consistent and normal level.”
The Long-Term Vision
Fagan told the meeting the long-term vision for PSCU/Co-op Solutions is to be the premier fintech provider for credit unions.
“It's the best of technology and unparalleled service and it fosters long term success and sustainability for the credit union,” said Fagan of that vision. “One of the advantages we have is, unlike a public company, we're able to create and roll out our organizational design in a way that best serves our clients and your members. We're working fast, but we're also approaching this process very thoughtfully using your feedback to ensure the least amount of disruption possible.”
The New Three R’s
Fagan recalled when he was named CEO in 2015 he listed three R’s as priorities: Restore, Reestablish and Research. Today, the three R’s are Reaffirm, Resolute and Rise, he said.
“First, this combination reaffirms our commitment to the credit union industry. Second, we're resolute in our passion, perseverance and commitment to the growth of our credit unions. As a combined company we can provide an end to end offering to a larger client base, while providing an even better service experience and enhancing relationships with our current creditors. Third, we will rise to be an elevated organization poised for continued growth and sustained success. Our ability to invest in innovation is greater than ever before.”
Fifth Time’s a Charm
Fagan noted that in the history of the two CUSOs there had been five occasions when a merger was discussed, and in the first four a three-letter word had gotten in the way: “ego.” He credited the respective chairs of each company with setting ego aside this time to make the combination happen, even as he joked it had led to a 17-person board.
Fagan said he has attended meetings between leaders drawn from each of the companies and “you would be hard pressed after day one…to determine who came from what organization. It truly feels like a team.”
Other Points
Fagan also said:
- The Co-op ATM Network brand will be retained. The brand is on machines at 5,400 locations across the U.S. and in foreign counties.
- Co-op Shared Branch will continue to operate, including 33 express self-service centers. The network saw 3.6 million transactions per month in 2023. “As we reimagine the future of shared branching, it will include integrating Juniper Payments to further transform money movement. You will be able to include DDAs across a mature and reliable network.”
- Fagan said Co-op Pay Network is the largest issuer owned unaffiliated debit network after Visa and Mastercard.
- The company will continue to emphasize innovation, as seen in last week’s announcement of the new Fintech Engagement Program, he said.