LAS VEGAS–Should your credit union be breaking up with some of its relationships, including CUSOs? Or should more CUSOs be merging and creating “super-CUSOs?” Or, are there even more options?
Those questions and more were at the heart of a debate format discussion during the Underground Collision: CUSO Mayhem meeting here sponsored by Mitchell Stankovic. The meeting was held in conjunction with NACUSO’s Network meeting.
Offering their insights during the session titled “Relationship Breakups” were John Janclass, president and CEO of Nymbus; Stef Luck, VP-sales with Trellance; Raj Bandaru, CIO with Kinecta FCU, and Denise Wymore, field marketing manager with Zest AI.
Which relationships need to stay and which should go? Here’s what the panelists had to say:
Janclass: I think to be successful in relationships going forward we might want to change out the golden rule. Know it's hard to put it to bed and adopt a new one, but I’m going to call it the platinum rule. The golden rule says you treat others how you want to be treated. The platinum rule says treat others as they need to be treated.
A lot of people in our ecosystem now are very different. I am telling you they're working on this side of the equation. They have different needs and those needs are changing. Being in tune with that I think is really important we can save our relationships and we can optimize more relationships. When you go to business school a lot of times they talk about being tough when you negotiate those contracts, you are to really hold their feet to the fire.
In the DNA
But if we can transcend that, and this is in our DNA as credit unions, we can help our fintech partners and CUSOs think about things (the platinum) way, and then we've really got something. We have a real competitive advantage to bring to the table, because by comparison we're just going to operate differently than others.
Bandaru: Prior to credit unions I was in banking for half my life, so half my mind is emotionally intelligent. Ten to 15 years ago I had deeper pockets to build all this cool stuff. At JP Morgan Chase I had a development team larger than Microsoft, so we could do cool stuff. With credit unions, there’s no way they can even think about that, so CUSOs were the answer.
But fast forward and we have a lot more options. You have a fintech coming online every day or every month. What that means is it's contractual service levels, it's functionality, whatever the case might be.
I have to report for the credit union so I have to go with what's best out there in the industry. A lot of credit unions continue to stay with CUSOs. There’s a level of loyalty, but if we start thinking about just our pure ROI and functionality and service levels, I have other options, For me, it's all where am I getting the best (value). I should be nimble and agile and move between vendors.
Inflection Point Coming?
Luck: As a technologist, I had to look at the data first. From 2020 to 2021, there was an increase in the number of CUSOs. At same time we know the number of credit unions has been decreasing. My question is, will there be an inflection point where the number of credit unions can’t support the number of CUSOs out there.
We have heard the term that those that grow together, stay together. Is there an opportunity to be a super-CUSO? There are 470 CUSOs that do lending alone. No doubt, each has its own specialty. And that doesn’t even consider the other fintechs.
It's a no-brainer to go with the CUSO and stay within our industry. I think it would be a key consideration for us to look at how we can make sure we continue to leverage this unique advantage.
Wymore: Guy Messick is fond of saying, ‘If credit unions go away, CUSOs go away.’ Earlier, we announced the credit union de novo collective. Now we have a foundation; we got our 501(3)c last week. We started because there are 3,000 credit unions under $250 million. In the last year I have worked with some very, very small credit unions. What I found was they're being held hostage by their contracts; they have seven to 10 year contracts and they cannot get out. (For the large vendors) it's a bar tab. Those are the relationships we need to break up.
New CUSO Being Formed
We are looking at forming a CUSO we're calling Revolution that we can make for affordable core processing. What is the sixth Cooperative Principle? Cooperation among cooperatives. If we don't embrace that sixth Cooperative Principle we will lose 3,000 credit unions.
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