In today’s tight earnings environment, non-interest income is critical for maintaining credit union bottom lines. Many credit unions that are diversifying their income streams are looking to service organizations, as CUSO involvement can bolster non-interest income in the following ways:
1) New Ventures
Purdue Employees Federal Credit Union used its pre-existing mortgage CUSO, CU Channels, as a springboard to invest in a start-up that provides a dynamic portal software solution for financial institutions. The result? A new company, Passageways LLC, that has sold portals to more than 200 financial organizations and provided a cumulative return to Purdue FCU of more than $1 million.
“Passageways LLC has an usual history, but…it has also been quite successful, earning a good deal of non-interest income for our credit union,” says Gail Koehler, executive vice president and head of IT for Purdue Employees FCU ($611M, West Lafayette, IN).
2) Increased Service Usage
Financial Service Centers Cooperative’s Vcom machines, which are located in more than 2,000 7-11 locations around the country, don’t just increase member convenience through shared branching. When a cooperative network markets the machines, they also drive up the number of transactions.
In March, FSCC sponsored a call center competition that promoted the Vcom machines, said FSCC president and chief operating officer, Sarah Canepa Bang, in a release.
The promotion helped Water and Power Community Credit Union ($471M, Los Angeles, CA) grab 13,000 transactions in only two months, while First Credit Union ($452M, Chandler, AZ) increased its transactions 1,750.0% from the prior year.
Some CUSOs create new forms of income through dividends and returns of capital. For example, PSCU Financial Services has issued $245 million in total payouts since becoming a cooperative in 1994.
“Payout of dividends from the CUSO can be a vital source of revenue for credit unions,” says Merry Pateuk, PSCU director of public relations. “Both reduced expenses and dividends are especially important during lean years when credit unions are struggling to meet revenue objectives.”
4) Referral Fees and Sales to the Secondary Market
Frank Amantia, president of the commercial lending and business services CUSO Mid-Atlantic Financial Partners shares his thoughts in the video below on two ways CUSOs can generate non-interest income: referral fees and sales to the secondary market.