At first, CUSOs were just an idea. The acronym referred to any business effort outside the legal boundaries of the credit union charter. USERS, the credit union data processing company now owned by FiServ, is often cited as the first CUSO, having been founded in the 1960s. Early cooperative initiatives such as stabilization funds, the first share insurance programs and myriad other shared efforts also are expressions of the CUSO idea.
Today, CUSOs are at the forefront of cooperative innovation. They are leveraging credit union offerings through operational networks that result in strategic options beyond the capabilities of any single organization. Increasingly, CUSOs have emerged as operational, financial and politically powerful organizations.
- Several CUSOs have shown how it is possible in one year to raise as much as $10 million in capital to support new business efforts, dispelling the notion of a capital problem in credit unions.
- CUSOs have created ATM and shared-branch networks on a scale to compete with ever-expanding national banks. These solutions provide members with credit union transaction choices in nearly all states.
- CUSOs are providing efficient, centralized RFP processes that aggregate many credit union common needs into one purchase decision. This process has helped credit unions achieve better pricing and a more supportive vendor relationship.
- Almost a dozen CUSOs are becoming technology development firms creating and supporting state-of-the-art interfaces and operational solutions that allow credit unions to own the intellectual creativity they have developed in its technology applications.
- CUSOs are the primary vehicle by which credit unions are entering new markets, from manufactured housing and tax preparation services to near- and sub-prime lending products.
Driving the Future of Credit Unions
It is clear that CUSO impact is growing. CUSO successes are becoming models for future efforts at creating strategic advantage for credit unions. In fact, CUSOs may be the key to future performance breakthroughs as well as responding to some of the challenges of growth and narrowing margins facing most credit unions today.
For example, many credit unions are entering the business lending market through more than a dozen CUSOs that have been created in the past five years. One of the leaders is Business Partners LLC, a creation of Telesis Credit Union. In addition to the over $1 billion in loans originated by that CUSO, the Business Partners model has spawned a number of local business services CUSOs. The model has encouraged several credit unions to focus on a specific market, such as the borrowing needs of churches.
CUSOs also can expand a credit union’s service options by providing an outlet for loans not within the credit union’s lending policies. For example, sub-prime auto and home mortgage loan turndowns number tens of thousands a month. CUDL, Member Gateways and several local CUSOs, including Central States, are providing options for credit unions to refer these applications for expanded underwriting consideration.
In the area of technology, credit unions are increasing their investments. Some credit unions have organized service bureaus and software development CUSOs to resell their applications to other credit unions. Credit unions directly and through Member Gateways are investing in knowledge software such as Experion. The goal is to cost-effectively develop and disseminate the latest improvements in member service applications
To read find out more about America's CUSOs, order your copy of CUSOs: 2006 Directory of Credit Union Service Organizations. Along with key contact information for all multi- and wholly- credit union owned CUSOs in over 30 service categories, it also includes updated information on every CUSO's financial, ownership and customer metrics in this year's just launched CUSO Guide Online. Online access is free with your purchase of the publication.