Embracing the Cooperative Principle of Collaborative CUSOs

Evaluating the role of the CUSO business model.


Throughout their proud history credit unions have been the most successful model of the power of co-operation and collaboration in the financial services industry. The model has since been extended beyond the credit union-to-member relationship to credit union-to-credit union as well, and now also encompasses the CUSO-to-CUSO relationship.

We cannot emphasize enough that today, more than ever, economic scale, geographic diversity, speed to market and shared risk cry out for the creation of more CUSOs in the credit union community.  We see the opportunity for growth and expansion of this great idea, the continuation of the cooperative model. 

This year marks the 20th Anniversary of the founding of NACUSO. The CUSO business model most people are familiar with was a child of the deregulatory environment of the 1980s. That period was the starting point of unprecedented credit union growth through the 1990s and beyond. The equities market skyrocketed, and CUSOs played a paramount role in harnessing that growth for the credit union marketplace. CUSOs were a regulatory necessity in providing for-profit investment services.  This was the principal initial niche of CUSOs.  There were examples of collaborative CUSOs in areas such as shared branching but credit unions did not fully embrace the wide spread use of the collaborative CUSO model at first.

However, credit unions cannot afford to run as a 20 th Century financial institution in a 21 st Century world. NACUSO believes that collaborative CUSOs are the means to jump start credit unions to a new level of success.  CUSOs are the means to combine the best elements and advantages of free market theory with traditional credit union philosophy. There are many examples of how a CUSO's application of business practices used in the for-profit world has enhanced the ability of its client credit unions to serve their members.  We believe the CUSO exists to serve the needs of the credit union, just as the credit union exists to serve the needs of its members. 

An Industry Advocate

We are here to openly promote credit union owned options for products, services and delivery channels. Those options may be held by wholly owned CUSOs or jointly owned CUSOs. NACUSO intends to be the clearinghouse for information and knowledge about and for all CUSOs. As a starting point, we intend to make it common practice to promote that whenever a credit union needs a solution to a problem that it starts the RFP process by searching for a solution from a credit union owned provider.  NACUSO will be a resource to credit unions and CUSOs who are searching for the right partners.

We need more knowledge of what credit unions are doing together.  This information is not available anywhere on a comprehensive basis. Even the regulators do not know the quantity and quality of CUSO activity. We'll be working closely with Callahan and Associates to refine the collection of data about the myriad of CUSO based businesses and provide this information to our industry. 

A Problem Solver

Credit unions will always face systemic challenges. Today we face a national membership growth rate that is increasing, but the rate of growth is decreasing at the very time credit unions have the largest potential field of membership.

What role can CUSOs, through collaborative efforts, play in bringing new operating efficiencies and widespread product availability to all credit unions, large, small and in-between?  How can shared technologies allow smaller credit unions with well-established brands survive and thrive?  Can we focus CUSOs on giving all credit unions the ability to acquire services at the lowest possible costs and at the highest efficiencies, in order that credit unions continue to remain competitive?

The collaborative CUSO is beneficial to credit unions of all sizes, but it may prove to be the saving strategic advantage for many small and medium sized credit unions. In today's world size does matter, and being big enough to play the full service financial institution game requires large capitalization and more than a few years of patience before the returns stream in to justify such large expenditures.

Credit unions today can chose to outsource to non-CU suppliers to enter new fields of business, or, they can collaborate and provide their own tailor-made solutions.  We believe it is this melding of the entrepreneurial spirit and the cooperative structure that will fuel credit union growth in the decades to come.

A Repository of Best Practices

In the past NACUSO has channeled its educational efforts through the traditional schedule of conferences and meetings.  While we will continue doing some of those, our plans call for us to share best practices, case studies and practical application solutions on a much timelier basis. We'll do that thorough regular, online Webinars and our website ( www.nacuso.org ). We'll also incorporate smaller regional presentations to maximize our reach and keep that valuable face-to-face networking quality. 

Credit unions have always prided themselves on the unselfish sharing of both good and bad lessons. This level of honesty is astonishing in today's business world. It can bind us together and launch the credit union world to the greatest growth it has seen in decades. It's our greatest untapped asset and we must use it wisely and for the best of reasons.  The transformative power of collaborative CUSOs is still a too well kept secret, much as credit unions themselves remain undiscovered by the general public. 

We firmly believe there should be a credit union-owned solution for every product, service and delivery channel. If a credit union needs it, a credit union group can provide it. We believe that in every RFP process there should be a CUSO alternative. We want our business partners to be our credit union colleagues.  We plan and hope for many more to join us in our collaborative effort.




Sept. 4, 2006



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