How Back-End Cooperation Will Help 6 Credit Unions Cut Compliance Costs By $200K

Six small credit unions have projected more than $200,000 in compliance costs savings over the next two years with their new CUSO — and they say that’s just the beginning.

 
 

With assets ranging from $57 million to $150 million, the six credit unions that own the rkGoBig CUSO are combining key back-office operations, including compliance, to gain economies of scale and better serve their members.

Mid-Atlantic Corporate began the Rekindle initiative to help smaller credit unions thrive.  The rkGoBig CUSO sprang to life directly from Rekindle.

“The heart and soul of this industry is the small, community-based credit union,” says Peter Barnard, CEO of rkGoBig. “There were 18,000 credit unions when I began in this industry and we’re now under 7,000. That is a real concern.”

Credit Union Total Assets State
Destinations Credit Union $57,019,062 MD
Viriva Community Credit Union $66,291,142 PA
Department of Labor FCU $68,094,962 DC
SPE FCU $80,120,966 PA
Century Heritage FCU $119,906,513 PA
Everence Federal Credit Union $149,643,766 PA

 

According to Barnard, one of the biggest challenges smaller credit unions face is how to operate more efficiently.

“Our focus and our first effort with this group of rkGoBig credit unions was to cut costs by merging vendors, merging processes, and merging systems,” he says.

Although the credit unions are merging several operational processes, the institutions themselves are not merging. In fact, achieving competitive scale without merging is an immediate goal of the group. It’s a goal with a decidedly cooperative bent; however, the credit unions won’t be able to achieve it overnight.

The rkGoBig credit unions spent 10 months planning their three-year implementation. That plan is currently underway with the first few services — compliance, vendor management, and collections — already launched in a shared environment.

On May 1, Everence became the CUSO's first credit union to convert to the chosen core platform, CU*Answers. It also converted its debit cards to the CUSO's shared cards vendor, which requires a mass reissue of approximately 10,000 debit cards.

Initially, the CUSO projected most of the savings would come from sharing staff and facilities. But during negotiations, it found it could also achieve significant vendor savings.

“When our project is well articulated to the vendor, we end up seeing radically different pricing,” Barnard says. “We’re basically moving from a $57 million credit union to a $541 million credit union in the eyes of the service provider.”

On the compliance side, the six credit unions were spending approximately $438,000 collectively per year on compliance. The CUSO estimates it can cut that to $232,000, which represents an annual savings of more than $206,000 in compliance alone. That’s a 47% savings based on the latest estimates.

Compliance/Vendor Management (current estimates)

  6 Credit Union Group Costs
(Annually)
Average Per Credit Union
(Annually)
Current State Today $438,316 $73,053
Future State Plan $232,271 $38,711
Annual Savings ($) $206,045 $34,341
Annual Savings (%)   47.0%


“Obviously, the ultimate results will be based on the actual 5300 reports for each credit union,” Barnard says. “But our early math shows strong savings potential.”

Although it is still too soon to measure the actual cost savings, the team spent months examining each credit union’s current day expenses, isolating an estimated 2,500 data elements to get to the most accurate expenses for each area of operations. The CUSO called this endeavor "current state mapping" and continues to use and refine this tool as it builds plans for additional functions.

“This initiative is a real commitment,” Barnard says. “It takes brains, brawn, and heart.”

The credit unions’ CEOs have collectively driven more than 10,000 miles and have spent more than 150 full days meeting since the beginning.

"Everyone has real skin in the game," Barnard says. "And that matters."

View excerpts from a presentation about the ReKindle Go Big initiative.

 

 

 

May 5, 2015


Comments

 
 
 
  • An excellent way of survival and meeting the needs of our members without merging. Small credit unions should consider this option for sustainability in the ever changing financial industry.
    Anonymous
     
     
     
  • What a concept. It's amazing what can be accomplished when working together, rather than working against each other!
    Anonymous