The Competitive Advantage of the Cooperative Business Model

Credit unions make up only 6.5% of the financial industry’s assets. As a result, they need to look for innovative ways to keep up with their larger competitors.


Credit unions make up only 6.5% of the financial industry's assets. As a result, they need to look for innovative ways to keep up with their larger competitors. Credit Union Service Organizations (CUSOs) play a key role in this effort as they allow credit unions to pool their resources together in order to expand their capabilities and provide improved services to their members.

One area where credit unions see an added benefit from CUSOs is in intellectual capital. Credit unions can use the CUSO to develop a knowledge base around certain products, services and models without exhausting internal resources. Furthermore, a CUSO has a full-time professional staff and management that directs the business. Managers also have to report to a board or ownership about the success of the CUSO.

Credit unions also use CUSOs for economies of scale. CUSOs allow small and medium credit unions provide the same services that a large credit union offers. For instance, individually the most branches that one credit union has is State Employees Credit Union in North Carolina with 165. This is fairly small given that Bank of America has almost 5,700 branches. Through effective use of a CUSO that specialize in shared branching though, a credit union could have up to 18,908 branches where there members could go for their services.

In addition to the benefits listed above, here are some other benefits a CUSO has over providing these services in-house:

  • The CUSO has its own capital and revenue streams. For that reason, they are not dependent on owner's subsidy.
  • CUSOs can sell to credit unions beyond their owner group and grow their business as market circumstances provide.
  • The business model for a CUSO can be easily expanded beyond a local or statewide market to a regional or national reach.

These are just a few of the many benefits that a credit union should contemplate before entering the CUSO market. To learn more about these unique organizations, take a look at our 2004 Directory of Credit Union Cooperatives.




April 5, 2004


  • It would have been interesting to know if there is a regulation governing CUSO creation or that one or more C/U's can form a CUSO. Also, where to go form more info on beginning a CUSO.
  • Together with several business partners we would like to organize, it seems, the first Credit Union in Romania, and I am very interested with all the aspects of such a business. Any information, old or updated, are welcommed. Be sure I will readand save all the information in respect of CU.Furthermore,I will register to your newsletter.