Credit union service organizations (CUSO) have grown in popularity and influence over the last decade, but they weren’t always as prevalent as they are now.
The Federal Credit Union Act of 1934 gave credit unions the authority to invest in organizations associated with the routine operations of credit unions. However, it took nearly 50 years for the National Credit Union Administration (NCUA) to enact the first CUSO regulation in 1987.
Today, there are more than 1,000 CUSOs, according to the most recent statistics available from the NCUA. In 2021, those organizations reported more than $1 billion in loans and $4 billion in investments from federally insured credit unions.
According to industry veteran Mansel Guerry, for a CUSO to truly benefit a credit union, it must provide a quality service at a competitive price that helps the credit union grow its market share and add value to its members.
There are many reasons why credit unions form CUSOs. Arguably, the most important is to foster partnerships and collaboration with other credit unions. Additionally, CUSOs help credit unions expand service offerings and enhance scalability.
Many CUSOs were created as a way to reduce operation costs. CU*Answers, for example, was initially launched in 1970 as a service of the Grand Rapids Teachers Credit Union to reduce the cost of supporting third-party core processing.
CU*SOUTH, a 100% credit-union owned CUSO, was founded in July 2006 with a simple mission: to help grow credit unions. To accomplish this, CU*SOUTH empowers credit unions with leading solutions in core processing, accounting, collections, IT management, and much more.
If your credit union isn’t already a part of a CUSO, here are four reasons why you should join one.
One of the things CUSOs do well is help credit unions cut costs.
From outsourcing core processing operations to handing over the keys to your IT infrastructure, joining a CUSO relieves the burden of back office operations, the stress of IT management and the responsibility of collections management—so you can focus on serving your members and slash operational costs.
In addition to cutting costs, the CUSO model is conducive to increasing revenue, too.
If your institution wants to offer a new service, you can spend precious time, money and other resources to develop that new service internally. Or, you can expand your service offerings through a CUSO partnership and gain access to shared resources and additional revenue streams without having to worry about development, project management and other things that would cost time and add more to your workload.
Then, you could devote the time you save to launching marketing campaigns, cross selling new services to existing members, developing initiatives to attract new members and other avenues that will boost your revenue and strengthen your bottom line.
There were more than 850 credit union mergers in a five-year period from June 2016 to June 2021, and those numbers are only going up. During his keynote at CU*SOUTH’s recent Visionary Conference 2023, former NCUA chairman Dennis Dollar said about 3.5% of credit unions merge every year.
“If you’re not planning organic growth, then you’re planning a merger,” Dollar said. “It’s the only way to grow besides organically.”
Organic growth is one of the biggest challenges facing the industry today, and CUSOs help credit unions meet that challenge head-on through collaboration. From meeting regularly to discuss challenges and share best practices, to submitting joint requests to improve service offerings and enhance functionality, credit unions collaborate in the CUSO to achieve outcomes together.
For an organization to qualify as a CUSO, it must have at least one credit union owner. Becoming a CUSO shareholder gives credit unions a voice, a vote and considerable influence on the direction of software and services.
Many CUSOs limit share ownership and distribute votes in a way that ensures equal control. CU*SOUTH, for example, limits share ownership to 10 shares per credit union and adheres to the “one credit union, one vote” rule to ensure owners have equal control.
Additionally, investing in the CUSO helps build the cooperative and directly contributes to the strength and success of the credit unions within, as opposed to bolstering the strength of vendors owned by private investors. Recently, CU*SOUTH declared a stock dividend of 3% to owners following a successful fiscal year 2022.
Joining a CUSO provides many benefits and presents multiple opportunities to strengthen your credit union’s financial standing, enhance the service you provide to your members and ensure your credit union remains competitive in a tough market.
Contact us to learn more about CU*SOUTH and how joining a CUSO will benefit your institution.
CU*SOUTH is building a collaborative, peer-to-peer community of Credit Unions through shared development of technology and service platforms. CU*SOUTH is headquartered on the Eastern Shore of Mobile Bay, with a nationwide network of CU experts.