Facing up to the Benefits of Collaboration
I think it's time for the credit union world to have an intervention, that is, no-holds barred look at what's happening now and what might happen if we don't take action to stem the diminishing number of credit unions. Credit unions today are coming to grips with the bottom-line realities of the low net margin business we are in, and margins are still shrinking. I can almost hear CU presidents, CEOs and board members heaving a collective sigh. The squeeze is on and everyone is going to feel it sooner or later, no matter your asset size. We all know that in such an environment, there are not a lot of business choices you can make where you can afford a mistake. The average net profit of credit unions today is 1%. I think that's one reason that CUs are so risk-averse. But business paralysis isn't the answer. And there are a great number of smaller and mid-sized credit unions out there whose CEOs and boards are not welcoming of the constant merger feelers they get from much-larger credit unions. They don't want to give up their identity, their hard-won history and members. But many feel that knock on the door is inevitable. The good news is that it isn't. Can we please remember that we're all in the same boat? Realizing that, we can no longer avoid making the decision that may offer the credit union industry the best possible solution: collaboration. I know you've heard it before. It's always been with us. It hearkens back to the very premise of credit unionism: combined effort, shared expertise, economies of scale, mitigated liability, self-ownership and control and so on. Besides all that, it allows for bold thinking, new ventures and greater service to members. Did I say members? You bet I did. As chairwoman of the "new" NACUSO, I'd like to tell you what makes our outlook new again. And for all of you reading this who may think it the "same old, same old," get ready to change your thinking. NACUSO was always about credit union service organizations providing non-traditional services like investments and insurance. But we're also about back-office support, data processing, personnel, shared branching, indirect lending, business loans and related services and a bunch more than that. CUSOs have always been the `for-profit' mirror image of the `not-for-profit' credit union that passed the profit over to the CU. The marriage of two mindsets is sometimes not easy (did someone say `sales culture?') But credit unions and CUSOs have never needed each other more than they do today. Why? Here's my one word answer: competition. Today, it's competition from banks and other forms of financial institutions (Internet banks, etc.) and other credit unions. Meanwhile, the cost of technology makes the capital outlay necessary to offer sophisticated services near impossible for many CUs. Then, factor in the cost of expertise and the staffing to run such programs and it adds up to a daunting scenario. Rather than risk a CU's good capital standing, many boards settle on what looks like a sensible merger partner. While for some that makes sense, for the CU industry as a whole it's an omen for eventual invisibility. Numbers do matter; we are losing too many CU charters. And even if some CUs get very large, it won't be the same. We've always had the answer before us, hiding in plain sight, as it were. The power to work together. The power to pool our money. The time has come for CUs to get over whatever obstacles they think have held them back and get on with this work now, for while collaborating may have some difficulties (all of which can be overcome) the alternative is much worse. NACUSO has taken this effort to a higher level by going from an organization that has great meetings, great speakers, features great ideas on collaborative ventures that are working and brings CUSO idea people together with credit union CEOs, managers, IT experts and others. Now, we're grabbing the bull by the horns and actually making things happen through force of will. We call them Flare Projects. One is now taking shape in Michigan, where changes to the credit union law has had a liberating effect. Five CUs have made a commitment to form a CUSO to make group purchasing power and reduced costs a reality. Everything from better quality and lower cost printing of monthly newsletters to office supplies, janitorial services to equipment rental. Vendors who wouldn't dream of dealing with one or two mid-sized CUs and a few smaller ones will look differently upon a group that brings 10 credit unions to the table. One of our Platinum Partners, CU*Answers has already been using this kind of collaborative power for decades, planting little regional seeds here and there. So from a few credit unions in Michigan coming together in 1970, here is an example of collaboration that now sparks others. As the core data processors consolidate and reduce the choices and negotiating power available to credit unions, there now exists the option of a collaborative solution for credit unions of all sizes. We've also got examples of CUs banding together to provide core service needs like mortgage lending, indirect lending and collections. So CUSOs aren't only for doing the non-traditional services, they are just as powerful at helping credit unions perform the traditional services, too. So, my invitation is to CU presidents, managers and directors everywhere in CU-land. Come, collaborate and succeed. It's worth the effort.