Imagine how surprising it was the first time I attended a credit union chapter meeting on a cold winter night in Chicago when the issue of the evening was the free exchange of ideas around dinner and a few drinks! It was truly an eye-opening evening, and I believe that the expansion of CUSO's have become a direct extension of this philosophy and possibly the avenue for many credit unions and CUSO's to thrive in the new financial climate that has engulfed the world.
Recently, we have found that because of the credit crunch business owners that in the past were able to find credit at their local bank are now reaching out to sources they might not have considered before. Fortunately, some have discovered credit unions and now know that they are a viable source. What makes this type of situation exciting to us is that to accommodate these requests for credit from quality applicants, we might need to find a credit union in the business owner's market that could take the lead on the opportunity while we participate, if needed, the remainder of the loan to other credit unions in and out of our network. When a deal like this arrives, our national lending team will look at the CUSOs that we have a relationship with to determine if one of their credit union partners is able to originate the loan. In effect, this is the beginning of a nationwide credit union business lending origination network and an example of how collaboration among business lending CUSO's is being fueled because of market conditions.
Don't be surprised to see CUSOs in the near future employ what I am going to call "cross-collaboration" as a regular part of their business model. For example, most CUSOs have carved out a particular niche for themselves and partners. It might not make economic sense for each credit union to engage, invest in or start multiple CUSOs based on product and need. If they did engage a number of CUSOs, aren't they really then just managing a number of different vendors with some hope of financial return?
I can see in the near future where some of the more prominent CUSOs that do not compete merge their product's together, determine how to divvy up financial and oversight duties and create a larger offering to their partners and the industry. Let's use originations and refinance of consumer mortgages as an example. Almost every credit union has a similar process for underwriting and servicing these products. It would seem an ideal product to be outsourced. Because of market conditions in many parts of the country and widening expense-to-income ratios, some credit unions already have or are beginning to think about outsourcing this service. They might take a good look at a an integrated lending platform from multiple CUSO's for consumer mortgages, auto lending, small business lending, credit cards and potentially other services. The underwriting of the applications and servicing of the loans could still be performed by the individual CUSO with that particular expertise. This type of service could become a real advantage to the credit union in cost savings, time management and increased member service levels. Look at it this way: how many SAS 70s do you really want to review each year. I could go on with many such examples, but you get the point.
The spirit of collaboration and the exchange of ideas that has driven this industry to develop CUSOs just might be the engine that drives its innovation. During this economic reset and expected industry consolidation this unique system of CUSO's that are available for an assortment of products and services could also be the system that many credit unions rely on to help create an advantage over their competitors.
Murray Halperin is senior vice president of marketing and business development at CU Business Capital LLC. He can be reached at 954-704-5411 or Murray. Halperin@cubusinesscapital.com