The interaction of these complex pressures will not just affect credit unions; they will impact all players in the industry, including CUSOs. Shrinking capital will make competition for credit union venture funds and lines of credit more difficult in the future. CUSOs will be required to diversify their ownership models and spread the risk and return over a larger number of credit unions. CUSOs should expect more due diligence from their credit union clients as CUSOs take on more critical roles in providing operational services to credit unions.
A key factor in addressing these challenges involves establishing opportunities for collaboration and getting credit unions to work together in business networks to create scale and meet shared needs. Now is the time for credit unions to transform themselves and the industry by embracing innovation and the unique advantages of collaboration and networked business models.
Credit unions will be facing upward pressures on operating expenses led by technology and compliance costs, coupled with downward pressures on revenue led by other larger, more leveraged competitors. Credit unions have only 5.6% market share of the financial services industry and they need to create scalable platforms to: 1) develop lower-cost operations, and 2) develop higher value products and services-the two fundamentals of profitability that ultimately translate into increased value for members. Credit union collaboration also provides pooled resources and expertise, spreads the risk and allocates the capital investment in business ventures across many credit unions.
There are many excellent examples of successful multi-owned CUSOs in the areas of shared branching, ATM networks, credit card services, indirect lending, mortgage/title/real estate services, business services, call centers, investments and insurance services, trust services, data processing and technology services, disaster recovery services, and compliance services. While interest and participation in multi-owned CUSOs and business networks is growing, it is still not the dominant theme. As of Dec. 31, 2008, 2,122 credit unions participated in a multi-owned CUSO, while 5,846 did not. We need to create a higher level of industry awareness of the benefits of participating in a multi-owned CUSO.
A further demonstration of the value of collaboration is found in a comparison of the 5-year average annual performance of credit unions having an investment in a multi-owned CUSO with those having no investment in a multi-owned CUSO:
Although it cannot be implied from these data that having an investment in a multi-owned CUSO will result in higher credit union performance, I have found that there is a unique mindset and way of operating that pervades a credit union that embraces collaboration; e.g, its business model, competitive advantage and market differentiation. And certainly, participating in a multi-owned CUSO can directly enhance credit union performance; e.g., increased loan volume through indirect and mortgage lending.
To help the industry embrace collaboration, NACUSO will be offering a new program through its National Center for Collaboration and Innovation entitled Planning at the Speed of Change: Designing and Implementing Collaborations and Business Networks. This education and certification program will be offered in partnership with Pepperdine University in Malibu, California and will provide an environment where your ideas combine with those of your peers in the credit union community, as well as those of thought leaders from different academic backgrounds. The program curriculum will include courses ranging from principles of networked businesses and networked business design to acquiring the skill sets necessary for managing a business collaborative to funding strategies for networked businesses.
Business as usual is reaching an evolutionary dead end. When the going gets tough, the tough collaborate. Economic downturns provide an opportunity to create a gap between credit unions and their competitors. Winston Churchill had a good line: "We are out of time and out of money. Therefore gentlemen, we are going to have to think." While others cower, credit unions must take advantage of their ability to think critically, collaborate, and innovate together. Collaboration is a learned skill and must, along with implementation, become the new currency of our industry. You alone can do it, but you can't do it alone. Collaboration is the furnace that will drive credit union and industry sustainability.