CU Vendors Take the Good With the Bad When it Comes to Consolidation
CUSOs and vendors agree that mergers in the credit union industry continue to have an impact on their business models, but it's not necessarily a negative one.
"There are fewer potential clients, but there are bigger potential clients," said William McGuire, CEO of McGuire Performance Solutions Inc. in Scottsdale, Ariz. "There's a zillion credit unions out there, but so many are so small they're too little to afford some services. Overall I think the trend is going to be positive. We sell technical solutions. I can get down to a certain price but not to the point a $10 million credit union can afford."
Progressive credit unions are more likely than conservative credit unions to invest in a CUSO. Therefore, in most mergers, the surviving credit union is more likely than the credit union that merged into it to have a CUSO and to continue to invest in CUSOs, said Dennis Dollar, principal partner for Dollar Associates LLC in Birmingham, Ala.
"Certainly the growing trend of mergers among larger credit unions will increase the likelihood of CUSO investment because many of these larger credit unions already see the value in CUSOs and will now have their CUSO investment limits increased in actual dollar availability because of the merger," Dollar said.
David McConney, executive vice president of client services for Harland Financial Solutions in Orlando, Fla., said fewer opportunities means more competition among vendors.
The solution, he said, has been to focus on pricing products competitively and making sure existing clients know what his company's software can do for them.
Jay Johnson, executive vice president of Callahan & Associates, said many CUSOs see this time as a prime opportunity to step in and be more hands-on with their CU clients.
"Some vendors may be trying to understand a little better how their clients are doing as a whole, and as individual institutions, and saying, 'Maybe we can help them, and maybe there are ways we can help support them and how they are growing, and help change the direction of some of their results,'" he said. He added that now might be the time for vendors to approach their clients with ideas of ways to help make things better for them.
Credit union vendor Symitar markets two core systems: Episys, which is targeted at credit unions with more than $50 million in assets, and Cruise, which is targeted at credit unions with less than $50 million assets.
"The market for Episys is actually growing," said John San Filippo, marketing manager for Symitar. "That's a good thing. And although the market for Cruise is shrinking, there are still a lot of credit unions in that space. So that's good, too."
For Symitar, a merger can either mean retaining a client or losing a client. San Filippo explained that when a Symitar credit union merges with a non-Symitar credit union, the resulting CU usually stays with Symitar. However, he pointed out, Symitar effectively loses a customer when two of its clients merge.
"That's one less credit union that pays annual maintenance, and one less credit union to buy additional products and services," he said.
Lisa Renner, CEO for CU Holding Co. LLC. in Lenexa, Kan., agreed with Johnson that CUSOs and vendors now have a huge opportunity to make a difference for their clients.
"We could stand to be more proactive and help credit unions that are struggling even more," she said. "One thing we try to promote is 'Buy CUSO when you can.' Why spend your members' money outside the industry? First look inside and try to keep your money in the industry. It may not always be a solution but at least look there before going outside."
Renner noted that credit unions are currently putting about $2 billion toward supporting CUSOs, and 32% of credit unions have a financial tie to a CUSO.