One of the biggest challenges we face today is how to profitably grow while providing outstanding service and value to our members.
Overall loan demand is tepid and net interest margins are at historical lows as a result of the fragile economy. How do you overcome these issues and serve your members’ financial needs? Leveraging one of the unique competitive advantages credit unions enjoy, the ability to collaboratively use CUSOs, is a key component of profitable growth strategies.
CUSOs can be utilized to achieve economies of scale as well as offer a broader set of products. Combined, these benefits produce greater earnings helping to facilitate growth through retained earnings.
Working together, credit unions have been able to significantly reduce operating expenses by consolidating some of their back office operations and technology investment, literally saving millions of dollars per year.
In addition, the shared resources improve member service, allowing for efficient support to resolve member questions and issues. Another way to help serve members while saving money is through shared branching, which can significantly reduce costs while providing convenient access not only at thousands of branches across the country, but surcharge-free ATM access to 28,000 locations nationwide.
CUSOs also provide expertise and relationships that would be difficult for any one credit union to acquire on its own. This can range from helping credit unions generate mortgage loans for their members to helping provide student loans.
CUSOs provide access to thousands of dealers to not only help serve your existing members auto finance needs, but can help you find new members through the dealers.
One of the more complex areas where credit unions can leverage CUSOs to help meet growing financing needs is helping small business owners with access especially during these challenging economic times when banks have largely pulled back from this segment.
Another important way CUSOs help credit unions serve their members is in the area of financial services. You can help your members manage the financial aspects of their lives through providing investment services all the way to providing insurance services. All of these services are off balance sheet but still produce valuable income to supplement net interest income, which is under pressure in this low rate and low loan environment that we are currently operating.
An important aspect of CUSOs is that they are owned by credit unions. They are not for profit businesses that make decisions in the best interest of their shareholders and are owned and driven by their credit union owners. Credit unions are focused on meeting the needs of their member owners, rather than earnings per share for stockholders.
Utilizing CUSOs to help you provide a broader array of products and services to your members not only helps you capture a larger share of wallet, it makes your members more loyal, profitable and have lower risk. The more products and services your members have with your credit union, the more likely they are to take another product or service. The cost to acquire new products and services is lower with existing members who don’t need to overcome inertia to do business with their credit union. The more product relationships a member has with their credit union, the less likely they are to result in a credit loss.
Beyond the financial reasons for utilizing CUSOs to profitably grow the relationship with your members, you will also find that members with multiple products with your credit union are more loyal, satisfied and profitable. While I was at USAA, we discovered that if a member only had a checking account with us, we had a 50/50 chance of losing them if we made a big mistake. And, we are all only human, so mistakes do happen, as much as we try to avoid them. But we found that likelihood of attrition declined as members had the following mix of accounts: 33% if they had a time deposit account, 10% with a checking account and a time deposit account, 2% with a mortgage, checking account and time deposit account and 1% with a mortgage, credit card, checking account and time deposit.
CUSOs can help you significantly expand the profitable relationship with your members to include mortgages, financial services products, credit cards, student loans, indirect auto loans, even micro loans for specific member life event needs such as home improvement or repair.
CUSOs can also help you develop the new delivery channels that your members want to take advantage of, enabling them to do business with you, when, where and how they choose. Choosing to take advantage of a CUSO’s tool allows you to collaboratively work with other credit unions in developing and delivering the best member focused solutions. With the added earnings from the additional products and services and the savings on operational and technology CUSOs, you are able to generate the necessary earnings to support robust growth, allowing you to expand your relationships with existing members, as well as serve new members.
The choice is yours, take advantage of this unique competitive tool available to the credit union movement and meet the needs of your members, and have a brighter sustainable future. Or, go it alone and miss the expertise, cost savings and additional products and services you could be offering to your members. I know what my choice would be.
Jack Antonini is president/CEO of NACUSO.
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