The National Federation of Community Development Credit Unions has started to build a shared back-office platform for CDCUs.
The federation announced the effort at its 2013 annual conference earlier this month in Baltimore. Federation CEO Cathie Mahon announced that the group had received a $250,000 grant from Citibank to serve as seed money to help the federation develop the platform. She also said the platform would eventually be open small credit unions as well as CDCUs.
“We need to be building systems to help us aggregate our combined work and create efficiencies,” Mahon said
Pablo DeFilippi, director of membership for the federation, said the platform would enable CDCUs and smaller credit unions to more easily and efficiently provide a number of services, such as check cashing and remittance origination to their lower income members. He also said the platform would become a key tool to help small credit unions track and document how they serve members and the public at large, both for their own purposes such as better marketing and compliance but also to help them meet the requirements of grant writers.
The federation made its announcement in the context of a general alarm about the fate of small credit unions that ran through the remarks of several plenary session and breakout session speakers.
NCUA Board Chairman Debbie Matz used her remarks at the meeting to bemoan the growing gap between larger and smaller credit unions, with the larger credit unions usually remaining financially healthy.
Matz lamented in particular the loss of small credit unions and urged them to keep their capital well above 7%, adding they should really aim for keeping 10% to serve as a buffer against future unexpected difficulty. She told the assembled executives that only 20% of small credit unions that fall below 7.0% net worth, succeed in rebuilding it.
She also urged small credit unions to learn about and implement better internal controls, reporting that there had been nine credit unions liquidated this year because of fraud losses.
Other speakers turned to the organizational challenges that need to be overcome and some at the breakout touted the advantages of shared services.
James Gibson, CEO of the 30,000-member $213 million Carter Federal Credit Union in Springhill, La., recounted how his CDCU had served as a pilot site for the Dedagroup, the Italian firm which had been working with the federation to advance the project. The pilot study was meant to see how a shared platform at a CDCU might work and what the advantages might be. Gibson told the other executives that the advantages would be many, including savings on equipment and labor expense, savings on core processing costs and fewer third-party service vendors.
He reported to the group that Carter Federal now had relationships with more than 40 firms that provided some aspect of its IT and core processing capability, a burden that he said had come to be both expensive and time consuming. Sharing a platform and core processing capability would eliminate or at least ease these expenses, Gibson said.
Should the project go forward, future steps include founding a CUSO that will provide the services, determining what the parameters of such a services might be and writing software to support those services, Dedagroup said in its presentation. The timetable for getting the project up and running is between 18 and 24 months.