NACUSO Award Winners Push Efficiency, Innovation
This week at the NACUSO Conference in Las Vegas, the national association will honor Member Support Services LLC, this year's New CUSO of the Year award winner, and PSCU, the 2016 CUSO of the Year honoree. CU Times talked to the CUSOs’ leaders to learn more about their strategies, how they’re helping credit unions succeed and their plans for the future.
MSS Streamlines Core Processing
Three New Jersey credit unions converted to the same core processing technology to form a CUSO, MSS, in 2012 to reach a simple goal: Reduce operational costs by at least 30%.
The first winner of NACUSO's New CUSO of the Year award, MSS has already achieved that cost savings goal in one operational area – labor intensive collections – and is aiming for much more in the years to come.
MSS was founded by Thomas J. O’Shea, president/CEO of the $182 million Aspire Federal Credit Union in Clark, Leo R. Ardine, president/CEO of the $334 million United Teletech Financial Federal Credit Union in Tilton Falls and Andrew L. Jaeger, president/CEO of the $323 million Credit Union of New Jersey in Ewing Township.
“We were commiserating over our core systems and the lack of responsiveness from vendors and the controls and limits that our core systems had,” O’Shea recalled. “We also talked about the general costs of doing business and we were independently looking at ways to collaborate to save money and improve our quality of services. Everything that I had read from Filene and CUNA research said that the big barrier to true economies of scale in credit unions was the lack of the common core system. So getting all of us on that common core was key,”
The idea behind the new CUSO was for the three equal credit union partners to convert to the same core processing technology, Corelation's KeyStone core system, which features state of the art capabilities that enable the cooperatives to improve their home banking and mobile banking products and services for their members. The three credit unions collectively serve more than 90,000 members.
What's more, operating on the same core system technology enables the credit unions to combine and lower the cost of collections, IT security, telecommunications and call center services, purchasing and contracting.
“Corelation allows vendors to fully connect with the core system, which other core systems just don't allow, and that was a real key for us,” O’Shea said. “And the vendors we work with across the board have said the same thing.”
Based in San Diego, Calif., Corelation's Keystone platform runs on a single IBM box located at a data center belonging to Corelation's partner, Wescom Resources Inc.
About a month before the core conversion was completed in November 2015, MSS hired its first president/CEO, William Arnold, who previously worked as chief information officer for the $2.7 billion Service Credit Union in Portsmouth, N.H.
“We’ve got a pretty clear strategic plan that is going to guide us over the next 18 months or so,” Arnold said. “We have already set up a collections unit since I came on board in October that is now processing collections activities for all three of our credit unions from a centralized location with a centralized staff working on the same common core system.”
In addition, Arnold said the CUSO plans to consolidate IT systems such as higher level information security services that the credit unions would be unable to afford separately.
“In IT, a lot of what we are looking at is the ability to standardize our systems and bring them to a centralized location,” he said. “We’re in the process of evaluating carriers to replace the current carriers that are connecting all of their data and telecom services for each of their credit unions. That is a piece we are going to get accomplished this year.”
The CUSO also plans to consolidate other operational IT systems, such as the remote and physical support of desktops at credit union locations, which could reduce staffing costs by as much as 25% to 30%.
MSS also hopes to attract two or three additional credit unions to join the CUSO as equal shareholders and eventually open its CUSO services to help credit unions reduce their operational costs.
PSCU Keeps Credit Unions on the Cutting Edge of Payments
The collaboration began in 1977, when the CEOs of five Florida credit unions founded the St. Petersburg, Fla.-based CUSO that enabled the cooperatives to offer competitive, full-service credit cards to their members.
Over the next six years, the credit unions’ CEOs shared the responsibility of running the newly formed CUSO, which attracted about 200 cooperatives primarily based in the southeastern states. As the organization's growth continued, the first CEO of PSCU was hired in 1983.
“It was established just like a credit union, one member, one vote,” Chuck Fagan, president/CEO for PSCU, said. “So we really mirror the structure of a credit union. Today we have 11 board members from all geographies across the country and we’re pretty diverse in terms of size and operation. The real shift in PSCU's business occurred in 1989 when we formed a partnership with First Data so the organization as we know it today was built out with call centers and its full operations, which started in 1989.”
Today, PSCU is known as the nation's leading CUSO serving 820 member credit unions that represent more than 18.2 million credit, debit, online bill payment and mobile payment accounts.
Among PSCU credit union members, the average penetration rate of credit card holders averages 18% to 20%. The average credit union industry rate of credit card holders is about 14% to 15%. Fagan noted that among PSCU's high performers, the average penetration rate is 30% to 35%.
For PSCU, collaboration is kept alive and well in a variety of ways. In addition to surveying its members every year to capture trends, ideas and challenges, PSCU's account executives and trainers cultivate deep working relationships with all member credit unions.
“In many cases, our account executives are brought in as members of the strategic planning team at the credit union,” Fagan said.
Last year, PSCU's IT systems and staff stopped an estimated $190 million in potential card fraud.
Because the payments industry has been and continues to change rapidly, PSCU constantly pursues innovations to address market challenges and maintain a frontline position for its member credit unions.
“The way the payments industry is working is just with high, high velocities,” he said. “Through PSCU's established close relationship with FirstData, Visa, Mastercard and other fintech companies that might be coming into the space, we can hopefully keep our credit unions as fast followers and hopefully in many cases at the cutting edge. With Apple Pay, we were one of the early adopters. We have more than 150 credit unions on Apple Pay. With Samsung Pay, two of the first eight in production were PSCU credit unions. That shows kind of how the model works and supports the challenges that credit unions face while competing in the market.”
Last month, PSCU launched the Card Lock security application for mobile devices that give consumers additional fraud fighting controls over their credit union credit card accounts. The app, which holds two registered patents for its breakthrough technology, enables cardholders to set transaction limits, block purchases, request alerts and take full control of their card from their mobile device.