WEST PALM BEACH, Fla. – Yes corporates are competing and yes they are consolidating, but what gets less attention is how much they are cooperating these days. The network has had a flurry of partnerships and strategic alliances of late, and many leaders believe it is the wave of the future. A few months back, 24 corporates and U.S. Central joined forces to create Corporate Exchange, a new CUSO which will offer a brokered CD product similar to that of Corporate One's SimpliCD. That's just one of many recent examples. Others include Northwest Corporate forming a business services CUSO. Northwest has opened up membership to FirstCorp and Empire Corporate, and there are more corporates hoping to get involved. While these are closer to major deals, there are also smaller deals – many times involving just two corporates – being developed all over the country. For example Georgia Central CU and Southeast Corporate are forming Corp CUSO, a CUSO to handle the hardware needed for each corporates' move to Open Solutions Inc, for core processing. The systems will be housed in a facility in Jacksonville and save the corporates some serious money according to one of the corporates. Up in the Northeast Empire Corporate has partnered with Southwest Corporate for e-com services. First Carolina Corporate partnered with a mortgage firm and Prime Alliance, Boeing ECU's wildly successful mortgage origination CUSO, to help CUs in the Carolinas do more mortgage loans. First Carolina is open to working with other corporates on this. There are lots of little deals that most corporates don't even publicize that demonstrate cooperation and a willingness to align. For example Georgia Central CU was surprised to learn that one thing its members were looking for was a portal for loan participation. The portal would allow CUs to see what loans are out there for participation. Georgia Central hooked up with SmartSource Solutions, the high-tech CUSO of Constitution State Corporate, to develop the portal. Georgia Central said the portal could grow nationwide someday. First Carolina Corporate President/CEO David Brehmer said fortunately alliances like these will proliferate going forward. There can be pitfalls however. He believes alliances should be more than just one corporate giving another corporate access to their members, or as he put it, "just offering up your mailing list." "You better be smart up front to make it a win-win situation. If it's not a win-win that partnership will fall apart. One corporate is not going to like another corporate getting too rich off something it created," said Brehmer. He believes each corporate in a strategic alliance should bring something to the table, more than just agreeing to co-market a product. Brehmer also believes the days of corporates trying to get 100% consensus among all corporates are over. While that would always be desirable, it's unrealistic, he said, and corporates are going to move forward with new offerings without a consensus. A U.S. Central Board member, Brehmer, also sees the corporates' corporate being a partner in more of these alliances, but not necessarily being the sole owner or lead player as much as it was in the past. With Corporate Exchange, for example, U.S. Central is one of many owners. This "depoliticizes things for U.S. Central," said Brehmer. Speaking of U.S. Central's role, Credit Union Times has learned that a new study of the future of the corporate network, with a major emphasis on U.S. Central, may soon be taking place. Last year a planned study of the future of the three-tier system commissioned by the Association of Corporate CUs was killed. This new study is still in the early stages according to sources, and it's too early to tell if and when it will be completed. Georgia Central President/CEO Greg Moore said corporates can compete with each other all they want, but the biggest competitive hit corporates are taking isn't from each other. "I think they've known for a while that the only way we're going to be truly successful is to come together. Our competition is not each other, but the agencies and securities that people are buying from other places," said Moore. Moore said the corporate network shouldn't be duplicating its efforts, a problem that has plagued other parts of the credit union industry for years. "We shouldn't expend too many resources to develop separate products that do the same thing. We have to be more efficient with our resources to compete," said Moore. For years the corporates in Minnesota, Montana, Nebraska (now merged), Iowa, and North Dakota (now merged), have cooperated on various initiatives. "We've dealt a lot with operational issues, meeting periodically and discussing those. We always look for ways to work together for economies of scale," said Tom Kuehl, CEO of Iowa League Corporate Central CU. They joined together to form Corporate Access, a CUSO that looks to develop products and services the group can use. "We worked together building the process for loan participations. One corporate took the lead, and the rest shared in the costs," said Kuehl. "We also developed a financial counseling product together," he said. "When there's an opportunity to create economies of scale and bring products to market quicker, corporates will always cooperate," he said. While there's been a lot of talk about corporates looking outside of their FOM to grow business, it's not always an easy way to grow. Trying to move in on another corporate's share draft processing or cash services is next to impossible as they require a local presence. How Much Competition is There? The only real place corporates are competing is deposit accounts and investments. The problem is lots of corporates have similar rates so to just try and grow with attractive deposit/investment rates can be tough. Also, if a corporate brings in some new money through aggressive rates, it may be "hot" money and gone very quickly as this rate environment has CUs chasing yield. Some corporates aren't willing to cut their spreads even slimmer to win this new business, while others are. For those corporates willing to compete on rate, there can be long-term money at stake. "The easiest thing to sell across borders is investments. Credit unions want to diversify and they are looking for more corporate relationships," said Joe Herbst, president/CEO of Empire Corporate. Herbst said while some of this may be hot money, he believes that for the sake of diversification CUs are looking to develop solid investment relationships with two or three corporates, and they can be long-term relationships. "I don't think you're going to see credit unions joining 30 corporates. They're going to join a select few they feel comfortable with. Three seems to be the magic number," said Herbst. Credit unions have to do their due diligence on corporates they're going to invest with, so it's unlikely they'll join much more than three, said Herbst. Those three then become a CU's option for corporate investments. Herbst said however that any corporates moving into another corporate's FOM are going to face the loyalty factor, that is many CUs are still very loyal to their home state corporate. Empire too believes in partnering said Herbst, and thinks it is the ultimate way to prevent corporates from retreading the same trail another corporate has already blazed. This saves money and time for corporates. [email protected]