When TwinStar Credit Union launched a CUSO in 1985 that offered credit, life and disability insurance to its peers, no one could have predicted the entity would morph several times over.

The $728 million credit union in Olympia, Wash., has seen the CUSO, now named CUSTOM Inc., change from selling insurance to processing data and clearing checks to reselling services. In addition to providing back-office support service to TwinStar, the CUSO also serves its card-processing CUSO Member Access Pacific, which is also owned by $671 million Harborstone Credit Union in Tacoma, Wash., and five other credit unions. CUSTOM's core lineup consists of data processing centers, imaging and data archiving, Fedline courier, accounting services and sales of third-party products.

Among CUSTOM's offerings are payroll services including tax payment tracking, time-off accrual and human management services. When the CUSO rolled out payroll processing, the intention was to tap into TwinStar's select employee groups to build relationships, said Tim Johnson, senior vice president of TwinStar. Unfortunately, many of the companies were small, had fewer than 30 employees and were more likely to use solutions such as QuickBooks.

“It never lifted off the ground,” Johnson said of CUSTOM's payroll division. “We found that the companies were using other providers. It didn't become a targeted product.”

At one point, there were discussions of TwinStar steering its payroll processing to a major payroll solution provider that serves the credit union industry. Johnson said the CUSO had just launched, and there was some hesitation about investing in a new entity. Still, CUSTOM continues to do payroll processing for MAP. And with more than 600 SEGs at TwinStar, Johnson said there is still some optimism that alliances can still be had.

“We want to offer a complete [payroll] solution that can be a major saver of time, money and worries,” Johnson said.

To make that happen, CUSTOM is expanding its reach through its five other CUSOs. TwinStar is a co-owner of Financial Services Management Group, a subsidiary that has a partnership with PrimeVest, a national broker-dealer. FSMG also offers investment, insurance, planning services and a commercial lending program. Johnson said having the CUSO has allowed TwinStar to offer health care benefits, 401(k) plans and other services to the credit union's SEGs. The goal is to build FSMG to the point where it has a wider presence beyond Washington that includes small businesses and SEGs.

“The management and support systems are now in place to promote financial services in the Northwest region. By adding credit unions, the cost of services provided to TwinStar will be reduced and over time may result in a revenue source for the credit union owners,” Johnson said.

Payroll services may not be the main revenue builder for TwinStar, but CUSTOM has no plans to abandon the offering altogether, Johnson pointed out. The credit union sees potential in revving up the service through its other CUSOs including FSMG and Paragon Consulting Group, a wholly owned subsidiary that specializes in strategic planning, management and staff development, computer software skills training, database development, market planning and other services.

Along with four other credit unions, TwinStar also is a part owner of CU Dealer Direct LLC, an indirect lending CUSO that underwrites, audits and processes the funding of loans for credit union members at 413 car dealerships. These loans are sold to seven participating credit unions with branches in nine counties. TwinStar is the largest consumer, with more than 30% of all funded loans, according to Johnson.

The jointly owned MAP provides plastic card processing and ATM network solutions to 14 credit unions in the Pacific Northwest. The network includes 45 credit unions in Washington, Idaho, Alaska, Oregon, Arizona and North Carolina and now provides members with access to more than 8,500 ATMs in 42 states.

All of these connections may provide opportunities to build alliances with SEGs. Johnson said CUSTOM is in the early stages of building a collaborative marketing plan to develop all of the CUSO's lines, including payroll services. Keeping an eye on how the economy preps for recovery, it also plans to expand the client base. Meanwhile, TwinStar, like many credit unions, is being careful about its future developments.

“We've trimmed down. We've stopped travel, and we're managing our expenses,” Johnson said. “Part of our resellers are taking more time to use services. But we haven't seen any loss of service.”

–msamaad@cutimes.com

Instant Insights /

TwinStar Uses Collaborative Marketing, SEGs to Build Payroll Services

Related Stories

Recommended For You