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

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

Among CUSTOM's offerings are payroll services including taxpayment tracking, time-off accrual and human management services.When the CUSO rolled out payroll processing, the intention was totap 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 andwere more likely to use solutions such as QuickBooks.

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

At one point, there were discussions of TwinStar steering itspayroll processing to a major payroll solution provider that servesthe 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 withmore than 600 SEGs at TwinStar, Johnson said there is still someoptimism that alliances can still be had.

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

To make that happen, CUSTOM is expanding its reach through itsfive other CUSOs. TwinStar is a co-owner of Financial ServicesManagement Group, a subsidiary that has a partnership withPrimeVest, 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 healthcare benefits, 401(k) plans and other services to the creditunion's SEGs. The goal is to build FSMG to the point where it has awider presence beyond Washington that includes small businesses andSEGs.

“The management and support systems are now in place to promotefinancial services in the Northwest region. By adding creditunions, the cost of services provided to TwinStar will be reducedand over time may result in a revenue source for the credit unionowners,” Johnson said.

Payroll services may not be the main revenue builder forTwinStar, but CUSTOM has no plans to abandon the offeringaltogether, Johnson pointed out. The credit union sees potential inrevving up the service through its other CUSOs including FSMG andParagon Consulting Group, a wholly owned subsidiary thatspecializes in strategic planning, management and staffdevelopment, computer software skills training, databasedevelopment, market planning and other services.

Along with four other credit unions, TwinStar also is a partowner of CU Dealer Direct LLC, an indirect lending CUSO thatunderwrites, audits and processes the funding of loans for creditunion members at 413 car dealerships. These loans are sold to sevenparticipating credit unions with branches in nine counties.TwinStar is the largest consumer, with more than 30% of all fundedloans, according to Johnson.

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

All of these connections may provide opportunities to buildalliances with SEGs. Johnson said CUSTOM is in the early stages ofbuilding a collaborative marketing plan to develop all of theCUSO's lines, including payroll services. Keeping an eye on how theeconomy preps for recovery, it also plans to expand the clientbase. Meanwhile, TwinStar, like many credit unions, is beingcareful about its future developments.

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

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