CUSOs are innovation platforms for credit unions, allowingcredit union owners to share risk and expenses when building betterand sometimes revolutionary systems, products or channels to servetheir members.

Fintech firms are the very essence of innovation and throughtheir entrepreneurial drive have created revolutionary changes(marketplace lending, new payment methodologies, mobile platforms,etc.) in banking. They have disrupted banking in ways we could havenever imagined.

Over the last few years there have been a lot of discussionsabout how a marriage between these two innovation engines could andshould be arranged in order to create the perfect retail bankingbusiness model. Credit unions come to the relationship with thebest value proposition (lowest cost of capital) in financialservices and fintech companies bring the sexy technologies thatlevel the playing field with big banks and provide the innovativechannels that all consumers are wanting. Together they are a superstar couple that can build awareness, enhance service, deliverunprecedented value and dominate retail banking services for theforeseeable future.

Unfortunately, there are significant roadblocks that come tolight after the infatuation wares off. Those often unreconcilabledifferences frequently lead to discontent, separation and sometimesdivorce. The reason: CUSOs and fintechs have fundamentallydifferent motivators and beliefs. One believes in a long, permanentmarriage and the other in a series of partnerships and separationsover its lifetime.

I recently found myself at the vortex of this challenge when Ipartnered with two incredible entrepreneurs who wanted to bringmarketplace lending into the credit union space. We worked for ayear researching platforms, talking to credit unions, setting upsales calls, demonstrating the system and working through differentbusiness models. Yet we ended up being somewhat incompatible. Why?I come from the mindset of the cooperative model, having been inthe industry for 30-plus years. I wanted to build consensus withcredit union partners, have a measured pace into the new model, andshare ownership and risk evenly with the credit union investors. Mypartners, who were very successful, serial entrepreneurs, saw theopportunity in credit unions and wanted to build a model thatquickly gained scale, was controlled by the founders, had outsideinvestors and could be sold in a few years for a significantprofit.

These very basic differences in beliefs, at least in our case,became insurmountable and our relationship ended in a friendlydivorce. I still love them but we can't live together.

As I see it, this dysfunctional family scenario has played outin many attempts to create innovative CUSOs. The different worldlyviews between cooperatives and for-profit-minded enterprises isdifficult to reconcile, and because of this, the industry has seengreat ideas and disruptive technologies fall apart as the argumentsbetween the partners have become more intense and the middle groundharder to find.

But there are successes, and we have seen many examples of thesediverse marriages working. The solution often comes in the form ofsomething similar to a prenuptial agreement where the challengesare worked out before the business is consummated. We have foundthat the best way to create a common definition of success for thenew organization is to go through a process that starts withbuilding consensus, defining the governance model and jointlybuilding business plans. A process we have used successfully isknown as “decision by design.” This process is organized so thatthe different parties devote themselves to a process (marriagecounseling?) that builds a partnership that can stand the test oftime and more importantly keep everyone happily engaged.

Kirk Kordeleski is Senior Managing Partner for the EdgeConsultancy. He can be reached at 516-528-5057or [email protected].