You never know where a chance encounter and a casual conversation between friends may lead. Just ask Tom O’Shea and Leo Ardine.
Following CUNA’s 2012 Governmental Affairs Conference, O’Shea, president of Aspire Federal Credit Union, Clark, N.J., ran into Leo Ardine, president/CEO of United Teletech Financial Federal Credit Union, Tinton Falls, N.J., while waiting for a train.
“We’ve known each other for a couple of decades,” O’Shea recalls. “We started commiserating about the cost of operating our businesses and the need to come up with a solution for something better.”
That “something better” turned into Member Support Services (MSS), a credit union service organization (CUSO) that collectively handles the core processing and collection functions for Aspire Federal, United Teletech Financial Federal, and Credit Union of New Jersey in Ewing.
Plans are underway to expand the CUSO’s services to include information technology (IT), payment services, and loan processing.
By pooling their resources and working collectively, the three credit unions have cut costs nearly 30% on functions moved to the CUSO.
“But it’s not just about savings,” O’Shea says. “We can afford the quality of staff that we might not be able to afford individually. We can improve the quality of our technology buying collectively. This sets us up better for the long term to survive and offer better member value. It always comes back to what can we return to the member by making our operations more efficient.”
Because of increased efficiencies, O’Shea, Ardine, and Credit Union of New Jersey President/CEO Andrew Jaeger spend less time focusing on day-to-day operations and more time developing relationships and the cultures of their respective credit unions.
The founders of MSS may take on additional partners and, eventually, smaller credit unions as clients. The critical requirement of partnership is a common core system.
Collaboration is a powerful tool, especially for small credit unions, O’Shea says. “We can help them become more compliant and at the same time offer them state-of-the-art technologies they couldn’t otherwise afford,” he says. “It’s a much better option than a merger. Nobody knows [small credit unions’] memberships better than they do. They can turn over the back office work to the CUSO and build on those relationships with members with additional services they couldn’t otherwise offer.”
Brad Miller, executive director of the American Association of Credit Union Leagues, said that collaboration within the credit union system has been driven by both cooperative values and a changing marketplace.
“Collaboration between credit unions, leagues, CUNA, and system partners has enabled the growth and success of our cooperative movement and will remain vital in meeting the evolving demands of consumers,” Miller says. “There are many remarkable examples of collaboration, both broad-scale and closer-knit partnerships delivering real member value. Moving forward, we are focused on raising the bar in how we serve members, coordinate with each other, and engage potential new members.”
Several credit union leagues have adopted virtually the same concept as MSS to pool resources and form a company that provides back-office services, including accounting, human resources (HR), and IT.
Once again, a casual conversation sparked the concept for the company, called Plexcity, this time among league presidents: John Bratsakis, president/CEO of the Maryland-D.C. Credit Union Association; Diana Dykstra, president/CEO of the California and Nevada Credit Union Leagues; and Greg Michlig, former New Jersey Credit Union League president/CEO and currently CUNA’s deputy chief engagement officer.
“We started talking about collaborating and creating a back-office company to reduce operating costs, then redeploying resources back into member-facing programs,” Bratsakis recalls.
In addition to the three original investors, Plexcity owners now include the Hawaii Credit Union League, Ohio Credit Union League, and the National Association of Credit Union Supervisors.
In fact, delivering value to league members is Plexcity’s primary focus, says the company’s President/ CEO Tony Kitt, who previously served as senior vice president, strategic innovation and planning, for the California and Nevada Credit Union Leagues. “With Plexcity taking on all the functions in accounting, HR, and IT, it allows the leagues to then focus more on their members,” he says, “and provide meaningful business opportunities for their membership.”
Plexcity also provides economies of scale and talent its owners couldn’t afford separately. Bratsakis and Kitt say Plexcity saves its investors 30% to 35% in operational expenses.“We’re really focused on expenses,” Kitt says. “That’s where we can add the most value to our members.”
He notes that most leagues are similar operationally. “We know how to do accounting for 501(c)(6) activities like nobody else. We understand the league service corporation side of things. Most of the leagues have a nonprofit side, some kind of foundation. It just makes sense to have a shared service operation.”
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