In 2017, during the aftermath of Hurricane Harvey, $3 billion asset Credit Human Federal Credit Union in San Antonio needed to provide members with pre-approved, short-term emergency funds. It found the answer in a credit union service organization (CUSO).
The CUSO, QCash, offers a cloud-based payday loan alternative, says CEO Ben Morales. The credit union wasn’t looking to generate loans or fee income. It simply wanted to give members instant access to funds.
“They wanted to automate and make their preapproved loan process more efficient,” he says. “Our engine does that well. So we made some adjustments to our system and built in some new capabilities, and we were able to help them.”
The takeaway: Technology and collaboration make credit unions stronger, individually and collectively, Morales says. “If you’re part of a CUSO, the tide raises all boats.”
By design, the CUSO model provides solutions. On an everyday, get-your-hands-dirty level, CUSOs solve problems and ease frustrations.
Given today’s competitive environment, never before has the CUSO model been more important to credit unions.
“Through the CUSO model, credit unions can reduce costs and obtain high-level technology and expertise at less cost than if they did it themselves,” says Guy Messick, general counsel for the National Association of Credit Union Service Organizations (NACUSO). “I don’t know how cooperative financial institutions can meet today’s challenges without leveraging the advantages of collaboration and economies of scale.”
Many credit unions believe they can’t compete or innovate, Morales adds, but CUSOs give them that opportunity. “Through CUSOs, their voice will be heard, and they get the benefit of bigger ideas.”
At year-end 2017, 946 CUSOs registered with NCUA, 74% of which serve a single credit union.
“It’s a huge advantage for credit unions,” says Jack Antonini, president/CEO of NACUSO. “Banks, for example, don’t naturally collaborate. They also have anti-trust issues. So it’s a lot harder for them to do what we have a legal right do. Our cooperative principles are a really big deal.”
Here are some newer entrants on the CUSO landscape.
The seeds for Constellation were planted in 2014, when Kris Kovacs served as chief information officer for $2.9 billion asset Coastal Credit Union in Raleigh, N.C. He read an article about a bank that was releasing its 150th app for small-business customers.
“That’s when we started to think about what a credit union app story would look like,” says Kovacs, who’s now president/CEO of Constellation. “We were doing some design work on mobile applications at the time. We eventually concluded there’s a different model for credit unions. Our model is about aggregating services into a single application.”
Kovacs began three years of research, and in 2017 he led the rollout of Constellation Digital Services, a cloud-based financial services marketplace and platform that allows credit unions and members to choose which services to use inside of a secure banking experience.
The company’s model calls for developers to become service providers and partners on the new platform. Developers can create “tiles” or services, and credit unions can purchase those services within the marketplace.