COLORADO SPRINGS, Colo. -
But for Hollen, along with the rest of the company's management, the greater emphasis has been on demonstrating for credit unions that here are rewards for them, as well, for doing business with the credit union-owned company. Ontario, Calif.-based CO-OP Financial Services, for instance, recently reported it will distribute a record patronage distribution (see related item, page 12).
That dividend was paid out of income earned from 1.3-billion transactions in the CO-OP's ATM, shared branching, debit and POS networks. CO-OP, after some lobbying of Callahan & Associates, has been named the country's largest CUSO, and boasts nearly 2,000 member credit unions representing 25-million members.
As reported in the Credit Union Journal June 4, CO-OP's latest expansion is to expand its surcharge-free ATM network into Costco Stores nationally (with the exception of Washington and Oregon).
But it's most aggressive plans are in credit cards. Hollen said it will add card processing during the third quarter of this year. "Credit cards are something we feel very strongly we should be into," Hollen said. "It's right for us and it's value added. We plan to be very price competitive."
Hollen, who came to CO-OP from Liberty Enterprises in Mounds View, Minn., after serving as CEO of The Golden 1 Credit Union in Sacramento, Calif. prior to that. (Hollen observed that moving to an EFT network from a check printer, given trends, "is a way better place to be.") Hollen shared these observations with Credit Union Journal readers during CO-OP's recent annual meeting at the Broadmoor Hotel.
eFunds, which Hollen described as the back-end engine for CO-OP, has followed FDR as an acquisition by a private equity firm. "If another major processor is acquired it could be very good for us as they will take care of their best customers," he said.
The State of the CO-OP
Here's a look at some of the other topics covered by Hollen:
* In July, CO-OP will move into new office space, also in Ontario, Calif., that will be three times the size of its current facilities. The space will allow for the addition of 25 new people, most of whom will be involved in a call center for Fair Isaac's Falcon Fraud solution.
* Since taking over as CEO, Hollen said he has placed emphasis on improving customer service to credit unions. That has included the implementation of SilverCloud's Knowledge Management solution. A recent survey of CO-OP customers has found an increase to 7.9 (on a 1-10 scale) from 7.2 on how the company was rated.
"All of our staff, including me, is in an incentive program tied to customer service," he said. "I think our call center will do a better job and calls will not be handed off. We're down to a 2% (call) abandonment rate." CO-OP has call centers in Ontario and in Southfield, Mich., which it picked up as part of its acquisition of Service Centers Corp. (SCC), the original shared branch network.
* CO-OP is looking to expand its stored-value card offerings, and has hired away from VISA a VP with extensive experience in such cards.
* CO-OP card-holding CU members are now doing more than 2-million transactions per month (1.7-million withdrawals, the remainder are inquiries) through the 5,300 ATMS available through 7-Eleven stores nationally, 2,100 of which feature the Vcom kiosks (through which rival Financial Service Centers Corp. also offers access).
The Vcom kiosks offer expanded functionality in addition to dispensing cash, including accepting deposits. "I don't think the average member will go to 7-Eleven to make a deposit, but I think we'll get from 100,000 to 150,000 deposits a month."
He added that CO-OP's own analysis shows a check-imaging kiosk accepting a deposit can deliver savings of 30% to 50% over an in-person transaction at a branch.
Hollen said there is surcharge income from the relationship, but the heavy CU member traffic involves a "significant" cost to CO-OP, which isn't passed along to CUs.
"I liken that to our patronage dividend," he said. "And the more volume we get the better off we are as we can share some of the interchange income."
* CO-OP has made a significant investment in Ensenta, on whose board Hollen sits, a San Mateo, Calif. company that supplies self-service platforms and web-services to support digital check, check verification, shared branching, image cash letters and targeted marketing.
"I think that much like the airlines we are going to see much more usage of self-service kiosks. We are in a great position to drive those kiosks."
Hollen added he believes multi-functional kiosks can allay the concerns of large credit unions that if they participate in shared branching their facilities will be overwhelmed by non-members.
* The acquisition of Credit Union Shared Centers (CUSC), the Georgia-based operator of a 2,518 shared branches in 46 states, also marks a "major shift for us. When I came to CO-OP we decided that if we were to get involved in shared branching, it would be to be very, very involved, or we would exit the business. We want to create a super-strong shared branch system. I believe our strong position in shard branching is bring more attention to it and to FSCC," said Hollen, who helped start FSCC when he was with The Golden 1. "FSCC's model is a little different in that they are outlet only, but together we operate 85 branches through state leagues and CUSOs."
The Importance of Aggregation
Other recent acquisitions have included CU Anytime to handle image processing, and Encore, the Virginia-based EFT CUSO.
"These are similar networks to ours. Aggregation is important." Hollen said all of its acquisitions and partnerships are designed to execute its larger strategy of aggregating more transactions and driving down its own costs and therefore costs to its credit union owners.
* In terms of New Mexico-based CU Anytime, a CUSO owned by that state's credit unions, Hollen said CO-OP believes ATM servicing is a potentially strong growth area in markets where CO-OP member CUs have a sufficient number of ATMs.
* It isn't just credit unions feeling the margin squeeze; interchange fees are also being pushed down. "We do worry about interchange income," said Hollen. "I hope we won't see more erosion."
* Hollen predicted more credit unions will outsource their ATM driving, particularly on the technology side, similar to what has happened in check processing. CO-OP is now driving 5,400 ATMs, including for billion-dollar players such as American Airlines Credit Union and BECU.
