CUSO Offerings Pitched As Key To Capturing More Members' Assets

The competition for assets is intense and increasing as new players enter the game, transaction revenues are decreasing, and margins and spreads are getting thinner. So how are credit unions supposed to thrive in the current environment?

The short answer, according to Valorie Seyfert, president of CUSO Financial Services, is for CUs to leverage the strong bond they have with their loyal members. And how do they do that?

"Get them to use services offered by your CUSOs (Credit Union Service Organizations)," Seyfert told the CUES Marketing, Operations and Technology Conference here. "Emphasize that you are different and have always been different."

At the beginning of her talk, Seyfert noted that there are a number of unknown issues regarding the future of CUSOs. She said the Securities and Exchange Commission (SEC) is discussing a "no action" request that was received two months ago, and might release a ruling soon. She said she does not know where this issue fits on the SEC's "full plate" as it deals with corporate scandals.

You've Got The Look

What is known, she suggested, is that credit unions create perceptions for themselves with the "look" of their branch, said Seyfert. Typically, CUs feature products such as home or car loans on in-branch posters and other marketing materials. To move forward, she said credit unions not only must develop new product offerings to meet the changing needs of members, they need to get the word out.

"In the next 20 years, $8 trillion will pass from one generation to the next," she said. "At the same time, consumers want to simplify and consolidate their finances. They don't want to go to multiple institutions. They want life to get easier, because it seems to be getting harder."

One way for credit unions to get a piece of the substantial investment services pie is to use technology to integrate products offered by their CUSOs, asserted Seyfert. This includes using the Internet and highly automated delivery systems.

Members are more willing and able to use technology, she said. "This includes getting education and using tools online."

Standing in the way, she said, is the specter of increasing competition. Brokerage firms are adding banking products, online firms are adding a brick-and-mortar presence, and portals offer access to "best-of-breed" financial services.

"The lines have blurred," she assessed.

To combat this threat, Seyfert recommends technological innovation; including "total solutions" across multiple products and channels, and access to and integration of all member data.

"Credit unions must provide new value for members through integration of CUSOs with the credit union," she told attendees. "Technology means credit unions are standing on equal footing with big banks."

Increasing Wallet Share

Recent studies estimate credit union deposits represent a mere 17% of their members' "wallet." Forty-two percent of members' assets are deposited at other financial institutions, and 40% is in investments at other institutions.

"That is terrible," Seyfert declared. "There is too much wallet share out there that is missing."

The investment market is important, because while only 2% of households use investment services of a credit union, those services generate 12% of total CU net income. "So it is profitable," she said. In a credit union's migration from where it is to where it wants to be, Seyfert said it must position products with its members, know its value proposition and how that proposition is communicated to members, and it must know the obstacles.

"Integration of the CUSO is the key-in the HR structure, in marketing and branding, and in the whole organizational structure," she said. "Make sure the technology department thinks of the CUSO as part of their job. The goals of the CUSO should be institutional goals because, if not, there is a huge gap."

"You don't want people in the technology department griping about staying late to work on something for the CUSO because they see it is as being separate from the credit union," she added.

Finally, a CUSO needs visible management support, Seyfert said.

"If you don't use your products, why should your members? If you want success with CUSO products, you have to treat them the same way as credit union products," she recommended. "Having a product champion and expert helps, and make sure employees are trained and educated on all products offered by CUSOs."