How are CUSOs helping credit unions and their members?
The approaches are changing, as are the needs of members coming out of the recession.
Credit Union Journal recently spoke with industry analysts as well as a handful of new CUSOs to see what services are emerging. Among them: new revenue-driving solutions, improved use of data analytics and methods to serve good members who have fallen on hard times.
1. Compliance And MBL A Focus
Brian Lauer, general counsel for the National Association of CUSOs and partner at Messick & Lauer in Media, Pa., said he is seeing greater interest in CUSOs that serve the compliance and business lending needs of credit unions.
He said more small CUs are interested in aligning to share compliance staff and back-office operations.
He also expects to see more collaboration around member business lending due to the "extreme cost in creating a commercial lending department."
2. Know Your Business
In Plymouth, Minn., OnApproach is offering credit unions an enterprise-wide solution for data integration and reporting. Chuck Gulledge, SVP of business intelligence for the CUSO, said there is a growing need for credit unions to gain a sound understanding of what's driving business results.
"For example, I recently met with a CEO of a credit union with many branches. I asked him if the credit union was seeing a lot of mobile activity, and he said yes. Then I asked him to quantify the traffic, and he could not."
Gulledge stressed the importance of CUs — especially those with a lot of bricks and mortar — to understand how members are accessing the credit union. "What if you find that almost all of your young people are using mobile and then it's just your older members using the branches?"
3. Steer Members Away From Payday Lending
In Naperville, Ill., Intercept CUSO I, LLC will make loans to members who fall just below the CU's appetite for risk, giving the credit union another option than simply sending members out the door.
Mark Johnson, chairman and primary stockholder of Lending Solutions Inc., one of the partners in the new CUSO, said the referral service not only helps prevent members from taking their relationship elsewhere when they are denied a loan, it provides a community service.
"Without the referral the member could fall prey to payday lending," he said.
4. Banks Don't Want Them Back
The San Diego-based CU Revest helps "prior prime" members rebuild their credit and eventually return to the credit union, and at the same time generate revenue for the CU from charged-off accounts (see related story on page 1).
CU Revest President Mike Joplin says the service is a perfect fit for credit unions due to their close relationship with members. "Very few banks are interested in this program. Banks don't care about someone who does not pay them and they don't want these people back."
5. Members' Outlook Much Different Today
The $3.3 billion Kinecta FCU in Manhattan Beach, Calif., is using CU Revest. In working with members who are rebuilding their credit, the credit union has learned an important lesson about the mindset of former prime borrowers who suffered life events during the recession.
"I found it fascinating to learn that many people today have a hard time understanding the actions they took five years ago and would not take them again," said Randy Dotemoto, Kinecta SVP and president of the CU's Kinecta Alternative Financial Solutions CUSO.
"When I first learned that I was surprised. But then it made sense. Five years ago you are doing what you can to survive a job loss, foreclosure or eviction," Dotemoto observed. People were in the terrible position of not having any money and not knowing what to do."
