Franchising Seen as Possible Solution to Small CU Problems

MADISON, Wis. – The vanishing small credit unions could compete better by outsourcing to third parties, or franchising of critical services like compliance and internal audit, consumer lending and marketing, human resources and facilities management, according to a new study released Friday by the Filene Research Institute. With credit unions, most of them smaller institutions, disappearing at a rate of almost one a day, “franchising or strategic outsourcing may be a way for smaller credit unions to alleviate staff resources expended on routine, time-consuming functions,” suggested the authors of a ‘Preliminary Study on Credit Union Franchising.’ Under one scenario, small credit unions could collaborate on routine back-office activities to gain economies of scale and focus their energies on activities involving member contact. However, such sharing of resources may be premature because for a franchising system to work, credit unions first need to consolidate their IT systems into a common platform, concluded the author, Professor Steven Michael, of the University of Illinois at Urbana-Champaign.