ARVADA, Colo. - Small credit unions in Colorado and Wyoming have turned to CUSOs to address rising employee healthcare expenses and to cost-effectively provide and expand IT.
Credit Union Resources said it is now also interested in working with credit unions beyond those two states.
The group of CUs, most under $50 million in assets, have formed a CUSO whose COO says provides the “size” to compete with larger financials.
“Together we represent nearly 270 employees, 87,000 members, and $639 million in assets, equivalent to the seventh-largest CU in Colorado,” said Karen Morgan, chief operating officer for the Credit Union Resource Group LLC, which is also owned by the CU Association of Colorado’s service corporation.
“With the increasing complexity of the financial industry, our credit unions’ core processing and technology systems didn’t allow them to compete,” Morgan explained. “Individually, they didn’t have the capital. So they needed to come together to get the best deal and purchase technology services that allowed them to offer the same broad range of products that the larger credit unions do.”
There was another issue also hurting growth at small CUs–the very real cost of employee healthcare and the more abstract but just as real cost of not being able to offer competitive benefit packages to attract and retain the employees they needed.
The CUSO addressed the issues by contracting in 2005 with Innovative Technology, an Omaha, Neb.-based service bureau that runs the Summit system, to outsource IT functions. Health benefits were similarly outsourced, in this case to ADP Total Source.
The results have been good, according to Morgan. The new IT arrangement is allowing CUs to add new products and services, keep costs in line, and grow assets–and the healthcare benefits packages are “attractive and affordable.”
Morgan cited examples of individual CU healthcare savings ranging from $18,000 to $22,500 annually. And since managing healthcare costs has been outsourced, some CUs are reallocating resources to other initiatives.
On the tech side, the credit unions utilizing the CUSO are integrating data processing, home banking, audio-response, online lending, while in some cases also going from batch to real-time processing, often at a cost below what they were previously paying, Morgan said.
The $21-million Great American Community CU in Grand Junction, Co., has grown “significantly,” Morgan noted, adding a number of e-commerce tools like e-statements and online loan application. “Now they’re doing shared branching because it’s affordable.”
Formed in 2005, the CUSO is considering other ways to drive economies of scale, such as fraud prevention, compliance services, and possibly collections. “We are looking to expand the CUSO,” Morgan said. “We are open to having ownership outside of Colorado and Wyoming, as well as working with other leagues and associations. Clearly the more buying power we have the better for everyone.”
