In payments shakeup, CO-OP Financial Services absorbs TMG

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In a move expected to impact more than half the nation’s credit unions, CO-OP Financial Services today announced the acquisition of TMG (formerly The Members Group), the Iowa-based card processing and payments firm.

California-based CO-OP has been a minority owner of TMG since 2012 and the full acquisition is a significant development in the credit union payments space – though not a wholly unexpected one, representatives from the two companies said.

“As we thought about where we needed to go as an organization – both CO-OP and TMG alike – we looked at the product sets and decided they fit well; we looked at the talent pools, they fit extremely well, and it seemed like the right time and the right place to go ahead and make that partnership a full-on marriage,” said Todd Clark, president and CEO of CO-OP.

Among the most notable elements of the deal is that TMG CEO Shazia Manus will join CO-OP as chief product and strategy officer.

In order to finalize the acquisition, CO-OP purchased the remaining ownership share of TMG from the Iowa Credit Union League for $100 million. Clark noted that while he was the one to approach the league about the deal, the original partnership between the two implied that they might ultimately consolidate.

“It’s fair to say that the original purchase agreement and partnership was conceived in a way that would make this type of thing easier in the future should it ever come to fruition,” he said. “There wasn’t an option or anything, but it was certainly tailored that way.”

CO-OP already serves about 3,500 credit union clients, and Manus and Clark estimated approximately 60 percent of TMG CU clients are also CO-OP clients.

“The reality is that whether you’re directly impacted or indirectly impacted, this is a monumental day and it rounds out the CO-OP product set across the board,” he said. “I think we’re the only folks out there able to offer credit, debit and the network, as well as a shared branching offering. It’s a really well-rounded product set to go and serve all of our credit union members.”

Changing face of CO-OP
The transaction was finalized on Friday and made public Monday, with Clark and Manus appearing together at TMG’s Des Moines headquarters for the announcement. All TMG employees are expected to continue in their current roles and Manus said CO-OP has made “a long-term commitment” to TMG’s Iowa location.

Along with the merger announcement, CO-OP also unveiled an executive restructuring and several new appointments, including adding executives from Fiserv, First Data and Freddie Mac.

“While we’ve always been a services-oriented company with a tech background, we’re going to move technology to the foreground,” Clark said of the new appointments, adding that full acquisition of TMG was a crucial component of capturing that technology-focused mindset. “It’s fair to say that in the credit union space, TMG is well out in front of everybody from a tech perspective.”

Clark declined to state whether CO-OP was considering further acquisitions, but said the company planned to continue to look for products and technologies that met credit unions’ needs.

“As those technologies and companies are available for this type of thing, we’ll look to invest in those companies as we’ve done for many years,” he said.

While CO-OP currently exclusively serves credit unions, TMG serves a handful of clients from the for-profit banking world. Clark did not rule out branching out into serving more banks – “I’m not hung up on it one way or the other,” he said – but emphasized that the primary focus for the next 18 months would be integrating the two organizations’ technologies.

‘Significant impact’
Just as notable as the deal itself is Manus joining the CO-OP fold – a move particularly notable given her role as a female CEO of a major part of the credit union landscape.

“I don’t look at it as [moving into] a subordinate role,” she said, noting that as chief product and strategy officer she will be playing a significant role in a larger organization with a broader impact, covering not just payments, but also branching, fraud mitigation and more.

“If I look at Todd’s executive team, it’s 50/50 male and female – four very strong, powerful, able, capable leaders,” she added. “Being a champion of the cause of women, this is something I’m really passionate about, and if I didn’t feel I had a voice along with influence, I wouldn’t pursue this role. I really feel I’m able to bring in not only my expertise and experience, but I can elevate it to a higher plane where I can touch the lives of many and make a significant impact.”

With approximately 3,500 credit unions as members, CO-OP serves an outsized portion of the overall CU landscape, but that landscape has contracted significantly within the last decade as even healthy, profitable credit unions and state leagues merge in order to gain efficiencies and save money (to say nothing of smaller, struggling institutions being absorbed into larger ones).

“We’re all aware that credit unions in general are consolidating to gain efficiencies and serve their memberships better; I think it’s incumbent upon us as partners in the industry to be looking at the same thing,” said Clark, adding “Consolidation is nine-times-out-of-10 an efficiency play, and that’s something we’ll bring to market.”

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Payments M&A Technology Shared branching
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