NEWPORT BEACH, Calif. — More credit unions are turning to CUSOs for many of their non-core services, with analysts saying that could be very welcome news for the long-term health and efficiency of the movement.
"The only way to sustain this industry is through collaboration. Credit unions need to become interdependent. The CUSO environment is the perfect model where credit unions can share redundant operations and generate new income," contended Mike Hales, director of NACUSO and president/CEO Small Business America. "The recession is something that has helped people think in that direction."
Hales pointed to call centers, compliance, human resources, payroll and a variety of other areas where credit unions can utilize CUSOs to accomplish what they once did in-house for a fraction of the cost. Several CUSO CEOs told Credit Union Journal that they are noticing greater demand for their services in an economic environment where efficiency is not just desired, but required for survival.
"We're seeing more outsourcing on ALM reporting," noted Brian Hague, president/CEO of CNBS, an investment services and brokerage CUSO. "I think people recognize that as soon as you factor in the cost of the model and the expertise to run the model in house and interpret that it's cost-effective to outsource."
Communications and marketing organizations are also seeing an uptick as CUs try to keep their budget manageable while still trying to grow their business and reach new members.
"We cost fractions of what a person on staff does," said Ron Daly, president/CEO of DigitalMailer. "This is one of our best years ever because credit unions want to do more with less."
Credit unions need to overcome a major structural hurdle to fully embrace the CUSO model and real industry-wide collaboration, Hales argued. The desire by a huge number of institutions to be seen as the "good guy" to members, the community and employees has led to wildly inefficient operations caused by severe overstaffing.
"The biggest problem is that to achieve the economy of scale and efficiency we have to reduce staff and nobody, particularly credit unions because we are the nicest people in the world, wants to reduce staff. We're sacrificing efficiency, profitability and member value," said Hales. "The sustainability of the industry dictates two things: we have to reduce expenses and gain revenue."
