The recent move by Wescom Credit Union to form an alliance with PSCU Financial Services to enter the credit card acquisitions business is a shrewd strategic move for the credit union and a prudent step forward for our movement (CU Journal, Jan. 30). This innovative arrangement illustrates the unique cooperation and collaboration within the credit union system that is our greatest strength and clearly differentiates credit unions from other financial services providers.
Moreover, the timing for initiating this type of alliance could not have been better. Past practices of allowing bankers to provide services to credit unions have limited credit union opportunities and strengthened those who are now clearly our enemies, as evidenced by the increasing, well-coordinated attacks from the banking industry. And in today's financial services environment, keeping credit union business within the family is not only more important than ever, it is also more achievable than ever. Virtually any service needed by credit unions can now be found within the credit union system itself.
Wescom has identified the key elements of its alliance with PSCU as follows:
* CU credit cards for credit union members. CUs that wish to sell their card portfolios will have an industry-based solution, so they know their members will continue to receive the fundamental CU benefits of service and value.
* This new service provides an industry solution to an industry need. In the last few years, hundreds of credit unions have sold their card portfolios to banks or bank-owned acquirers; CUs have very few options other than bank-owned acquirers.
* Credit cards are a core credit union service. We believe it's critical to preserving the long-term interests of the CU system to keep all aspects of this business within the CU movement.
* The target market of this project is credit unions and their members
Consumer Value
The alliance extends the credit union value proposition and provides members with traditional credit union benefits: better rates, lower fees, better service. Credit unions offer better rates and fees to members, which is conspicuously overlooked in the bankers' criticism of this project.
* Wescom and PSCU are committed to providing value to client credit unions and their members.
* A competitive advantage is better service and value to members which will increase the likelihood of their continued use of their credit union.
* The joint capabilities of the two organizations will provide a full-service solution to meet all the CUs' needs, including card processing, 24-hour call center, consulting and professional portfolio management.
This arrangement leverages the capabilities and strengths of two organizations committed to the credit union system to provide another industry solution:
* Wescom Credit Union has experience in providing industry solutions (Wescom Resources Group provides technology solutions to other credit unions; Wescom Financial Services provides investment services to other credit unions and their members).
* PSCU Financial Services is the nation's largest Credit Union Service Organization (CUSO). As a non-profit cooperative, the company is owned by more than 500 member credit unions nationwide.
* Both organizations are committed to the credit union philosophy and know the special needs of credit union clients.
Consistent with our mission and tax status, there are clearly defined roles for each partner that make the best use of their respective capabilities.
Credit union ownership of ILC's is specifically provided for in California law (Section 701.1 of the California Financial Code).
This is not a stretching of ILC ownership; Wescom Credit Union is an established financial institution, not a retail establishment. The ILC CUSO will pay all appropriate taxes and required UBIT taxes will also be paid by Wescom Credit Union. Credit unions like Wescom are highly regulated and CUSO operations are closely monitored to protect safety and soundness
I view Wescom's alliance with PSCU as the most recent example of credit union innovation and cooperation, but it is one of many such examples. Already we can count check processing, ATM support, and point-of-purchase lending as key systems we have been able to bring in-house, and additional future opportunities will become apparent as consumers demand greater sophistication of services from their financial institutions.
I applaud Wescom CU CEO Darren Williams and his credit union board and staff for their leadership on this issue, and I encourage others to devise such innovative, collaborative services. Keeping credit union business within the credit union system is a strategy that benefits the movement and the consumers we serve.
David L. Chatfield is president of the California and Nevada Credit Union Leagues, Rancho Cucamonga, Calif.
