Just days after announcing it has formed an alliance with the two other shared branching networks, Service Centers Corp. (SCC) announced plans to merge with CU Cooperative Systems, Inc. , parent to the Ontario, Calif.-based CO-OP Network, which operates a national selective-surcharge ATM network. The combined entities will be called CU Cooperative Systems, Inc.
The boards of SCC and The CO-OP approved a letter of intent to combine the two firms into one entity, but there will be two operating units, EFT and shared branching.
SCC, which has a business presence in 12 states plus the District of Columbia, currently serves almost 350 credit unions through its Credit Union Family Service Centers shared branching network, its SC24 EFT network, or both, and has a combined monthly switch volume of approximately 10-million transactions. CO-OP Network operates in 49 states, serves more than 800 credit unions with a range of EFT support products and services, and has a monthly switch volume of more than 45-million transactions.
The resulting combined ATM network will serve more than 1,150 credit unions with more than 12,000 ATMs around the country. Those ATMs will offer surcharge-free service to network participant cardholders.
The proposed merger is still subject to completion of a due diligence process by each organization, development and execution of a final merger agreement and final approval by each organization's respective boards and shareholders. A definitive agreement is expected to be completed by the end of March for later action at the annual shareholders' meetings for each organization.
"We are extremely excited at the strength of such a merger and the significant synergies it should create and bring to our respective participating credit unions and to the credit union community nationally," said SCC CEO Dan Balagna. "We've seen unprecedented consolidation across the general EFT industry in just the last two years, resulting in credit unions having less ownership and policymaking roles in the larger payment systems arena for services considered vital to their ongoing success.
"CO-OP Network has been very successful in pursuing its objective of becoming the national ATM and debit network for credit unions, and up to now, we've been focusing on our own organic growth opportunities, as well as the outright acquisitions of other credit union ATM networks," said CO-OP Network CEO Robert Rose.
SCC will develop a link to the CO-OP Network system that will support transactions between the two organizations' participants and respective ATMs. SC24 ATMs will be re-branded after the merger is consummated, and current SC24 cards will be re-branded with the CO-OP Network logo as they are re-issued.
Prior to the announced merger, SCC had announced an agreement with Financial Service Centers Cooperative, Inc. (FSCC), San Dimas, Calif., and Credit Union Service Corp., the other two share branching networks. That followed more than a year of planning and ironing out the technology and operations side of things. The alliance will will provide international remote branch access to more than 16-million members.
Between SCC, FSCC and CUSC, the three shared branching networks serve 950 credit unions and have 719 locations across the country as well as in Guam, Japan and South Korea. FSCC and CUSC had already established such a partnership about eight years ago before welcoming SCC, which pioneered the concept of shared branches beginning in Michigan more than two decades ago.
The decision by the three networks follows an earlier move to pool their resources to hire The Bramwell Group, Cleveland, Ohio, which conducted a study on who uses shared service centers last year.
"SCC got its start 26 years ago, and we consulted with the other two and offered them advice when they were first getting started, so we have always cooperated," said Bryan Conroy, VP-marketing for SCC. "But we had never officially teamed up like this before, so this is new. But we have always been in contact."
The closest collaboration the three have been involved in was the formation of Credit Union Service Centers Network, Inc., which acts as a single national switch for shared branch transactions among the networks.
But this is the farthest-reaching alliance the three have engaged in to date.
"This is truly an exciting time for credit unions involved in shared services," said Mike Culbertson, CEO of CUSC. "This cooperative endeavor between the three networks puts credit unions one step closer to the vision of serving their members anywhere, anytime, using any method."
The idea behind shared branching has always been to provide added convenience to members as part of an effort to compete with the large banks with the resources to have branches all across the country.
'One Step Closer'
"Imagine being able to transact your financial business at any one of 10,000 branches nationwide," said Ed Callahan, CEO of Patelco CU, san Francisco. "Credit unions have the capability to make it happen today, and the link to SCC brings us one step closer."
Should credit unions ever link the more than 10,000 branches across the country, it would create a physical presence that dwarfs that of even the biggest banks. Bank of America, Charlotte, N.C., has 4,274 banking centers in 21 states and the District of Columbia, as well as international offices in 38 countries. Citibank, a unit of Citigroup, New York City, has 1,400 branches in 46 countries.
"This puts us in the same ballpark as the big banks," Conroy observed.