By Kirk Drake
If you are interested in learning about the difference between how a CUSO delivers technology vs. a normal company you have come to the right place.
Quite often I am asked, especially by folks outside of the Credit Union industry, what is a CUSO? A CUSO, or credit union service organization, is a special type of entity that is owned and operated by Credit Unions. Credit Unions are not-for-profit financial institutions that unlike banks return all of their profits back to their customers or members.
The primary rules for what the NCUA, National Credit Union Administration, says creates a CUSO is a credit union investing in an entity. With the credit union investment comes a string –51% of the business must be focused on credit unions. There a good and bad things that come with this classification.
First the Good
- Our owners are some of our best consumers of our products.
- Our ownershave a vested interest in our service levels and quality of products.
- Our owners, being financial institutions, havemuch lower cost of capitaland are willing to continuously invest in the business.
- Our ownerstake the long-term viewand are not creating a company with the goal of exiting or taking advantage of an opportunity in the market. Instead they are focused on building a long-term sustainable business that provides their organization the tools they need to compete and be successful.
- Our owners havehigh expectations of service and security, beyond what a normal market player provides.
Now the Bad
- Our solutions need to be credit union focused – if you aren’t a credit union it doesn’t mean that you don’t share the same values and expectations of credit unions – in which case we are good fit. If you don’t believe in collaboration, listening, value driven business decisions and are just looking to make a quick buck – we probably won’t match your expectations.
- A national regulator, the NCUA, can come in and examine us through our investors. They can’t tell us what to do but they can put pressure on our investors indirectly (this has never happened in 7 years though…)
- Credit Unions are not the fastest adoptersof new technology. This means we are probably on the leading edge – but not bleeding edge.
- Sometimes we just don’t behave like normal mercenary, venture capital backed businesses. (we tend to like this…but it really confuses some people!)
