The CUSO evolution continues

Over my past 20 years of supporting credit union growth, it has become increasingly clear that Credit Union Service Organizations (CUSOs) are the most effective vehicles for strategic expansion. In that time, we’ve witnessed the evolution of CUSOs unfold in three distinct chapters—each building on the last, each redefining how credit unions collaborate and compete.

The earliest CUSOs emerged from collaboration. Several credit unions would join forces, each contributing resources to form a multi-owned entity. These organizations were created with a shared purpose: to leverage scale and existing vendor relationships in order to reduce costs for each participating credit union. By acting collectively, CUSOs could negotiate better pricing and service terms than individual institutions could achieve alone.

A prominent example is PSCU (originally Payment Systems for Credit Unions, now Velera), which began in 1977 when five Florida-based credit unions came together to offer better products and services to their members—at a lower cost. Other examples include Credit Union Direct Lending (CUDL, now Origence) and Open Technology Systems (OTS), both of which were founded by multiple credit unions to achieve similar scale advantages. Regional lending CUSOs also fall into this category, designed to pool expertise and infrastructure to serve local communities more effectively.

A second subset of traditional CUSOs are those independently owned by a single credit union. These were often formed to offer services not directly permissible for credit unions or better suited to be operated through subsidiaries—such as investment or insurance services. As noted by "the CUSO Guru" (and my mentor) Guy Messick in his 2019 CUSO guide on investment and insurance offerings, these wholly-owned CUSOs allowed credit unions to extend their reach while remaining compliant.

Interestingly, we are now seeing a revival of this model to meet contemporary needs. A notable example is the emergence of compliance CUSOs, in which multiple credit unions pool resources to build shared infrastructure and expertise—reducing duplication and increasing efficiency across the board.

Roughly seven years ago, a new chapter began as fintechs started entering the credit union ecosystem. Credit unions, long seen as a relatively sheltered market, began to feel the effects of private equity investment and industry consolidation—such as Thoma Bravo’s acquisitions in the lending tech space. It was only a matter of time before fintechs turned their attention to credit unions, drawn by their deep member relationships and efficient paths to market.

These fintech firms leveraged technology to reduce customer acquisition costs or deepen engagement with existing members. Then the COVID-19 pandemic hit, accelerating the push for digitization in lending, onboarding, engagement, and more. Suddenly, the question in boardrooms shifted from “Should we compete with fintechs?” to “Should we collaborate with them?”

Many credit unions began to see partnerships with fintechs as a way to enhance traditional financial offerings. Fintechs gained access to distribution channels, while credit unions delivered targeted products to key demographics.

This convergence led to the creation of investment vehicles like Curql Fund I and its sister organization, Curql Collective. These initiatives allowed credit unions to professionally invest in a diversified pool of fintech innovators. As a result, new hybrid CUSOs formed—where credit unions now sat side-by-side with venture capitalists and entrepreneurs on the cap table. This alignment created new incentive structures, attracting top talent and providing a competitive edge in recruiting.

The result has been a surge of fintech-credit union collaborations, delivering innovative products, enhanced member experiences, and a new generation of growth-oriented CUSOs.

Following the fintech boom and abundant liquidity of recent years, we’ve entered a new phase—marked by tighter capital conditions and more cautious investment strategies. Capstone's CUSO practice has observed a notable trend: a growing number of credit unions are shifting their focus to acquiring or investing in mature, income-generating companies.

These companies bring steady cash flow, proven operations, and products that help deepen member relationships. One of the most popular strategies involves acquiring private insurance agencies. These transactions serve a variety of strategic objectives:

In many cases, these acquisitions allow credit unions to enter new geographies or acquire local talent. For example, buying a property and casualty (P&C) agency in a new region provides an immediate foothold in that community, staffed with experienced professionals.

Additionally, CUSOs are expanding into:

These “mature” sectors allow credit unions to access skilled teams through “aqua-hires,” while offering members valuable products and generating sustainable non-interest income. Notably, while Chapter 3 of the evolution is underway, Chapter 2 continues to thrive: Curql recently announced it raised an additional $309 million from 83 credit unions for Fund II—proof that fintech collaboration remains strong.

I won’t claim to have a crystal ball, but the fourth chapter in the evolution of CUSOs will likely include:

What’s clear is that the CUSO model remains as relevant—and powerful—as ever. Whether driven by fintech partnerships or traditional business acquisitions, CUSOs continue to offer unmatched opportunities for growth, innovation, and member impact. I say, bring on the next chapter! The CUSO evolution is far from over—and that’s a good thing for credit unions, their members, and the communities they serve.