The CUSO renaissance

It’s been nearly a decade since the Great Recession and for all the pain it brought, some good also came from those dark times. Among those positives was a growth in the number and variety of CUSOs.

For the decade starting in 1988, most CUSOs were focused on providing members with brokerage and other investment services. Then as operating expenses began to rise, credit unions began looking for ways to collaborate and share the costs of things like technology, compliance and human resources management.

It was the Great Recession, however, that really pushed the CUSO movement into high gear. As institutions crumbled across the country and margins were cut razor thin, credit unions were forced to find less expensive ways to do business. Saving money became an imperative and thus, CUSOs became a necessity.

When the Recession hit, I was working for a major fintech company who shall remain nameless, so my world view was probably jaded, but at the time, it seemed that the old adage of “you get what you pay for” clearly applied to CUSOs. Sure, they offered a cheaper alternative to for-profit providers, but imho at the time, those CUSO solutions were cheaper and inferior.

We can argue all day about whether that was really true back then, but I think we can all agree that it’s definitely not true now. From my vantage, CUSOs are going through somewhat of a renaissance. Not only are CUSO solutions more cost effective; they’re also plain better, especially when it comes to technology (which happens to be my specialty).

How can that be? How can a mere CUSO possibly compete with the deep-pocketed 800-pound gorillas of financial technology? I think the answer is threefold.

First of all, underlying platform costs are much lower now. Thanks to the cloud, even small organizations can have access to state-of-art computing horse power. It simply costs less to put a good tech product on the market today.

Second, because CUSOs are smaller and less layered than giant corporations, they’re nimbler. That’s absolutely essential in today’s ultra-fast-paced marketplace.

The third and most important reason that tech CUSOs are often better is that they’re in touch with what credit unions actually want and need. While for-profit companies answer to Wall Street and are often more interested in promising the feature their next billion-dollar customer will want, CUSOs are able to focus on what real credit unions need today.

Don’t get me wrong. There are some excellent for-profit technology providers out there. All I’m saying is that it makes sense to look at CUSOs first. Just like any other company, no CUSO can meet every credit union’s unique needs. On the other hand, if a CUSO can in fact build you a better mousetrap for less money than the big guys, the smart money says go with the CUSO. You’d be foolish not to.

John San Filippo

John San Filippo

John is the co-founder of OmniChannel Communications, Inc., a company that specializes in B2B marketing to community financial institutions. He started out in the savings and loan industry, but wisely ... Web: www.omnichannelcommunications.com Details