OVERLAND PARK, Kan.-Collaboration and CUSOs are credit union strengths, but one analyst is warning there are conditions that can tear collaboration apart.
Tony Ferris, partner in the Rochdale Group, noted the "state of the union" of credit union collaboration is affected by competition and the state of the economy. "Credit unions are realizing more than ever the need for competitive differentiators, and one of the key differentiators is member service, not back-office functions," he said.
CUSO investments have increased by approximately $230 million since the end of 2006, but Ferris believes that figure is "very telling," suggesting it is not comprehensive because many entities are part of collaborative ventures in which they likely have not formally invested. "I would suggest the level of CUSO and collaborative activity is definitely on the rise," he assessed. "It remains to be seen if those groups can put together the right types of activities or fall apart. But from a dollars and cents standpoint, and from what we have heard from the credit unions we are talking to, it is definitely on the rise."
As with every industry out there, he said, credit unions realize "competition for the sake of competition does not help us achieve our goals. Rather, we need to focus on two differentiators: service and attributes to our members."
Keep Trust Alive Through Foresight
Most breakdowns of collaborative efforts within credit unions can be attributed to two (usually foreseeable and preventable) sets of circumstances, Ferris noted: political reasons or a loss of trust.
He said credit unions that have the foresight to identify the process and the rules of engagement for a cooperative venture ahead of time, and to build a structure that is made to last, are able to build member value and organizational competencies faster than a credit union working alone.
What issues most typically break up collaborative opportunities? "Trust is the first one, followed by either a perceived competitive threat or a loss of control," Ferris said. "It is very important to have outside facilitation from an objective party, defined rules of engagement and a defined purpose as to what the CUSO is goig after, and, most importantly, a vested interest. If nothing is at risk, it is too easy to pick up the marbles and go home.
"Know the value proposition and the best way to obtain the objective," he added. There is a constant evolution to the scope of CUSOs, and Ferris said the only impetus to change is the need to transform due to the economic environment credit unions are dealing with. "This has given credit unions the true vested interest to push these efforts forward. The next wave of collaboratives will run the gamut. There will be a push into products and services such as lending, but there also will be heavy activity in back office functions," he predicted.