The Pray are Fighting Back

UNDERGROUND Thriller Coverage

LAS VEGAS–A new shared service model being developed is really about the “prey fighting back” and putting an end to “predatory” tech, according to several credit union leaders.

The comments came during a discussion on the Credit Union Shared Service (CUSS) model being developed by Mitchell Stankovic and numerous other CUs, CUSOs and companies and were made during the Underground Thriller event in Las Vegas. The session was one of two that focused on CUSS and what it is about (see separate story).

Participating on the panel were:

• Tyler Valentine, president and CEO of Stagepoint FCU
• Linda White, executive director of the Credit Union Women’s Leadership Alliance (CUWLA)
• Amber Harsin, VP-credit unions, with Mambu

The session was moderated by Sue Schroeder, strategic consulting officer with Your Credit Union Partner.

The Objective

At the heart of the CUSS initiative is an objective of lowering costs, both financially and timewise, for smaller CUs to leverage technology in order to better service members (although it is open to CUs of all sizes).

Schroeder noted that when YCUP meets with credit unions, there is a challenge that frequently “blocks the sun” in all conversations, and that’s the core system and conversions. For smaller CUs especially, limited core functionality (or obsolete cores) make it almost impossible to implement new solutions, she noted.

The Other Question

But Schroeder added that a question around “what is small?” also needs to be asked.

“When you look at (certain CUs’) charter types and where they’re located, the differences mean we need micro-segmentation and not just a broad-based view on asset size,” said Schroeder. “Predatory tech has got to stop, because that costs staff, that costs going into low-income and moderate-income communities, that costs the chance of tomorrow. So, if we want to pivot the movement we’ve got to change.”

No More Getting Eaten

Stagepoint FCU CEO Valentine shared with the audience his experience in merging in a $30 million credit union on Oct. 1 of 2024.

“It’s going to cost me more than $1 million to get out of their card and core contracts. It’s with one of the big ones, and there’s no conversation in which we’re working with them and trying to talk with them. This wasn’t a ‘partner’ conversation, this was ‘Somebody’s holding me captive.’ This was a predator preying on a small credit union that didn’t know better and didn’t have the resources to do anything different.

“In this case, I really feel as we’ve talked about this model that this is the prey fighting back and saying we’re no longer going to be eaten by predatory partners,” continued Valentine. “We’re no longer going to sign these contracts. We are going to move ourselves away from the partners that think of us in that way.”

Valentine described smaller credit unions as “small but mighty,” noting they represent $89 billion in total assets and represent the largest number of individual CUs.

‘Exponentially Higher’ Core Costs

“We may be small but I represent 10,000 members,” he said. “There are people behind me and I don’t think that is largely recognized. I also think from a core perspective, when we talk about pricing, we need to look at it from the member-level. I pay $2.33 per member each month on my core. I would love to know what a billion-dollar, a $10 billion shop pays for their core per member, because I guarantee you my marginal cost is exponentially higher than that large credit union, and that puts me at a disadvantage in serving my members and fulfilling my mission.”

The Definitions

In offering her perspective on the shared service model, Mambu’s Harsin shared the definitions of several terms she said helps define the reality for most smaller credit unions. Those terms included:

• Conversion. “That really just means to kind of retrofit something for something else,” Harsin said, offering as an example switching from one large data processor to another. “Often, we’re just getting a slightly different flavor of the same thing.”
• Transformation. “Over the last five years we’ve really started to talk about digitization and the digital transformation of our financial institutions,” Harsin shared. “The definition of transformation is a little bit better. It’s a major change in the form, nature or function of something. I think where we’re at right now and what we’re seeing coming out in the technology space are what I would call third generation cores. This is the push for open banking in the U.S.”
• Metamorphosis. “The definition of metamorphosis, and this is why I like it, because it’s where we’re at right now, is a series of energy intensive stages where an organism undergoes a radical change from one life stage to another,” Harsin said. “That’s what we’re talking about now is these boutique credit unions are at a place where I believe technology can enable this metamorphosis.

‘Catapulting’ Ahead

“It’s not going to be easy. It is going to require a lot of time and energy and, as a couple people said (during the Underground Thriller event), if we aren’t making those decisions today for three and five years from now, it’s going to be too late. I think we’ve just reached the cusp of where the credit union passion and desire has been here and has continued to grow, but some of our technological choices have now caught up and we’re in a space where we might be able to actually use those to catapult ourselves into that next space.”

‘Don’t Know What You Don’t Know’

In listening to the conversation and presentations during the Underground Thriller event, White said some of the impressions she received included that many credit unions eager to serve members lack data insights and don’t know what they don’t know. As a result, they are not reaching the people they need to reach.

“The barrier is resources and capacity,” noted White. “So, how do we collectively get it to where we can bring (the shared model) in and show the credit unions the return on the investment? That’s the other thing. A provider (may say to a credit union), ‘It’s only $5,000 a month.’ For a small credit union that $60,000 is probably what the manager is making.”

Avoiding the King’s Ransom

In addition, said White, while everyone recognizes “data is king,” getting to it can cost a king’s ransom, even if that analysis offers valuable insights into where members are transacting, where they may have financed purchases with other lenders, and more.

“For a small credit to get that data out of their system, the question is how do you get one person who could do that for multiple credit unions all at the same time, because (individually) they just don’t have the time?” White asked. “Not everybody has the staff to go ahead and take the time to do that. How to you tell the member about everything else you have that you have to offer? The big challenge is that the people that need it don’t know it, and the people that do want it don’t know how to get it.”

To that end in this example, White said the shared service model can allow for shared analyst services.

A Compatibility Test

Harsin said it’s a challenge the CUSS model is taking on and aiming to solve for, and she offered a core system that is compatible with open banking as an example.

“I know open banking is a swear word to some of you now because we don’t all get it yet and it feels like we’re giving data away,” Harsin said. “We are to some degree. But you know what else? We can get data back out of it.”

Using herself as an example, Harsin noted she has four credit union relationships, one bank relationship, numerous credit card accounts, accounts with fintechs and investment accounts. The core systems at her respective CUs have a limited view of her total financial situation, she pointed out.

With open banking, both she and her credit union are more empowered to see the full picture, Harsin stated, meaning the “boutique” credit union’s ability to personalize her experience goes up exponentially.

The Dream

“We sure as hell can’t do it with the cores we have today. I don’t think they’re going to be ready for open banking,” Harsin forecast. “But this is the dream. I think we’ve all had with this think tank (CUSS) around what that would look like. If we can all use that power of collaboration, can come together and say we’re willing to make some compromises maybe in some of the tech stack, we can build essentially a credit union in a box that has best of breed technology.

‘Pretty Powerful’

“And if we’re building it on the right kind of technology–cloud native, SaaS–when that vendor isn’t doing their part anymore we switch them out. It’s not very hard anymore,” Harsin continued. “It’s not a two-year or three-year project. The ability that this model can give to us in the United States is pretty powerful.”by years of financial sacrifice. Instead, let’s commit to valuing the selfless service of these executives and build a more sustainable future for all credit union leaders.

Want to learn more?

Attend our next UNDERGROUND Collision to learn more about CUSS (Credit Union Shared Services) and how it can make a difference for your credit union.

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