Is Your CUSO Ready to Take on the CUSO Challenge?


Credit Union Service Organizations (CUSOs) while essential and significant players in the industry, have often taken a backseat to the credit unions they serves, failing to leverage their own financial capabilities and industry influence. With over 1,100 CUSOs in the United States, and that number climbing, the overall reach of CUSOs has increased significantly. It’s time for them to step up and claim a larger role.

In supporting that goal and working to inspire other CUSOs to do the same, Variable Ventures and its partner NACUSO have created the CUSO Challenge, complete with five initiatives for CUSOs to take part in. These initiatives cover a wide area, from helping in the creation of de novo credit unions to a CUSO run think tank designed to inspire collaboration and innovation.

The five initiatives:

1. De novo credit unions

With the number of credit unions dwindling each year and mergers appearing around every corner, it’s essential CUSOs help create and support new aspiring credit unions. The complex and exhaustive process new credit unions must navigate discourages interested parties in taking on this task, and ultimately does little more than put a cap on industry growth. Vic Pantea, Manager of Marketplace Alliances, and one of the creators of the CUSO Challenge noted, “In order to really make this goal effective, we need to change and streamline the process of how charters are approved. It is historically a very trying event for any party to work with the federal government to start a credit union. We see new credit unions taking three or four years to get established. It should be a multi-month event, not multi-year.”

One large setback for de novos is that the NCUA views new charters as a risk to the insurance fund, when that is simply not the case. Seen as a new entity without extra capital and people with limited experience, de novos tend to make the NCUA nervous. However, the majority of new credit unions that end up going under within a few years tend to merge with other credit unions and add to their assets, creating no loss for the insurance fund. Therefore, the NCUA needs to reconsider how extensively they scrutinize potential credit unions.

Since the creation of the CUSO Challenge, this initiative has been incredibly well received, gaining support from a number of CUSOs seeking to collaborate, be it through monetary means, providing product expertise, or through discounted services or lower pricing models. The end goal being to not only find ways to support these credit unions, but also to change the system of their creation.

2. Scholarship programs

Jumping off the first initiative, the second aims not just at supporting the creation of new credit unions, but the sustainability of established ones. As credit union service organizations, the life force of CUSOs is tied to that of credit unions. As the number of credit unions dwindle, there will be less of a need for CUSOs, creating more competition and putting many CUSOs, especially those serving few clients, at risk. Twenty years ago, most CUSOs would not have had the ability to raise funds for struggling credit unions due to lack of capital, but today some of the larger CUSOs are multi-million-dollar businesses. There is a fair amount of funding available for small or de novo credit unions that can come directly from the CUSOs. By helping new or struggling credit unions succeed, CUSOs can also protect their own futures as well.

3. Think tank

To keep our industry moving forward and on par with the competition, it’s essential that creative professionals continue innovating and creating. This was the inspiration behind the third initiative, which calls for the founding of a CUSO think tank. “If you look at where much of the innovation for the credit union industry takes places, it’s in CUSOs,” Pantea commented.

When looking for a place where the investment in new ideas and the effort to develop new ideas and identify new products (operating solutions, delivery channels, etc.) occurs, it often occurs in the CUSO environment. While credit unions may find themselves taking risk averse strategies due to their fiduciary responsibilities, CUSOs have more room to entertain entrepreneurial and risk-forward initiatives. However, simply developing new ideas will not provide the industry with the innovation it needs. The think tank needs those with the ability to take action on those ideas and implement them into the industry.

4. Deposit insurance program

Going hand-in-hand with the third initiative, the CUSO Challenge believes the current deposit insurance program could use a redesign. When asked about this challenge, Pantea remarked, “If you look at a product that exists in today’s world, that hasn’t changed in its nature, features, or functionality since 1933, you’re looking at something that is quite unusual. It’s natural for things to evolve over time, and that includes credit union programs. Aside for the amount of coverage, the deposit insurance program looks exactly as it did in 1933 when it was established for banks, and as such, is long overdue for an update.”

CUSOs must reexamine the program in its entirety when brainstorming ways to improve and reshape it. They must evaluate all aspects, such as how important deposit insurance truly is now, if there is a threat to those deposits, or if there is a more cost friendly or simply more effective method than what is being using right now.

5. NCUA governance

If the CUSO Challenge is really setting out to inspire change within the industry, it will need the support of members on the NCUA Board. However, very few board members in the last 50 years had previously worked in the credit union environment. Most do not have the backgrounds in or knowledge of what they are regulating. Furthermore, the process for getting on the board is not at all transparent.

This initiative aims to not only clear away the confusion surrounding the nomination and selection process for NCUA seats, but to fill those seats with more qualified members as well. CUSOs in particular need to make sure their interests (and not just the credit union interests) are covered. In theory, it may seem as though credit union and CUSO interests should be one in the same, however there are a few areas where they are not. For example, the NCUA is currently seeking to have authority over what vendors credit unions can use (i.e. insurance, data processing, and yes, CUSOs), but the NCUA does not have the expertise to make those decisions and audit those companies. Should the NCUA approve this, certain vendors and potentially CUSOs could be prevented from working with credit unions or may need to change how they work with them entirely.

The CUSO Challenge therefore argues that there are enough CUSOs of influence in the industry that they could play a much larger role in determining who gets those seats, should they choose to step up and use their influence.

Getting involved

Should a CUSO want to support any or all of the initiatives in the challenge, they should visit the CUSO Challenge site and reach out to Variable Ventures. CUSOs should consider what initiatives they have the ability and resources to support, and how they plan to do so. As previously mentioned, CUSOs can harness their influence through monetary means or by offering their expertise or products.

It is time for CUSOs to stop being sideline participants in the credit union industry and use their influence to inspire positive and effective changes where needed. If you have any questions on the CUSO Challenge or wish to learn more, visit the CUSO Challenge website.


  • Connie#1

    August 7, 2020

    Emily this is a great article. Love the challenge and hope to see CUSO’s step up with their influence.


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