CUSOs and Innovation: A Deep-Dive into Their History and Future Disruptions

CUSO innovation and phases

You might already think of Credit Union Service Organizations (CUSOs) as the unsung heroes of the finance industry. But dig a little deeper, and you’ll find that, unsung or not, these stalwarts have a history that resonates with innovation. From conceptualization to modernization, they’ve revolutionized financial services, especially in credit unions.

I invite you to join me as we journey through the past CUSOs, observe the present, and speculate about the exciting future.

Phase 1: Early CUSOs and the Birth of Innovation

CUSOs emerged in the 1970s as a solution for credit unions to pool resources and offer ancillary services. But change seldom comes easy. Navigating regulatory landscapes was akin to trekking through a dense forest. NCUA regulations, enacted to protect the credit union industry’s safety and stability, were initially not as accommodating for these fledgling entities. Like a hiker adapting to harsh weather, the pioneers of the CUSO movement had to find a way to flourish within the regulatory boundaries.

Getting their unique business models off the ground involved significant risk. This involved convincing credit unions to invest in and share ownership of a CUSO, which was an untested and nascent concept at the time. Many credit unions, despite seeing the potential benefits, were hesitant about the prospective rewards and risks. Overcoming these concerns required robust stakeholder engagement and confidence-building measures.

Florida-based PSCU, originally named Payment Systems for Credit Unions, was a groundbreaking endeavor kickstarted by five tenacious credit union CEOs in 1977. Their goal? To provide cutting-edge payment solutions to credit unions before the traditional banks could. Fast forward to today, PSCU provides services to over 850 credit unions, boasting more than 2 billion transactions annually. 

Early in my career I sat down for breakfast with the late Dave Serlo when I was first starting Ongoing Operations (OGO). Dave had one stipulation for PSCU to get involved: “Go big!”

At the time, we had 9 credit unions. They were all from the Washington, DC area and Dave felt that we had to solve the problem on a nationwide basis for all credit unions. He was right. OGO went on to pioneer the use of virtualization, data vaulting, and cloud computing for over 150 credit unions.

Next in our saga is COOP Financial Services. Born in 1981, this forward-thinking CUSO was the product of ten Californian credit unions with a vision of connected, convenient, and shared services. COOP revolutionized the credit union industry, with over 30 million consumers accessing their shared branching and surcharge-free ATMs today. 

In the mid-90’s, the company Origence, previously known as CU Direct, was founded to provide credit unions with innovative technology and auto lending solutions. They developed CUDL (Credit Union Direct Lending), a platform designed to enhance the lending process for credit unions and their members. CUDL put credit unions in auto dealers for point-of-sale (POS) auto finance lending. Today they have over 19,000 dealers on the platform and generate billions in loans annually for credit unions.

These entities also faced the significant challenge of evolving product offerings and systems to meet the increasing expectations of credit union members. The success of more prominent players like PSCU and COOP didn’t come from bearing their initial product offerings alone but from their ability to innovate and adapt.

Phase 2: Embracing Fintech Innovation Today

Fast forward to today, where we encounter a new breed of CUSOs, exploring uncharted territories of fintech innovation. The goal? Maintain the driving spirit of the founding CUSO clans, matching pace with technological advancements, and democratizing finance to meet shifting consumer expectations.

“CUSOs are poised for a renaissance as credit unions face future waves of technological advances. The adaptability of CUSOs to the needs of credit unions is unmatched.”  — Benson Porter

Take PayOnward. PayOnward has developed a novel digital payments suite that uses artificial intelligence to process payments at a lower cost, providing a boon to both businesses and consumers. By bringing community-based financial institutions back into the commercial forefront, this platform aims to democratize finance and bolster local economies.

HR retention and payroll systems have not escaped the crosshairs of pioneering CUSOs either. Say hello to VEEP. It offers a solution for employees to access pay when they need it, with utmost data protection and reduced costs. This entity is taking the credit union industry by storm. Credit union hourly employees (and members) can receive a portion of their pay when they have worked the hours, increasing the financial wellness of these employees. More timely pay helps avoid overdraft and NSF fees and other painful financial experiences.   

Completing our trio of innovators is Open Banking Solutions. This game-changing CUSO brings an API-driven and cloud-based core and digital banking platform to community-based financial institutions. It’s a new dawn, where CUSOs help credit unions become agile competitors, leveraging open banking initiatives, and leading the digital transformation.

Phase 3: Charting New Terrains in the Future

With previous CUSOs setting an impressive standard, what does the future look like? Partnerships. Innovative funding. Evolution. The creation of initiatives like the Black Dragon Capital and the CURQL fintech funds reveals an exciting future for CUSOs. They will continue playing the pivotal role of connecting traditional credit union services with pioneering fintech solutions.

Innovation and entrepreneurship aren’t for the faint of heart. Just as one navigates tricky terrains on a hike, maneuvering through the world of finance requires both courage and creativity. Our goal? To help credit unions and entrepreneurs build robust companies that make substantial industry contributions, leave an enduring legacy, and of course, enjoy the journey.

So, buckle up, fellow adventurers. The future of CUSOs and fintech is here, and it’s a ride like no other. Let’s dive in, disrupt convention, champion change, and remember: innovate, grow, and enjoy the climb.

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