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How CUSOs Drive Innovation

For credit unions, CUSOs can help drive innovation with solutions for better member experiences, faster loan originations, and more.
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Credit unions are always looking for ways to better serve the needs of their members. In 2022, those members are increasingly sophisticated, especially in their desire for technology-driven solutions. The imperative for digital transformation can often pose a challenge for credit unions, whose strengths lie in tradition and personal interactions.

Today, handshakes are being replaced by apps – and entire loan experiences can be completed on a smartphone in minutes. As traditional ways of lending are being disrupted, global banks and well-funded fintechs are offering consumers new choices, new conveniences, and most of all… speed. Credit unions are pivoting to adjust, looking for lending, marketing, and member experience solutions that help them compete while holding true to their missions.

The good news for credit unions is that CUSOs can drive innovation in the credit union space by offering services that help community-based organizations keep pace with larger organizations. At Lending Tech Live ’22, an industry conference dedicated to connecting credit unions with new lending innovations and technologies, the breakout session How to Use CUSOs to Drive CU Innovation with a Cooperative Fintech Mindset, explored the many ways that CUSOs can help credit unions grow.

Hosted by Brian Lauer, partner with the law firm of Messick Lauer & Smith, the presentation showed how CUSOs are uniquely qualified to help credit unions thrive in this new, digital-first world without losing the commitment to their communities that make credit unions essential. Some of the industry statistics that Brian shared showed the clear difference that CUSO participation can make for credit unions, particularly in portfolio growth:

  • Credit union investments and lending to CUSOs, for all U.S. credit unions, was over $5 billion as of December 21.
  • Credit unions that invest in CUSOs consistently grew their assets at 10.8% in 2021 versus 7.3% for credit unions that don’t invest in CUSOs.
  • Credit unions that invest in CUSOs grew their loan portfolios at 6.5% in 2021 versus 0.9% without CUSO investment.
  • CUSO invested credit unions have slightly higher expense ratios but generate stronger earnings: 1.11% versus 0.69% in 2021.

With more than 1,000 CUSOs in existence today, it’s clear they are making an impact for the over 2,100 credit union investors they are dedicated to serving. Since CUSOs share the same DNA as credit unions, they have the unique insights and expertise that other vendors often lack – helping to cut costs while providing new member services and new loan types. In essence, a CUSO is like a shared resource for the credit unions it serves, helping credit unions punch above their weight in technology and research.

CUSOs are more relevant than ever, thanks to the change to the National Credit Union Administration (NCUA) rule that occurred on October 21, 2021. Under the new standard, CUSOs can offer new loan product types and now have the ability to lend without membership requirements. Since CUSOs can now originate the same loans that credit unions offer, they bring many of the same advantages that fintechs do, offering access to new markets and new opportunities.

Learn more about how CUSOs can help credit unions continue to innovate and thrive with the infographic below, and check out these additional resources:

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