Shared Services Model Success in Credit Unions
Credit unions have a unique opportunity to leverage their collaborative, not-for-profit business model. While collaborations have grown through CUSOs, we have not fully extended the potential through to more strategic endeavors.
Big banks are innovating – and gaining our members by the day. Credit unions’ market share hovers around 6% after more than 100 years in business. We must get out of our own way.
Global companies have been using shared services models for decades. According to Deloitte, 80% of Fortune 500 companies have implemented shared service models.
The Scale Gap
Credit unions’ cost of doing business – from technology to compliance to security – has grown exponentially in the last decade or so. The mounting expenses make it difficult for small- to mid-size credit unions to compete.
The answer is scale.
And you don’t need to merge for scale. A survey by the CEO Advisory Group in late 2019 unveiled that 60% of respondents cited digital transformation as a driving factor for cost cutting. The second most frequent response was economies of scale. A report by the International Journal of Trade, Finance and Economics clearly highlights the role economies of scale play in profitability. The solution is two-fold. With economies of scale, credit unions would have access to the tools and talent needed for a successful digital transformation. For smaller credit unions to compete and differentiate themselves in the ever-evolving digital landscape, they must leverage collaboration.
3 Credit Union Case Studies in Shared Services
American consumers are familiar with Netflix’s massive library of movies and shows at their fingertips or pulling out their cell phone to Venmo a friend the $10 owed for pizza last night. Consumers thrive on control and immediacy in their daily lives and their finances are no different. In fact, during times of uncertainty, like now, it’s critical to provide the technology needed to feel in control. Member expectations have evolved, and credit unions – no matter their size – must rise to the occasion.
Working collaboratively provides several benefits that an individual credit union will find difficult, if not impossible, to build on their own:
- Expertise
- Economies of scale
- Equity returns to members
The following is a series of case studies demonstrating how three of your credit union peers have leveraged collaboration to negotiate and innovate above their weight class.
$390M Credit Union of New Jersey
Experts will tell you your credit union requires digital transformation, front- and back-end. Consumers are demanding more from their financial institutions that many credit unions just cannot afford – or can you? If you’re a small- to mid-size credit union leader thinking, ‘how am I going to do all of this,’ you’re not alone. That was the situation Andy Jaeger (pictured below, left), CEO of Credit Union of New Jersey, found himself in. His $390 million credit union knew it needed to evolve. He saw the writing on the wall for credit unions like his, and it wasn’t going to happen to CU of NJ. Capitalizing on the global trend in shared services and credit unions’ collaborative nature, CU of NJ boosted his credit union’s negotiating power – as much as 66% with one vendor, created mid- and back-office efficiencies and achieved all of this while upholding the highest quality standards for service to its members. Creating all these long-term benefits to compete and develop sustainability have been a must, but it was equally important for CU of NJ to maintain member-facing products and services with the credit union.
“One of our key tenets is that it places our credit union members’ interests first, because without them, we are nothing,” Jaeger said. “Our members may never notice some of the operations changes
....-->Credit unions have a unique opportunity to leverage their collaborative, not-for-profit business model. While collaborations have grown through CUSOs, we have not fully extended the potential through to more strategic endeavors.
Big banks are innovating – and gaining our members by the day. Credit unions’ market share hovers around 6% after more than 100 years in business. We mu...