By John San Filippo
In what is a recurring feature, Finopotamus, in cooperation with NACUSO, profiles CUSOs that offer innovative technology combined with the credit union ethos of people helping people. For this installment, we spoke with Alan Bergstrom, vice president of marketing and business development at Aux. The CUSO is owned by 55 credit unions and serves nearly 200 participating clients, providing a range of progressive back-office solutions, including accounting, compliance and, most recently, data analytics.
If you remember the name Credit Union Service Network, or CUSN (often pronounced cousin), you know Aux. The CUSO was founded in 1992 as part of the Mountain West Credit Union Association as a pureplay shared branching provider. However, as the digital revolution unfolded, the CUSO saw a need to diversify.
“[Shared branching] is a business line that's in decline,” Aux’s Alan Bergstrom told Finopotamus. “Fewer people have a need to go into a branch to transact thanks to digital banking and online banking and everything moving to a digital space.” This led to a gradual but steady decrease in revenue for any organization active in the business of shared branching.
“The revenue is not there because volumes are down,” Bergstrom added, noting that the pandemic only worsened the decline. Fortunately, CUSO senior management saw the writing on the wall as early as 2014 and took steps to diversify the CUSO’s product offerings. The management team decided that the CUSO’s future lay in shared services and thus began hiring for its new accounting services. It’s at that point that the organization name changed to Aux.
“We went to our clients and asked if there were any other types of products or services that they need that we could provide,” said Bergstrom. “What we discovered was it was back-office things that are table stakes, like accounting and compliance that aren’t necessarily going to create a competitive advantage for the credit union. Nobody touts their superior compliance or accounting.” According to Bergstrom, the CUSO saw opportunity in creating economies of scale, rather than every credit union hiring their own teams for these functions.
Once the accounting operation was running smoothly, Aux set its sights on compliance. “We acquired a compliance CUSO owned by Fort Belvoir Credit Union in Virginia called Compass,” said Bergstrom.
Saving Credit Unions Money
Bergstrom noted that the cost savings for participating credit unions is significant. “That's one of the biggest advantages,” he said “Our philosophy is, take whatever money you save by outsourcing these functions and put that money to better use for your members’ benefit, whether it's investing in advanced technology or whatever.”
Just how significant are the savings? “We've done several studies with both services,” said Bergstrom. “With compliance, we're upwards of 75% less. Of course, it varies by market, but they typically get a staff of five or six compliance experts for about 75% of one full-time compliance manager.”
Bergstrom added that depending on market conditions, credit unions can cut their accounting costs by up to 95%. The CUSO recently expanded its accounting operation to include services chief financial officers (CFOs) typically provide, so the savings may be even higher. “A CFO is probably a between $100,000 and $200,000, depending on where you're located,” he said. “With what we're charging per hour – call it fractional consumption – they can get one hour a month if that’s all they really need.”
Enter Data Analytics
In June of 2020, with the COVID pandemic in full swing, Aux made a couple of bold moves. “We split the company in two,” said Bergstrom. “The shared branching that was driving us for decades was spun off into its own CUSO. All of the collaborative services stayed with Aux. At that same time, we also did the soft launch of Cuery, our data analytics product.”
Like the other Aux products, Cuery grew out of feedback from credit unions. “We allocated quite a bit of money to aggressive R&D over several years to identify the major pain points in the industry,” said Bergstrom. “One thing we found was blowing off the charts every time we did industry research was the need for data analytics. But there was a disconnect because it was ranking so highly in terms of need, but ranking so low in terms of available resources to do it.” He added that research showed that robust data analytics systems simply weren’t affordable for credit unions under $800 million in assets.
“We ultimately partnered with [data analytics firm] TIBCO to offer the software component of Cuery at a shared services rate, which makes it a much more affordable option,” noted Bergstrom. He added that this model makes advanced data analytics affordable for credit unions down to about $150 million in assets.
According to Bergstrom, credit unions that deploy Cuery see almost immediate results. “We always look for quick wins,” he said. “When we onboard a new client, we ask them what they want to accomplish with their member data. Then we guide them down that path so they quickly realize they can do things with Cuery that they couldn't do before.”