By John San Filippo
In what is a recurring feature, Finopotamus, in cooperation with NACUSO, profiles credit union service organizations (CUSOs) that offer innovative technology combined with the credit union ethos of people helping people. This is the third of four installments on the CUSO of the Year winners announced at the recent NACUSO Network conference. The four winners were:
Member Driven Technology (MDT) – Distinguished Service CUSO of the Year (recognizes long-term, consistent commitment to the credit union industry)
LenderClose – Contemporary CUSO of the Year (recognizes CUSOs with a fintech business model, including non-credit union investors)
Prodigy – Traditional CUSO of the Year (formerly CUSO of the Year before other designations were added)
Zest AI – New CUSO of the Year
No one was more surprised by MDT’s recognition as CUSO of the Year than CEO Larry Nichols. “We did not apply this year, so it was quite a shock,” Nichols told Finopotamus. “I think the last time we applied was 2019. They gave us honorable mention, but I didn't think more of it at the time. [NACUSO President and CEO] Jack Antonini told me that they really liked our model, but they had so many good applicants, they'd save us for another day. I really didn't know what that meant.”
What that apparently meant was three years later creating a new CUSO of the Year designation to honor distinguished service, of which MDT is the first recipient. According to a statement from NACUSO:
“This special award recognizes CUSOs that have provided substantial value and help to credit unions and their members over a long period of time. We believe that Member Driven Technologies falls into this unique group of industry leaders. Member Driven Technologies accomplishments are significant, including serving credit unions for nearly two decades and growing from the seven founding credit unions to 120 credit unions, serving two million members with $20 billion in assets, all done by referrals from existing credit union owner/clients.”
How It All Started
MDT formed as a CUSO in 2003. “There was a group of credit unions that had the idea to create a transactional core processing CUSO,” said Nichols. He added that there were five credit unions in the original group, but that number expanded to seven by the time the CUSO launched. At that point, there were no plans for growth. The CUSO formed solely to serve those seven credit unions.
With the assistance of some seasoned industry consultants, the group then started “demoing every core platform out there.” Even though only one of those seven credit unions was currently on Symitar’s Episys platform and Symitar had just recently been acquired by Jack Henry & Associates, due diligence led the group to choose Episys.
“When the group started looking for a CEO, several of them knew me as the CIO at Dearborn Federal Credit Union,” said Nichols. “I took the job in March of 2003 and had only three months to get everything ready.”
On July 1, 2003, MDT officially opened its doors and began processing for Research Federal Credit Union. Between his hire and that launch, Nichols had to move at a frantic pace. “I onboarded new employees. I had to get payroll set up. I had to get the general ledger set up. I had to do all the foundational stuff to open the doors,” he noted.
Despite the fact that the original intent of the CUSO was to provide data processing services for its founding members only, “the word got out that we started this CUSO and other credit unions became interested,” said Nichols. “We ended up onboarding two credit unions before we converted the initial seven. It just exploded from there.”
The MDT Difference
Unlike most service bureau operations that process multiple credit unions on a single server, each MDT credit union runs on its own IBM Power Server (formerly P-Series). According to Nichols, this is an important differentiator.
“I grew up on your traditional mainframes and I knew that if a mainframe failed, everybody's hair caught on fire,” said Nichols. “The last thing I wanted was a catastrophic hardware failure that affected 30 different credit unions,” adding that at the time, he didn’t expect MDT to grow beyond 30 credit unions. “So, I told the board I had a different kind of model. We designed it to be bulletproof.” Nichols said that the lower cost of the IBM hardware compared to a mainframe made the one-server-per-credit-union model practical.
MDT gradually evolved from a core-only CUSO to one that bundles a wide range of ancillary products. Nichols said this was a natural progression. “As we grew, the board saw how they could now focus on members and focus on product and focus on strategy rather than focus on technology,” noted Nichols. “The more products and services we bundled, the better off everyone was.”
Nichols made it clear that this model doesn’t prevent member credit unions from choosing the technology that they feel fits best. “For example, if they wanted to plug in their own card vendor, they could. If they wanted to plug in their own lending vendor, they could,” said Nichols. “We're really an integrator. We probably have over 300 vendors in our data center right now, just because of how the credit union world has evolved.”
He added that MDT is open to integrating with fintechs and what he calls specialty providers. “We don't say no as long as it passes our security tollgate and it passes our compliance,” said Nichols. “We'll integrate to any vendor that passes all of our checkpoints.”
The Impact of COVID
“We handled COVID pretty well because our office was already set up for mobility, meaning that every employee has a laptop that they’re required to take home every night,” said Nichols. “It's just part of our business continuity plan that if anything happens to the building, our employees are ready to go. We already had VPN access for everybody.”
He added that COVID was more of a challenge for some of MDT’s smaller credit unions. “The problem is the smaller credit unions didn't have VPN set up for every employee,” said Nichols. “We had to set up VPN access for close to 1,700 employees of these credit unions all at once. They didn't skip a beat either. With our help, those credit unions all learned how to be mobile and how to work from home.”