Strategies to Growth: Technology Advancement and Shared Platforms to Meet Cooperative Banking Needs...
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Transcript of Strategies to Growth: Technology Advancement and Shared Platforms to Meet Cooperative Banking Needs...
Strategies to Growth:Technology Advancement and Shared
Platforms to Meet Cooperative Banking Needs
Jack LawsonChief Operating Officer
Self-Help Federal Credit Union
June 6, 2013
Speaker BioJack Lawson is Chief Operating Officer of Self-Help Federal Credit Union (self-helpfcu.org and self-help.org). SHFCU is a fast-growing CDCU, comprised of three distinct retail brands: Community Trust in the Bay Area and Central Valley of California, Prospera in Los Angeles and San Jose, and Second Federal in Chicago. The credit union serves about 67,000 working class members and non-member customers and manages almost $600 million in total assets.
Prior to working at Self-Help Jack spent about ten years at another community development credit union, Brooklyn Cooperative FCU, working first as the credit union’s organizer and later as its CEO. While in New York City he also served as board chair of Bethex FCU for two years, board chair of the New York City Financial Network Action Consortium for four years, and as board treasurer of Make the Road NY, an immigrant and labor rights organization, for four years.
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Presentation Outline Part 1 - State the problem that is the premise of this
session
Part 2 - Summarize some key credit union industry trends and challenges
Part 3 - Describe one credit union’s approach to building scale – that of Self-Help Federal Credit Union
Part 4 - Explore the alternative path to scale provided by a shared core system platform
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Why ask the shared core processing question?
What is the problem?– Massive and steady consolidation of credit unions across the
past 40 years– Consolidation is largely a response to the increasingly difficult
economics faced by credit unions– More specifically, it is a response that seeks to drive down
operating costs by realizing economies of scale
Can a shared core processing platform offer an alternative path to scale?
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A Brief History SHFCU was chartered in 2008 as a federal credit union
operating in CA
Goal was to build a strong retail CDCU with branches spanning the largest and most populous state in the country
As economic downturn put pressure on CA CUs, mergers became the central piece of the growth strategy
After 5 years, three retail brands serving 67,000 members/customers and managing almost $600 million in total assets
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Continuity of CDCU service in some of the communities Ability to design, implement and launch from 20 retail
branches in two states– Elimination of ODP fee programs– DACA Loans and now developing a “Citizenship Loan”
Ability to experiment and take losses– Aiming to originate $40 million in immigrant mortgages in 2013– Larger loan size capacity
Technology Adoption– All operations on a single core system at fixed cost & server virtualization– Online and telephone banking upgrades– Mobile banking implementation– Dedicated Remote Services Team – call center, online applications, etc.
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What has scale meant to SHFCU?
Greater standardization means less local flexibility– Forcing a single way of doing things becomes more important at scale– Flexibility to adapt to local circumstances is challenged
Communications is really hard…– With employees – that is, ensuring that everyone knows what’s going on
and building a common sense of purpose– With members that is, we become more dependent on websites,
statement messages, etc. than a smaller, local CDCU might be
Less local control – SHFCU has a great, diverse board…– But it cannot be representative of all communities nor deeply involved in
running the credit union– Scale does make it harder for members to engage
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What has scale cost SHFCU?
• Limited to sharing ideas and some resources
• But retain local autonomy
Loose Federation
• Can we win significant economies of scale and retain local autonomy?
Shared Core Processing • Gain economic
efficiency of full consolidation
• But loss of local autonomy
Consolidation
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Can a shared core processingplatform offer an alternative?
Can a shared core processing platform help us to retain local autonomy while… – Lowering operating expense ratios– Helping us to bring new technology, products and services to our
members more quickly– Delivering competitive loan and deposit rates to a growing membership?
Yes. The real challenge will be two-fold.
– Build enough trust and organization so that CDCUs can feel comfortable letting go of enough local autonomy to win some real economies of scale and economic efficiency
– Find the appropriate technology at the right price
Some initial steps already taken
– Sense of urgency that something needs to change
– Federation as a trusted organization at center of initiative
– Engagement of vendor community to develop solutions at really attractive price points
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But can it work?
Compliance
Internal Audit
Accounting
Impact & Call Reports
DR Planning
ACH & Draft Processing
ALM Management
Treasury Management
HR Administration
Collections
Loan Modifications
Fee Schedules
Product Standards
Marketing
Common Branding
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Autonomy vs. Efficiency Tradeoff