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Authors Note:  This is the second in a series of articles that will address possible strategies and tactics that credit unions can adopt as alternatives to merger.  Here at XTEND we recently studied over 200 NCUA merger applications submitted by credit unions between 10/1/2021 and 10/1/22.  As a result of this analysis we have identified several primary reasons credit unions have given as the primary response for a merger request.  In this series, it is the objective of Xtend to provide alternative strategies and tactics that credit unions can adopt to avoid the destructive finality of merger.  It is also our hope to provide CUSOs with a variety of strategies they can pursue to better support those credit unions considering possible merger and establish a level of credit union viability that guarantees a healthy and vibrant market for CUSO based solutions.

Merger equals Economies of Scale?

In our study of NCUA merger applications the second most frequently mentioned reason for merger was the economic advantage of attaining some form scalability. In most of the merger applications there was little detail explaining what form of economies of scale was either lacking in the current state or attainable if the merger was to be approved.

Credit unions have historically struggled with having sufficient scale to efficiently and effectively implement, market and operationally support many financial products and services.  Many of these products/services need to be part of the menu of financial solutions necessary to meet the constant evolution of member/owner needs if any individual credit union is to be successful. The evidence of this difficulty takes on many faces; from the inability to afford appropriate human resources (expertise) to not having sufficient member demand to support minimum levels of product support and service.  These problems have certainly diminished in the credit union community as the number of multi-million and multi billion dollar credit unions has multiplied.   These credit unions can more often than not, afford the capital investment necessary to build the infrastructure required for new and innovative financial services, products and delivery channels. The same cannot be said for most credit unions below $500 million in assets.  Shame on us for not recognizing that the answer to this conundrum for smaller asset sized credit unions already exists in our history.

We have only to look at the evolution of plastic based financial services for solutions to the challenges we face today.  Our credit union community effort to discover and create collaborative business models is singularly responsible for our historical presence in the credit and debit card markets.  Over 30 years ago we, as individual credit unions lacked the scale, market appeal and investment capital to gain access to the national and international payment channels being created by banks and known as VISA and MasterCard.  It was only through the collaborative and collective leadership of credit union boards, executives and members that today our largest and most successful CUSOs still provide these plastic based products to not only small credit unions but even most of our largest credit unions who still find a collaborative solution best meets their needs.

Rather than looking for a merger solution to provide economies of scale, every credit union should exhaust itself to identify the many collaborative product and services based CUSOs  can provide them with “immediate” scale for any product, service or delivery channels that they lack from their member services menu.  This is one of the primary reasons that an organization like NACUSO exists.  They provide a marketplace where credit unions that suffer from the problem of scalability can identify and connect with a partner that will help them maintain their independence and market brand, while avoiding the merger strategy.

How can CUSOs respond to this opportunity?

Surely these smaller credit unions, who consider the option of merger, need to expend the energy necessary to identify product, service and operational CUSO partners, but CUSOs can also be much more proactive in reaching out to this part of our credit union community.  There is blame to be shared here, as some CUSOs today have adopted strategies that more closely imitate those for profit third party companies we, as CUSOs, were created to replace as a better option.  We hear, too often, of CUSOs who have segmented our CU community and strategically identified only credit unions above a certain asset level as being their target market. Alternatively, some CUSOs have created pricing models which almost automatically exclude smaller and even medium sized credit unions to access their product or service.  As credit union owned organizations we need to pay attention to our very purpose for being. We need to build product solution models that can support and assure the viability of this struggling part of our community.   Making sure that there are enough credit unions in the future for our CUSOs to continue as viable business concerns is strategically vital.

If the some form scalability is one of your reasons for merger, make the investment in time and effort to identify a CUSO partner that can help you overcome that problem.

What’s Next?

Join those who are making strides, putting their money where their mouth is and creating measurable impacts for credit unions.

Contact us at for more information.

Liz Winninger, President and CEO of Xtend

Vic Pante, Senior Consultant at Xtend

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