Strategies to Growth:
Technology Advancement and Shared
Platforms to Meet Cooperative Banking Needs
Jack Lawson
Chief Operating Officer
Self-Help Federal Credit Union
June 6, 2013
Speaker Bio
Jack Lawson is Chief Operating Officer of SelfHelp Federal Credit Union (self-helpfcu.org and selfhelp.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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Massive and steady consolidation of
credit unions across the past 40 years
Source: CUNA Data
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Net interest margin in steady decline as
operating expense ratios remains flat
Source: CUNA Data
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Credit unions are searching for economies
of scale
Source: CUNA Data
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The Self-Help Family
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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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Seven CU Mergers in CA
 11 full service retail branches
 41,000 members
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Prospera Pilot and
Check Casher Acquisition
 6 branches
 15,000 non-member customers
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Second Federal
Bank Acquisition
In Chicago
 3 branches
 11,000 members
Downtown
Chicago
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What has scale meant to SHFCU?
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What has scale meant to SHFCU?
 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 cost 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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Can a shared core processing
platform offer an alternative?
• Limited to sharing
ideas and some
resources
• But retain local
autonomy
Loose
Federation
Shared Core
Processing
• Can we win
significant
economies of
scale and retain
local autonomy?
• Gain economic
efficiency of full
consolidation
• But loss of local
autonomy
Consolidation
 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?
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But can it work?
 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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Autonomy vs. Efficiency Tradeoff
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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Questions
and Comments
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