CU*Answers, the 100% credit union-owned cooperative CUSO, is noticing a trend starting to take root in the credit union industry: CUs appear to be more willing now to pay early termination fees to switch data processors. There is mounting frustration with the traditional data processor model, not only with what credit unions receive as part of the core product, but also what they are paying if they want a new product/service or want to connect to a third party interface.

Per EVP of Sales, Scott Page, credit unions are approaching CU*Answers at a higher rate indicating they want to convert as soon as possible, even at the expense of hefty early termination fees. And other data processors seem to have taken notice and have begun using retention strategies that automatically roll the credit union into a new term if certain conditions are met. For example, a new five-year processing term may be initiated if the credit union upgrades or replaces its in-house servers, merges a credit union into theirs, or upgrades an ancillary service with the data processor. And in some cases they are intentionally staggering contract terms for ancillary products like home banking, bill pay, item processing, etc. so that ending the relationship becomes difficult and expensive.

“In recent years, CU*Answers has had multiple credit unions convert to our CU*BASE^® platform with over a year left on their existing data processing contract. Just this last year, we had a credit union convert to CU*Answers with over two years left on their prior contract, resulting in over $100,000 in early termination fees,” said sales rep. Mike Gruber. “These credit unions are looking for a data processor that will partner with them and not charge exorbitantly for a new product, service, or third-party interface.”

Credit unions see the switch as a long term partnership. Although it comes at a pricey upfront cost—with which CU*Answers has often assisted financially—CUs see it as an opportunity to break out of the exploitative business practices they were stuck in. In exchange for paying their former processor a lump sum, credit unions gain in CU*Answers a CUSO partner, where they can be an owner and help develop the data processing system and have a say in how the data processing company will operate and develop the tools, software products that the credit union, members and employees need to be successful.

“Do I see this trend changing any time soon? No!” continued Gruber. “Credit unions are collaborative by nature, and they want partners that will by partner with them for their mutual benefit. Credit unions are moving away from the banking model of vendor relationships and reclaiming their roots as cooperatively organized financial institutions.”