PSCU and Co-op Solutions announced on November 6, 2023, that they are entering into an agreement to combine. This combination of the industry’s two leading CUSOs promises to create the premier fintech solutions provider specifically made for credit unions.
Co-op VP of Sales Enablement and Product Marketing Kasey Stinson had a chance to sit down with Co-op Solutions President and CEO Dean Michaels and PSCU President and CEO Chuck Fagan, who will be named as CEO of the new combined organization, as well as Co-op’s Chief Product Officer Bruce Dragt during Co-op’s Q4 Update to get more information and hear their thoughts about the combination and what this means for credit unions in 2024 and beyond.
KASEY STINSON: Dean, I know you've had a chance to be out there talking to some of our credit unions. So, what have you heard so far from our credit union partners?
DEAN MICHAELS: Our team has spoken to a lot of credit unions, and I've personally had a chance to interact with many myself. I'd say overall the response has been very positive, very supportive. I think credit unions understand how fast the pace of change is in our market, that same dynamic is impacting financial services overall. And so far, a lot of their focus has been on wanting to understand better “How will this combination help me and my credit union?”
STINSON: So why don't we go ahead and answer that one right now, Dean. Generally speaking, how will this merger help credit unions?
MICHAELS: The combination's all about how we can put both organizations in a better position to help credit unions succeed. It's going to help our credit union clients scale their solutions and grow faster. It’s going to help all of us to better compete with fintechs and bigger financial services providers. It's going to allow us to take what I would call an “evolutionary leap” in being able to really fulfill Co-op's purpose, mission, and vision to be that strategic growth partner for credit unions.
STINSON: How would you characterize the growth opportunity for credit unions as a result of the merger?
CHUCK FAGAN: I think it's foundational. What we collectively can do as an organization with best-in-breed technology and being able to choose the best of the best. Looking at what our individual companies have been able to develop and creating integrated solutions, I think we can really put an optimized product portfolio for credit unions to consume. And I think it sets the stage for their growth scale. Our combined organization will certainly be able to attract and retain some of the top talent in the industry.
MICHAELS: I think one of the biggest opportunities is the combination of our investment resources, really what we spend on innovation for credit unions. So that combined pool will obviously be significantly larger. But to me, the most important thing is that we won't need to spend money on duplicative efforts. For example, rather than both of us spending millions of dollars on PCI compliance, we could do that once and then put those dollars that we didn't spend into something innovative, something that can be impactful, something that can help credit unions really improve their member experience.
STINSON: Both Co-op and PSCU have been dedicated to enabling credit unions to activate digital channels to engage members. Can you tell us how we can now accelerate that digital activation to meet the needs of credit union members and in turn drive credit union growth?
FAGAN: Well, I think the future and the strength of the credit union system really is dependent on us meeting the needs of the members, which have evolved and created a need for more personalization than ever. We have an opportunity build seamless experiences and to address a broader set of use cases to engage members. We intend to create end-to-end, best-in-class ecosystems of payments, digital and member experiences that incorporate the best from both organizations. Both Co-op and PSCU have 40-plus year histories and legacies of being true assets to the industry. The merger sets up a foundation of what the modern member to experience can be like for a daily engagement with the membership.
STINSON: While everyone at both Co-op and PSCU can expect to see change, in the bigger picture, a lot will stay the same. The new organization will still be owned by credit unions and will primarily serve the credit union industry. What won't be changing?
FAGAN: Service excellence is still going to be the key theme of the organization. That's the foundation of my 36 years in this industry that I grew up in. And it's a key reason why we are all so enthusiastic about the combination of the two companies. Both Co-op and PSCU live by the ‘people helping people’ philosophy and we deeply understand throughout the organization what it takes to grow and help members achieve their strong financial well-being. So going forward, we need to continue to remain adaptive, responsive to market insights, and pay attention to consumer behavior trends and emerging technology such as AI. It’s a big task, but I think one that our organization is up to achieving.
STINSON: We’ll still be for credit unions by credit unions, won't we?
MICHAELS: Absolutely. The combined entity will be credit union-owned, and will be led by a board of directors comprised of credit union CEOs. So that DNA won't change, and more than it just being DNA, it's really a competitive advantage for us. There's nothing more powerful than when you're developing your strategy and having your owners be your clients. It really helps serve as a North Star for us. It helps guide us and drive us to make sure that we're always relentlessly focused on how we can help credit unions grow, how can we help credit unions succeed.
FAGAN: I agree wholeheartedly. This combined organization will touch well over 3,000 credit unions. The fintechs are not building distribution channels for this segment of the market, but the combined PSCU and Co-op solutions have an incredible opportunity to access these financial institutions and, ultimately, the members.
STINSON: What can Co-op clients expect next?
MICHAELS: Both entities will continue to operate as two separate independent companies until the close of the transaction. Once we close, we'll be able to talk more about provide more details around the leadership team around the organizational structure and then, starting in 2024, really begin the work of integrating and making sure that we capture all the potential through this combination.
STINSON: I understand we are getting some questions about what the company name will be. Can you share?
MICHAELS: There will be a new company name. And that's really important because it's not about “PSCU” or “Co-op.” This is really a new beginning for both entities and it's a combination. And so, we thought it really important to start that with a new company name. It hasn't been determined yet, but we'll be really excited to reveal it once it has been.
STINSON: This question is for Bruce. Given the announcement, are we going to support current product sets from both organizations or when will one be sunset?
BRUCE DRAGT: For right now, we are full steam ahead. We are supporting the products that we have committed through our roadmaps. So, it's a great time of delivery. And then as we roll into the beginning part of next year, we're going to have a chance for the two entities to come together and to be able to set that long-term road map and vision. Our goal here is to continue to deliver for credit unions. We expect to do that separately right now and soon to be as part of one organization that we've been describing which enables us to deliver so much more.
MICHAELS: We have already begun working on the framework for our integration management office. We know how important it is that we hit the ground running on day one, how important it is that we have the structure in place to really make the best decisions for that go forward combined organization. So, at a high level, we already have employees from Co-op, employees from PSCU talking about that framework so we can get to some of those decisions and be transparent and socialize with our credit union clients as quickly as possible.
FAGAN: I could not be more humbled and thrilled to be part of it. I so look forward to working with the team members from Co-op as well as the board members and I think we're going to have an incredible run.
Get the most up to date information on the Co-op and PSCU combination as the story unfolds by visiting the Co-op website: https://campaigns.coop.org/pscu-co-op-solutions
