Hartford Business Journal

16 Hartford Business Journal • June 25, 2018 • www.HartfordBusiness.com By Gregory Seay gseay@HartfordBusiness.com G rins were all around on a recent Friday in June, as Gov. Dannel P. Mal- loy and officials with the state Department of Motor Vehicles (DMV) joined Nutmeg State Financial Credit Union execu- tives for the unveiling of the coopera- tive's Milford branch. The office, at 977 Boston Post Road, is the second of a planned series of "DMV Express" sites in New Haven County for which Nutmeg provides the facili- ties and staff to handle drivers' license renewals under contract with DMV. But Nutmeg CEO John Holt and his former operations chief, Jeff Levesque, had more reason to smile. Aside from offering a speedier service option to DMV's own license-registration branch-office network, Nutmeg's Milford and future DMV Express sites will serve as gateways to a more in- teractive and cost-efficient customer- engagement model for credit unions, experts say. Holt, who has appeared in TV ads touting Nutmeg's friendly mien and long list of member services, said members at the Milford office can help themselves — with the aid of its newly devised software and IT systems — perform digital account transfers, loan payments, check and cash deposits and withdrawals, get a new or replace- ment debit or credit card, apply for a loan, among other things. They also can renew their driver's licenses for free; nonmembers pay a $5 "processing fee." With more ATMs and smart digital devices siphoning banking customers away from traditional bank and credit- union branches, lenders of all stripes are scrambling for new ways to engage with their customers — both in and away from their offices. To achieve that, Nutmeg is the latest to join the growing ranks of Connecti- cut and U.S member-owned, nonprofit credit unions in establishing legal en- tities, known as "credit union service organizations,'' or CUSOs. Akin to operating subsidiaries at banks and thrifts, CUSOs are state- regulated entities that allow credit unions to partner with other member- owned lenders and vendors in provid- ing certain services, like automated lending, securities and investments, insurance or back-office operations, said Guy Messick, a Pennsylvania at- torney who is general counsel to the National Association of Credit Union Service Organizations, a California trade group. CUSOs, Messick said, allow credit unions to add new revenue streams and compete more effectively in this nation's constantly changing financial market- place, one in which their net-margin profit model has been besieged by years of extremely low interest rates. CUSOs first appeared about 30 years ago and number about 1,000 today, with most formed in the last three years, he said. "Nutmeg is plowing ground that others have plowed as well and been successful,'' said Messick, a partner in Messick Lauer & Smith, and also an advisor to Nutmeg on its CUSO. CUSOs, he said, "are becoming more prominent as credit unions need to find ways to become more efficient and find new sources of income.'' Credit unions, in particular, are encountering many of the same chal- lenges as banks — the need for more focused customer recruitment/reten- tion efforts and the pressures of keep- ing up with new services, technologies, products and financial regulations. The bottom-line aim for CUSOs, Nut- meg executives said, is to build a roster of financial and other services that will attract more current and potential credit union members to its doors. Nutmeg executives say their CUSO is specifically designed to help create rel- evance through the use of technology. CUSO services The state Banking Department recently approved Nutmeg's applica- tion to operate its CUSO in order to provide not just expanded self-service options to members, but also to co- brand with DMV and other potential What's a CUSO? Credit union service organizations, or CUSOs, are state-regulated entities that allow credit unions to partner with other member-owned credit coopera- tives and vendors to provide certain services. The top four services provided by CUSOs are lending, account services, investment advisory, and electronic-funds and payments processing, accord- ing to the National Credit Union Administration. There were 946 registered CUSOs at the end of 2016, according to NCUA. Branching Out More credit unions adopting 'CUSOs' to boost technology, other service offerings and bottom lines CT Credit Union Snapshot CT credit union Credit union membership branches in CT Year Members Year Branches 2014 845,463 2014 275 2015 851,579 2015 265 2016 863,379 2016 264 2017 875,122 2017 265 2018 878,094 2018 265 Source: National Credit Union Administration PHOTOS | CONTRIBUTED Rocky Hill's Nutmeg State Financial Credit Union is deploying digital self-service kiosks in its branches to improve member services and interconnectivity.

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