Just about every credit union has been operating in an unpredictable environment over the past few years. The pandemic has brought a cascading series of events, all of which have led to a lack of qualified candidates for many needs.
During a recent webinar hosted by Origence Lending Services, credit union leaders were urged to consider the financial impact of outsourcing versus hiring new staff.
Sam Clark, director of business development for Origence Lending Services, noted the cost of outsourcing can vary considerably from credit union to credit union, depending on a number of factors including the size and complexity of the organization.
Clark offered CUs a series of questions to ask, starting with: Is the outsourcing company qualified? How long does it take for your credit union to onboard and train a new hire? What is the cost per FTE, including benefits? When volumes slow, can you avoid layoffs and the resulting hit on morale?
“Outsourcing can be used for contingencies, leaves of absence, disaster recovery situations, as well as on demand/as needed services. It is important that the management team know the organization’s strategy and needs. Do you need help with dealership relations? Deposit growth? Membership growth?”
Sam Clark, director of business development for Origence Lending Services
Outsourcing is not made for all credit unions, he added, but it does mean accessing knowledgeable people without having to train them.
George Batty, also a director of business development for Origence Lending Services, served as co-moderator. He said outsourcing can lower the risk of starting new ventures.
“Timing is important, because there is a lot of thought, planning and budget in making a new venture successful,” Batty began. “It also is important to have an expert who knows how to make things work. Outsourcing brings in people who already are familiar with your goals. It allows a credit union to explore new solutions without making a heavy investment, while accelerating times to market.”
According to Batty, there are several cost considerations for the hiring/outsourcing choice. Outsourcing brings implementation fees as one-time costs, versus paying salaries and benefits full-time through busy times and down times.
“Outsourcing allows your credit union to continue doing what it is good at doing – such as dealer relationships – while expanding or adding what you might not be good at,” Batty counseled.
The webinar’s panel consisted of: Eric Snyder, chief revenue officer for LoneStar Technologies, Mark Chandler, VP of business development for Credit Union Leasing of America, and Charles Wright, SVP of growth at Centennial Lending.
LoneStar is an embedded finance company, Snyder explained. He said it allows lenders to extend to where transactions happen. Key verticals include home improvement lending, dental, and powersports and equipment. “We let credit unions diversify with new member capture and new loans,” he declared.
Chandler said CULA brings credit unions to the point of sale for leasing.
“We offer leasing to credit unions that might not have the skill set or the technology to do so,” he said. “The average price of a new car is approaching $50,000, which makes leasing a popular option.”
Wright noted Centennial is a credit union service organization founded in 2000. It is in residential mortgages, commercial loans and auto lease servicing.
“Credit unions have a massive opportunity today to be a source for home improvement lending,” Snyder said. “Many of our lenders lend locally or nationally, depending on their needs.”
Snyder said it is important to realize outsourcing does not have to be all or nothing. “There are many use cases for which it makes tons of sense. We can go to market quite quickly, so using outsourcing makes sense until you find success and longevity. Don’t hire a bunch of people and carry overhead costs – augment with outsourcing and then you can backfill.”
Chandler reported outsourcing is a “big part” of CULA’s business.
Wright said by outsourcing, a credit union gains a lot of expertise while pushing a function to an organization that “lives in a particular environment all the time.”
“You also gain help in getting a program launched,” Wright told the audience. “With us, credit unions gain all the back office and accounting functions. This is much quicker than hiring and onboarding, especially for a new vertical, and the costs are much less. If your new program is dependent on one expert, and that expert leaves your organization, you are in a world of pain. Outsourcing lets you have a number of experts working for you.”
When asked for a sample implementation timeframe, Wright cited payments. If a credit union takes on the task by itself, all frontline people would have to be trained on how the product works, how payments would be coming in, how to credit payments to the proper account, and having processes in place.
“The training timeline for all of that, versus outsourcing to an existing organization that handles payments, is night and day,” he said. “The expertise you gain by using an outsourced relationship makes everything a whole lot easier.”