What should board members know about selecting key vendors?
Like members, credit unions periodically make big purchases. These decisions must be considered carefully for financial soundness as well as value. And like members consult friends and family to make informed purchases—e.g., what car makes and models to test drive, how to set a reasonable budget—a credit union’s board of directors must be ready to guide their organization through the vendor selection process, analyze options, ask questions and endorse a purchase decision.
Boards should also be prepared to help re-evaluate these contracts over time, to ensure they are still meeting the CU’s needs.
Executives from four credit unions and credit union organizations share their most successful purchases and what your boards should know before making the same investment.
CSCU – Randolph-Brooks Federal Credit Union
CUES member and SVP/Central Operations Charlotte Norton, knows that $8 billion Randolph-Brooks Federal Credit Union, Universal City, Texas, made the right decision to contract with CUES Supplier member CSCU, Rocky Point, Fla., at the genesis of the CU’s credit card program in 1991.
“CSCU is our gateway to FIS, our card processor,” explains Norton. If FIS is offering a product that the CU wants to add to its credit card portfolio mix—for example, a rewards program—CSCU handles the contracting process. The CU also leverages CSCU for performance benchmarking and thought leadership in the form of whitepapers and industry articles. “CSCU is a trusted resource and partner,” she adds.
RBFCU hasn’t let its long-standing relationship get in the way of due diligence. The vendor landscape has changed over the past 25 years, and the CU’s leadership has acknowledged the importance of benchmarking against other systems. “This holds all parties accountable and [assures us] that we indeed have the right partner to help us map our strategies and be successful,” Norton says.
The board of directors’ involvement in the evaluation of a card processing vendor may vary between credit unions. “I’m very grateful that our board blesses our decisions,” says Norton. While technical and resource limitations might cause management and vendor support to accept the status quo, directors can inspire re-evaluation and innovation—bringing in ideas from outside the industry, conferences or even anecdotes and personal experience as a member not directly involved in CU operations.
“In my opinion, all of the major processors do a really good job of processing transactions for cardholders, statement processing and rewards programs,” Norton says, noting that vendors usually price competitively. “What boards need to focus on when selecting a vendor is really understanding the innovation a processor has displayed. ‘What have you done that others haven’t done?’”
Due to its size, RBFCU has connections that allow the CU to work directly with Mastercard and FIS to implement new features, but Norton suggests that smaller credit unions and card issuers often lack these direct relationships and can benefit from working with a partner like CSCU.
She also recommends that boards pay close attention to service. “When there is a problem, responsiveness is key,” Norton says. “[Cardholders are] not going to be tolerant of ‘the system is down.’ Day-to-day operations between the card issuer and the processor are critical.” She adds, “Reach out to your peers when there’s an issue or a huge fraud event. ‘How is your processor responding?’” Do your research and talk to other issuers using the platform to validate that response times and actions are adequate and as advertised, she advises.
Community is another important advantage. “CSCU provides networking opportunities, through their annual conference, and you can reach out to like-minded organizations with like-minded programs, to share ideas and share issues,” says Norton. “That, I think, more than anything is where CSCU’s value really lies. You wouldn’t get that if you went with one of these large processors.”
Questions for the board to ask about card vendors:
- What processes does the vendor have in place to respond to a security breach?
- What are the service expectations of the CU, and can the vendor meet them?
- How will this vendor support our strategic plans?
MyBoardPacket—National Council of Firefighter Credit Unions Inc.
It’s not hard to imagine an unproductive board meeting—if you’ve ever been a director or in a top leadership role that works closely with the board, chances are you’ve been in such a meeting yourself.
“My board is made up of nine members [from about 100 credit unions] that are located across the country, from Boston to San Diego. As a national association, our board meetings are largely done by phone,” notes Grant Sheehan, founder and executive director/CEO of National Council of Firefighter Credit Unions Inc., Coconut Grove, Fla.
Having a board portal allows this far-flung group of directors to conduct their meetings efficiently, Sheehan explains. “It’s the best tool there is for having a remote operation. Everything is uploaded beforehand. Everyone is on the same page. Everyone sees the same information.”
The organization has been using MyBoardPacket, a board portal service of CUES Supplier member M29 Technology & Design, Arroyo Grande, Calif., for nearly six years. Previously, Sheehan served as board chairman for 15 years and CEO for 11 years at $96 million Miami Firefighters Federal Credit Union. He and the CU’s board of directors successfully used MyBoardPacket for more than a decade, about as long as the vendor has been in business.
“I’m sure there were other [portal] products available back then, but they were mainly stand-alone or solutions developed in-house. They weren’t integrated as they are now,” recalls Sheehan. “Throughout the years, I’ve reviewed several products that have come out, but I’ve been very happy with MyBoardPacket and what they offer. They try to stay ahead of the curve and offer new products and services.”
Since implementing MyBoardPacket at the National Council of Firefighter Credit Unions in 2010, “I’d say the majority of the board members have implemented it at their own CUs, now that they’re familiar with it and know how easy it is,” adds Sheehan.
The group’s board meets in person twice annually. MyBoardPacket offers all of the features they need to conduct the rest of their business remotely. “We take votes, we have discussions. All of our bylaws, policies and procedures are loaded up on MyBoardPacket, and if [directors] have any questions when they’re going over the items, they can raise a discussion prior to the meeting. It makes the meetings go a lot more smoothly,” says Sheehan.
When selecting a portal, ease of use is a priority. “You can use [MyBoardPacket] on your PC; you can use it on your iPad,” he notes. Document management is also important. “You don’t have to transcribe anything. You can put it all into an Excel spreadsheet, for example, and just upload it.”
Security is another top concern when it comes to managing credit union documents, such as financial statements. Sheehan appreciates MyBoardPacket’s granularity—you can secure every uploaded page and control which users can view or download a document.
“It’s also good for employees,” adds Sheehan. “I have my financial statements and minutes [uploaded], and I can let federal examiners or the accountant view them and do reconciliations right there.”
Sheehan recommends a portal like MyBoardPacket for many types of organizations, not just credit unions or financial institutions. “Any organization with a board meeting can use it and benefit.”
Questions for the board to ask about board portals:
- How does the vendor secure the credit union’s and directors’ personal data?
- Does the portal include online and app access?
- How will the portal make the CU’s board meetings more efficient?
- What features does the portal include (e.g., online voting, unlimited users, discussion forum, push notifications)?
OM Financial—Hudson Heritage FCU
There can be intense competition to land and retain top talent in the credit union industry. Executive benefits are a key component of attracting that leadership.
Retirement plans are key for any executive, explains CUES member Michael Ciriello of $361 million Hudson Heritage Federal Credit Union, Middletown, N.Y., “because under current laws, you can’t save at the level that you should be able to, to set aside money for your retirement. [Executive retirement plans] help to offset some of those gaps where the law doesn’t allow for a higher level of contribution.”
It’s also about setting the example: “We’re supposed to be teaching our members to save for their retirement and their financial well-being. This is just another tool where we can do that ourselves,” Cirello says.
Hudson Heritage FCU recently re-evaluated its benefits offerings and began a partnership with CUES supplier member OM Financial Group, Syosset, N.Y., to meet those needs. The process started last year, and the board finalized its selection in early fall.
“It was really about looking holistically at the product we [previously] had—looking at its impact in the long term and the short term to the credit union’s financials as well as the impact on the execs,” explains CUES member Michael Ciriello, CEO. “The board did a full analysis on the product comparisons and saw the benefits.”
The CU chose to leverage a split-dollar supplemental executive retirement plan for some of its executive leadership team.
“Part of what made [OM Financial] stand out was the significant number of other credit union clients they have, and the references were strong,” says Ciriello. “The other piece was that the board looked at the analysis, and the product was just a better fit for Hudson Heritage and where we’re looking to go. The product allowed us the opportunity to cover other executives as well, which was a benefit. Under the original plan, just the CEO was covered.”
Trading up its “golden handcuffs” has been successful, according to Ciriello, who thinks his board agrees. “It helped keep their top-performing talent on a cost-basis that makes sense for the credit union. It has a totally different impact on the financial statements than other options,” he says.
Ciriello advises boards to work closely with their CEOs when designing executive benefits, as Hudson Heritage FCU’s board did. Ciriello explains, “When you don’t have the input of the executive team, you might miss the target. Due diligence is always key.”
Another consideration is that benefits plan choices are “different than the for-profit world,” says Ciriello. “There are no stock options or ownership interest. There are a limited number of options [for credit unions], and I think this option is a great and strong choice.”
Boards should also consider service. “I would say that OM Financial was extremely professional, patient and provided as much info as we needed to make our decisions,” notes Ciriello. “They made us feel comfortable with the decision we were making. They continue to be an asset when questions arise.”
Questions for the board to ask about executive benefits:
- How much experience does the vendor have working with credit unions?
- What are the financial benefits to the CU?
- How will you work with the CU’s executives to meet their retirement goals?
Why stay with your current vendor? That’s a question CUES member Jeff March, president/CEO of $2.8 billion Citadel Federal Credit Union, Exton, Pa., and his board answer annually.
“I think what we always look for is somebody that can be a partner, not just somebody that does the job for you—someone that genuinely cares,” says March.
When Citadel FCU decided to look at other vendors for its credit card program 13 years ago, CUES Supplier member PSCU, St. Petersburg, Fla., stood out for just that reason. “PSCU is a CUSO,” March explains. “They want to see credit unions growing and being prosperous.
“[CEO and CUES member] Chuck Fagan and the leadership team is rock solid. … They’re vested in us,” he adds.
March suggests looking for a partner that will forge a strong relationship with the board. “We’ve had folks from PSCU speak with the board every three to four years to help educate [them]," he says. "That’s been very valuable.
“We are looking to gain their insight as to where the future of payments lies and how fast they believe change will occur,” he adds.
March also recommends that CUs look for a vendor that is proactive about service. “‘Hey, Citadel, if you share your plans with us, we can take a look and see if there’s anything we can do for you that you’re not aware of,’” says March of PSCU. “They want to know what Citadel wants to achieve.”
According to March, PSCU also strives to stay on the forefront, keeping an eye on fintech, for example. So if the CU has a question, PSCU can give good informed feedback. “PSCU puts a ton of effort into fraud prevention and management,” March continues. “To have somebody that is heavily vested in that area and is working to protect us, that’s … really important.”
Looking for a vendor that is multi-talented is also an advantage, says March: “In my world, fewer relationships with partners or vendors is better.” As such, Citadel FCU has become a PSCU “power user.”
“We have credit cards, debit cards, their call center (Total Member Care); we have our rewards program there, bill pay, Advisors Plus [consulting], Engagement Builder and Apple Pay,” he lists. “[TMC] answers the phone for Citadel. They know us, they have the data, and the customer service is customized for a Citadel member, not a generic CU member.
“Advisors Plus (PSCU's consulting arm) can sit down with you, analyze your data, see where you’re at compared against your peers and come up with strategies … to grow your portfolio,” March adds.
“If somebody’s out there looking [for a partner], I highly encourage them to do site visits and reference checking. Go see the people, go see the atmosphere, watch the process and see how that goes,” says March. “A salesperson can tell you a great story. That’s their job. But is it really true? Go ... and find out.”
Questions for the board to ask about CUSOs:
- How will the CU be represented as a member of the CUSO? Will you get a vote on key decisions?
- What kind of service can the CUSO provide?
- What CU functions could a CUSO perform more efficiently?
Danielle Dyer is CUES' assistant editor.