Credit unions often rely on third-party vendors to provide certain services to members. However, when partnering with these vendors, credit unions may not be getting the most bang for their members’ buck.
Contract negotiations between credit unions and their critical vendors are few and far between given the five to 10-year contracts involved. And, credit union leaders may be going in without all the information needed to make the most of the negotiation process. At the same time, vendors are needed more than ever as technology keeps evolving more rapidly and becomes all the more complex.
Host and CoFounder of The Credit Union Connection Sarah Snell Cooke sat down with the President of InterLutions Jesse Kohl and SRM EVP Chris Gunnare to discuss how their partnership has helped credit unions improve their vendor contracts.
Read the full transcript:
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Sarah Cooke 00:05
Hello and welcome everybody. This is Sarah Snell Cooke. I am the Co-founder and host of The Credit Union Connection. Welcome.Today, I am joined by Jesse Kohl, President of InterLutions, on my left, and Chris Gunnare from SRM on my right. Welcome, gentlemen.
Jesse Kohl 00:23
Hello. Thanks for having us. Sarah.
Sarah Cooke 00:25
Yeah, yeah, it\’s great to have you all. So I\’ll let you guys start with introducing yourself and the
companies tell us a little bit about the partnership as well. Go ahead.
Jesse Kohl 00:36
Sure, Chris, I\’ll start if you don\’t mind. Sarah, again, thanks for, for having us. I\’ve been following the, The Credit Union Connection now for for a while, and appreciate what you and the team are doing for, for the industry. So again, thanks for having us. This is, this is great to be here. Yeah. I\’m Jesse Kohl. I\’ve been in the credit union industry over 20 years. Now. I\’m the president of InterLutions. We are a CUSO. We were formed in 2015 really, with the goal of leveraging the collaborative nature of our industry to deliver products that have a significant impact to a credit union\’s bottom line. So the catalyst to our CUSO\’s formation was actually around employee benefit services. We offer different pooled health plans that allow credit unions to kind of band together to lower their health plan spending. But our partnership with, with SRM was formed because of an advisory council of ours. We host a, what we call a MAC, a Members Advisory Council. It\’s a group of large credit unions. We meet with them about three times a year. Kind of act as a think tank for us. These credit unions were realizing how complex and how expensive their key vendor contracts were getting, and it asked us to, to help. And I\’ve known the team at, at SRM for a number of years, and their philosophy, I think, aligns well with, with our CUSO and with the industry overall. I knew how impactful their work has, has been over the years, so we introduced SRM to our advisory council. They love the idea of this partnership, and it\’s been successful and, and rewarding ever since. So Chris, thank you. Thank you for that, and I\’ll kick it over to you for introductions.
Chris Gunnare 02:19
Awesome. Thank you again, Sarah, for the time today. And I think I\’m just going to echo a lot of what Jesse\’s saying. But you know, I think in our business world today, it\’s complex. Technology is complex. You look at financial institutions and credit unions and a lot of time their key vendor contracts are some of their top line items of expense, and so SRM has been in the business for over 30 years of really partnering not only with financial institutions and credit unions, but also companies like InterLutions. We\’re committed to the credit union industry, and CUSOs are a great way, you hear it a lot in our business today, but we are stronger together as we work to help create mutual success. I, My name is Chris Gunnare. I\’ve been with SRM a little bit over a year now, but in the industry for 35 years and partnering to make credit unions more successful together, I oversee a lot of our sales and existing client relationships and our business partner relationships, and so very proud to be here with interlusions this morning and talking with you.
Sarah Cooke 03:41
Yeah, excellent. Well, thank you guys so much. That\’s great background for, to tee up the conversation today. So first question, are credit unions shifting more toward third party negotiators on these vendor contracts?
Chris Gunnare 03:56
I think that\’s an interesting yeah, interesting question, because the complexity, I think even coming out of COVID, there\’s a lot more push for digital first, a lot more member interaction. And as you look at that, different than maybe 10 years ago, where most of the credit unions, vendors or applications were their core, I mean, they have a lot more relationships now today and are looking to do more integration. I think everything\’s around that member experience. A lot of times it\’s around the employee experience too, within the credit union of how they can deliver better member service. And so you see us, especially with InterLutions right now, trying to find ways to partner to help create better negotiations with their vendors, more cost efficiencies. Sometimes it\’s even focused on growth, member experience. So a lot of different areas we help credit unions position not only for efficiencies now, but for the future as well.
Jesse Kohl 05:02
Yeah, and Sarah, I\’ll just add to that. It\’s a great question. I think a resounding yes out of absolute necessity. I think contract negotiation is sometimes not a fair game for, for credit unions. These, these vendors and companies negotiate contracts every single day with their clients, where credit unions negotiate some of their key contracts only every five to 10 years. So a lot of times, credit unions might not have the data and the benchmarks to understand some of the redundancies in these fee schedules or the gaps and the risks that they\’re exposed to. So they really need a partner to help and stand up for them.
Sarah Cooke 05:43
Right, right. And like you guys alluded to, pricing is a big deal, obviously. But in addition to that, I imagine there are other things to negotiate for. I mean, I\’ve even heard of credit unions not knowing their core part, their core business partner disaster recovery plan or a business continuity plan. You know that\’s, they don\’t make sure that\’s in their contract. So what are you, in addition to price, what are you guys seeing credit is asking for?
Chris Gunnare 06:11
I think that\’s a great point. And interestingly enough, SRM really started in the business and more of the payments, but because of the complexities, over this last five years, we\’ve really expanded out of payments, kind of an end to end, really helping credit unions for, with the core, like you said, additional functions within relationships, disaster recovery. I think there\’s a lot right now, and I think that\’s where kind of tagging on with what Jesse said, really around, SRM has a broad base of experts and deep within each of those practice areas. And I think that\’s what really allows us to partner, not only with InterLutions, but with their downstream members, really also of, how can we help you, not only negotiate better pricing and terms, but really, how do we help position you to be, to be able to grow, to be able to deliver what you want? I mean, a lot of that might be taking the contracts and really then going deeper into the operational efficiencies and how we help together create that mutual success.
Jesse Kohl 07:29
Yeah, I think, great point. One, oh, go ahead. Sarah.
Sarah Cooke 07:31
No, I was just asking if you had anything to add.
Jesse Kohl 07:33
Yeah, sure. I think the only thing I\’ll add is, yep, price is always the biggest point, right? Everyone wants to kind of see that, the price reductions and that\’s always the meat of the contract. But, you know, sometimes we won\’t find price savings, and that\’s fine, and maybe we can just offer a few tips and language changes to improve the contract. And if we can\’t find a significant enough cost save, you know, we won\’t charge for that, for that work.
Sarah Cooke 07:59
Yeah, that\’s a great deal. So…
Chris Gunnare 08:00
I think that has become a creative element in how we work together, because we do have different ways that we can evaluate and price our services. And I think that\’s a great point Jesse, it really of, and a lot of what we do, it\’s really, we succeed when the credit union succeeds, and we price it in that kind of way. If there isn\’t savings, if the credit union has really done a great job, then we can say that up front, and really there\’s no fee for those kinds of things. But I think a lot of times our exposure really to doing that every day for so many clients, gives us better and deeper insight into those contract negotiations, whether it\’s pricing or terms and conditions. I think it\’s interesting, because I think terms and conditions are just as important today as well too in the marketplace, and sometimes credit unions really aren\’t negotiating like Jesse said that often, and so our kind of instant realization of where the market is today and how those negotiations are going really help credit unions beef up their negotiations.
Sarah Cooke 08:03
Yeah, especially when that term is going to be five to 10 years, you\’re stuck in with whatever those terms are so, yeah.
Chris Gunnare 08:43
Right.
Sarah Cooke 08:44
Make them better for you. So you know, the reason we got together today is you all had shared a press release about you recently helped 34 credit unions save a combined ten million dollars by negotiating the improved contract, so now we are talking money with third party vendors. So, there\’s so much credit unions can do with that $300,000 right, per, you know, per institution. So what are your thoughts on that? Like, how did you, how do you, how do you get those savings? And then, where are you, are you hearing where credit unions end up applying them?
Jesse Kohl 09:55
Yeah, that\’s a great question. I love the question. I think it get back, gets back to, you know why, you know why, I\’ve been in this industry my entire career, why our CUSO was formed, I think, why this partnership was formed, it\’s, it\’s because we know the work we do and and the savings we help negotiate will go right back to the members and the communities that these, these credit unions serve. You know, my credit union is only a couple miles away from my house. We worked with them probably about three years, three to four years ago. I really helped them out, and I see what this credit union is doing within my small community every single day, sponsoring financial literacy courses at the high school. They\’ve made some pretty large donations to our local library and, and other non profit foundations. They\’ve made some nice scholarships to, to students every single year. The list goes, goes on and on and on. So it\’s, it\’s kind of great to see firsthand all the good that credit unions are doing for their members, their communities, and it\’s great to be a part of that.
Sarah Cooke 10:55 For sure.
Chris Gunnare 10:56
I\’d like to use, tag on that with an, maybe an overused word in the credit union industry, but our industry is really about people helping people. And I love the focus really, not necessarily, on the bottom line, but how do you actually make members lives better? And so I think that investment in communities, but also investment in lower income groups, credit unions are always trying to find ways to provide goodness to others, and I think it\’s so evident in a lot of that, and where we can help a credit union be more cost efficient, allows them maybe sometimes, to give a little bit higher savings rates or a little bit lower loan rates and make them more competitive. And I think, I mean, my parents took me to my credit union when I was in high school, I actually had to take a loan out to buy a suit to interview. And it\’s interesting. I think the ways credit unions help people grow at different life stages and how they can provide not only financial benefits, but educational, community. I think it\’s just a fantastic industry we have.
Sarah Cooke 12:11
Yeah, yeah. I always say there\’s so much more than money, and credit unions like to market on their rates. But they save members houses, you know, they save them from being homeless. They save their you know, kids, you know, help them go to college, whatever it is, they do so much more than than offer loans and savings. And I hope credit unions realize that, just because they do it every day, now.
Jesse Kohl 12:33
They help, they help a young Chris Gunnare buy, buy a suit for a job interview. I love that story.
Chris Gunnare 12:38
I did, like, my parents were trying to teach me financial literacy and help establish credit and so it starts really young. I think the RMJ Foundation out west, I mean, they do a lot of educational kinds of things around financial literacy. And I think anywhere we can help, and it starts really with the, how do we help a credit union be more financially secure, more profitable, but in a way that they can then turn that around to their members?
Sarah Cooke 13:09
Exactly, yep, yep, because it\’s all about the members in the long run.
Chris Gunnare 13:13
Right.
Sarah Cooke 13:13
So credit unions, you noted in the press release, are not large credit unions, so 300,000 means even more to them, you know, or what did, that\’s the average. So what types and sizes of credit unions do you see typically benefiting them most?
Jesse Kohl 13:29
Yeah, Chris, I\’ll start with this and feel free to add on. Yeah. We certainly partner with some of the largest credit unions across the country and have some pretty eye opening case studies. But we wanted our latest case study to really focus on some of the smaller credit unions that we\’ve recently partnered with, and when it comes to something like, like contract negotiation or some of the other consulting work we do, there\’s really no limit or exclusion for the size of credit unions we work with if you have a high cost key vendor contract, and we can probably help you out. So really, no, no limit, no exclusion, no no size, not really a niche, really small and large credit unions. We\’ve been really happy that we\’ve been able to help all of them out.
Sarah Cooke 14:12
Yeah, that\’s great.
Chris Gunnare 14:13
I think to tag on that again under that theme of people helping people, it\’s interesting, because you look at the expertise in either contract negotiations or integrating new technologies or going through conversions, I think that\’s where it\’s easier to see sometimes in smaller credit unions, where people might be wearing multiple hats, they might not have the depth and breadth of resources to be able to afford experts in each individual practice area. And I think that\’s where we can help. I think it\’s interesting because as credit unions look this way, we look this way too, is how do we create efficiencies? How do we serve everybody in the most efficient way? Interesting, before COVID, I never used the video camera on my laptop, and now we can meet with credit unions a lot more often. People are more accepting of meeting virtually. I think it\’s a new way to communicate more often, and seeing people is better. And so I think just trying to find ways to provide expertise to all sizes of credit unions is key to our values and why we both InterLutions and SRM exist.
Sarah Cooke 15:34
Yeah. I mean, I think we have to support all the credit unions or there won\’t be any in the long run. So one of the credit unions that you mentioned in this case study is the Perfect Circle Credit Union, which, 60 million in assets. They got a six figure payout. And that is a huge, it\’s huge for that credit union. And again, can you tell us a little bit more about that story?
Chris Gunnare 16:00
Well, Perfect Circle Credit Union\’s a credit union in Indiana, where we have a pretty good partnership. We helped them recently go through a card association brand agreement. We again another reference to sometimes credit unions don\’t have the knowledge, because they\’re not doing, I mean, a brand like, a Visa or MasterCard brand agreement might only come up once every five or seven years. They\’re not seeing the most current ways to potentially partner or negotiate with those card associations. And so we\’re able to, we went in with Perfect Circle, and help take them through a card association brand agreement, we were able to help negotiate better savings and terms, really, over the long term, to help them grow and get initiatives and incentives with Visa. We support both brands, but in this case, it was a Visa agreement, and in that opportunity, we were able to position them for savings over the term of the agreement, which is pretty great, great deal for them, great partnership, and again, an ability to really help them be more financially profitable or aware to be able to invest in other ways.
Jesse Kohl 17:27
Yeah, we love these kind of results for, for credit unions, like you said, Sarah, six figure cost save or payout is great, really, for credit union of any size. I think, may be good or bad, unfortunately, that\’s not really abnormal for us to see. So there\’s opportunity out there, and we love it when we can have this type of impact.
Sarah Cooke 17:47
Yeah, gotta return to the members every time exactly. Also said, I\’m going to quote the release, about 90% of credit unions we have worked with have discovered they are paying their vendors significantly more than the proven market value. That is just shocking to me. How does that have, I mean, we talked a little bit about they\’re less familiar with negotiating, but not even knowing the market value. What? How does that happen?
Chris Gunnare 18:12
Yeah, you know, I think technology and member experiences are advancing more quickly today than ever. I mean, I think again, you see post COVID, the move to digital, not only for growing new members, but for serving members. I mean, you look, I mean people, I think, are more knowledgeable today on how to use their phones to do self service, if you will. And so there\’s new functionality that\’s available to better serve members. I think that creates some technology integration complexity and our ability to really help them negotiate. I mean, like I said, years ago, people essentially bought off functionality from their core processing system. Today, there\’s digital vendors, there\’s online banking, there\’s online loan origination systems, and so the ability really to drive effective partnerships with those vendors, which is being efficient for the financial institution, for the credit union too. We find a lot of ways to be able to help them save financially, not only in pricing, but really in the ability to deliver new technologies for an effective price.
Sarah Cooke 19:29
Right, and you kind of mentioned that they everybody used to get their, their plugins, what are plugins now for from the core and one of those things that the cores really like to charge for is all those new plugins. That\’s definitely something.
Chris Gunnare 19:43
Each one\’s different, but I think efficiency is where you find a lot of the advantages. I mean, how today, with the use of open architectures and more API integrations, the negotiation discussion with multiple vendors of how you create the best member experience could involve two or three or four different vendors, and they\’re using new technologies that maybe the credit union hasn\’t negotiated before, and so all of a sudden, having that expert behind the scenes that lives in it every day as part of their team kind of in those negotiations, creates efficiencies all across the board.
Jesse Kohl 19:44
Yeah, I\’ll just share a quick, quick story. Sarah, Chris, I\’m not sure if you\’ve heard this one, but when I first met the president at SRM many years ago, and really you learned about the opportunity and just how much room there is for, for cost savings in contract negotiation. I kind of said to him, wow, these, these companies must really, must really hate you guys. And he said, quite the opposite, that although these companies certainly, they know they need to sharpen their pencil, but they also know that this is a, you know, this can be a consistent and a smooth process, and in the end, the goal is to turn these, you know, sometimes one sided vendor relationships into more of a long term mutually beneficial partnership. That, that\’s really our goal.
Sarah Cooke 21:14
Sure. So now I\’m going to ask you. I\’m going to ask you, give away your secret sauce. What are your top negotiating tips?
Chris Gunnare 21:21
Well, okay, yeah, I\’ll kind of start there, and I think partnering with experts or people who live in that world all the time is maybe the first beneficial part in being able to effectively negotiate. I think it\’s interesting, but I think this parallels the credit union industry as well as a partnership really is mutual success. And I think when people go into their negotiations with whoever, whichever vendor, I mean, you hear the best credit unions talk about their relationships as a partnership, maybe not as a vendor, but as a partner, right? We try to work with credit unions to build those partnerships with their vendors. I think that mutual success and setting the table that both sides need to be successful in the partnership helps open the door in maybe a different and unique way. I mean, I don\’t think it always has to be the hammer, and I think that really opens the door for unique, new ways to partner with vendors. I think that being current and aware of where you can negotiate is important. And I think that\’s where consultants like SRM really bring expertise to those negotiations, because we live in it all day, every day. But I think that partnership has to be there first with the vendor. And I think that vendor, I mean, in today\’s day and age, they want to be successful too, and they want a successful partnership. And so I think that mutual lens of your success comes from our success kind of discussion helps the negotiations, being current on what\’s available, what the market\’s saying, what the market bears, having facts to be able to present to the vendor gives you more negotiation strength, I think, and I think that\’s what we bring to the table, but it\’s so important for the credit unions. And I think that alignment of values, not only with us, between us and the credit union, but the credit union and their vendors, and between us and the vendors, I think you put in partners like InterLutions, and they really are bringing all of us together in a lot of their membership, member relationships really helps as well, too. And so I think I keep going back to the people helping people. We are all stronger together.
Jesse Kohl 23:55
Yeah, great point, Chris. I think just one point to add. When you have the data behind that to back it up, that makes it even, even more powerful.
Sarah Cooke 24:04
Yep, always bring the data. So gentlemen, as you know, we allow our guests the final thoughts. You\’re going to get the final word. I\’ll know, who wants to go first?
Chris Gunnare 24:15
Jesse, would you like to go or…?
Jesse Kohl 24:17
Sure, I\’ll kick it off. So yeah, I think I\’ve said it before, is the, and when it gets into, into some of the complexities of, of ,of contract negotiation, yeah, the process is just not really entirely fair. It\’s not a level playing field for, for credit unions. So again, if we\’re only negotiating contracts once every several years, they have the advantage, excuse me. So having, yeah, like I said before, the data, the benchmarks, the pricing, the expertise in place, it, just having a partner that\’s willing to stand up for you, that\’s really what makes it so impactful. And although, yes, we typically see there\’s always room for cost save, even if there is not, again, we\’re a CUSO, we\’re aligned with the right partners. If we can\’t significantly help, we\’ll still give you some, some great tips, talking points to go back to your partners and really negotiate a better contract. And we\’re not going to charge you for that.
Chris Gunnare 25:17
I, just add to that, I think it all starts in our great partnership with InterLutions, and so as we have had a long term partnership with InterLutions, we are stronger together serving downstream member credit unions. I think that brings greater options. We keep going back to partnership. We are all stronger together. And in the end, we\’re really trying to find ways to create greater success for credit unions. And I think as you look at all of that working together, there\’s a lot of momentum, and I think there\’s a lot of excitement around the future, around member experiences, how we grow and serve more members in different ways. And I think it\’s a great partnership, both with InterLutions, but with the credit unions as well.
Jesse Kohl 26:11
I agree, Chris, it\’s been rewarding. Thank you. Thank you for all the comments. And Sarah, thank you so much for, and for having us. This has been great.
Sarah Cooke 26:17
Absolutely. Thank you gentlemen for your time. Appreciate it.
Chris Gunnare 26:20
Well, it\’s great always to talk with you, and I think in, this is a good virtual way to kind of show to credit unions, I mean, there\’s multiple ways that we can help each other be successful, and this is just another one that just talking about how we create success together.
Sarah Cooke 26:37
Absolutely. Well, thank you for your time. Appreciate it.
Jesse Kohl 26:39
Thank you, Sarah.
Chris Gunnare 26:40
Thank you very much. Thank you. Thank you.