GRAND RAPIDS, Mich.–CU*Answers said it has noticed that a “trend is starting to take root,” which is that credit unions appear to be more willing now to pay early termination fees to switch data processors.
There is mounting frustration with the traditional data processor model, not only with what credit unions receive as part of the core product, but also what they are paying if they want a new product/service or want to connect to a third-party interface, the CUSO said.
Scott Page, EVP of sales at CU*Answers, said credit unions are approaching the company at a higher rate, indicating they want to convert as soon as possible, even at the expense of hefty early termination fees.
“Other data processors seem to have taken notice and have begun using retention strategies that automatically roll the credit union into a new term if certain conditions are met,” CU*Answers said in a release. “For example, a new five-year processing term may be initiated if the credit union upgrades or replaces its in-house servers, merges a credit union into theirs, or upgrades an ancillary service with the data processor. And in some cases they are intentionally staggering contract terms for ancillary products like home banking, bill pay, item processing, etc., so that ending the relationship becomes difficult and expensive.”
CU*Answers’ Sales Rep Mike Gruber said that in recent years it has had multiple CUs convert to its CU*Base platform with more than a year existing on their contract; in one case, a CU had two years remaining and it paid a $100,000 early termination fee.
“These credit unions are looking for a data processor that will partner with them and not charge exorbitantly for a new product, service, or third-party interface,” Gruber said.
CU*Answers said the company has assisted some credit unions with the “pricey upfront cost” of making the move as it is seeking to help those that want to “break out of the exploitative business practices they were stuck in. In exchange for paying their former processor a lump sum, credit unions gain in CU*Answers a CUSO partner, where they can be an owner and help develop the data processing system and have a say in how the data processing company will operate and develop the tools, and software products that the credit union, members and employees need to be successful.”