A challenge for credit unions today is to keep pace with banks, which have seemingly unlimited budgets to fuel innovative efforts, to deliver comparable value, capture more market share, and provide enhanced member experiences. However, the investment fund Curql presents an opportunity for credit unions to not just survive but thrive by embracing collaborative efforts and pooled resources. By strategically combining forces and capitalizing on collective insights, credit unions can not only effectively compete but also scale their operations and introduce innovative products and services that cater to their members’ diverse needs.
Brian Lauer, general counsel for the National Association of Credit Union Service Organizations (NACUSO) and partner with the law firm Messick Lauer & Smith P.C., joins “C.U. on the Show” to share how the first-of-its-kind fund can help propel the credit union movement through strategic fintech partnerships and a collaborative member network. For more than 10 years, Brian has helped credit unions better serve their members and provide innovative products and services through credit union service organizations (CUSOs). He’s advancing those efforts with Curql, which combines credit union partners’ investments into fintech designed specifically for credit unions to deliver vetted solutions more efficiently.
What is Curql?
Credit union leaders know their organizations need a digital-first perspective, which fintech can foster, but the question remains: How can we do it better and more efficiently? Curql is a CUSO formed by 68 limited credit union partners to address how credit unions can be more relevant in the fintech space, level the playing field, pool resources to invest in and partner with fintech companies, and influence solutions by having a seat at the table.
Fintech Solutions Designed for Credit Unions
The fund only invests in fintech companies that are already CUSOs or can form CUSO subsidiaries to benefit credit unions and their members specifically. The fund’s investment management group works directly with credit union partners and the Curql Collective, its extended member network, to share insights, gain feedback, and understand the movement’s needs. In less than two years, the now closed fund has raised $250 million and invested in 19 fintech companies.
How Collaboration Expands Fintech to Credit Unions
Identifying and vetting viable fintechs one by one is inefficient for credit unions that may have limited resources or expertise. Curql provides the investment management expertise to increase the speed of funding and take ideas to market faster so credit unions can capitalize on these opportunities. While the first fund is closed, credit unions can continue to benefit from Curql through its Curql Collective. This subscriber-based ecosystem provides ideas, information, and introductions to strategic investing and fintech they may not be aware of.
Connect Your Credit Union to Fintech
Stream the episode to learn more about Curql and its benefits, plus:
- Companies Curql has invested in, including Silvur, Goal Setter, and Posh
- A current credit union challenge Brian would like fintech to address next
- What credit unions should consider before investing in or partnering with any fintech
Brian Lauer, Messick Lauer & Smith P.C., NACUSO, and Curql are not affiliated with or endorsed by ACT Advisors, LLC.
Audio Transcription (pulled from the podcast)
Doug English 00:00
My guest on this episode is none other than Brian Lauer, the esteemed general counsel for NACUSO. With an extensive background in the financial industry, Brian is a driving force behind the evolution of credit unions in today’s dynamic landscape. In this conversation we explore the bold concepts brought to life by Curql and Curql Fund. Brian shares his insights on how these innovative ideas are reshaping the credit union movement and paving the way for a more vibrant and customer-centric financial ecosystem.
Doug English 00:47
Brian, welcome to the show. We are delighted you are here to educate us on great things going on in CUSOs for credit unions.
Brian Lauer 00:57
Yeah, thanks. Thanks so much, Doug. Happy to be here.
Doug English 00:59
Tell me a little bit about your initial connection to the credit union movement. So many of us have a real special memory or an impact the credit union movement made on them. What’s yours?
Brian Lauer 01:12
Well you know, interestingly enough, Doug, when I got into this industry, I didn’t really even know what credit unions were, which I think is something that speaks a lot to the industry, unfortunately. When I graduated from law school, I had the good fortune of connecting with my mentor, Guy Massick, and started working in the CUSO law space. From there, from initially meeting this space and learning about credit unions, I have a real affinity for nonprofits and people helping people. And so when I learned those things, initially entering this industry, I was like, wow, this is the space for me. And now here I am, 18 years later, so I think I like it. And hopefully they like me too.
Doug English 01:52
Yeah, based on your social media activity, I would say you’re wildly popular. So your specialty work is in CUSOs. Talk to me a little bit about what your work entails. And then, of course, as we always do on this podcast, we’re going to look for the boldest, most innovative ideas you see in CUSO strategy.
Brian Lauer 02:11
It’s a great spot to talk about CUSOs, just in general, Doug, because CUSOs I think, are big bold ideas, right? CUSOs are really the tip of the spear of innovation for credit unions. It’s an ability for credit unions to collaborate, which is another really important part of the credit union industry. Credit unions in general are smaller than their big banks, right? And they need to collaborate to get scale and create better opportunities for their members, better service for their members, more products and services for their members, better expertise to be able to provide better products and services, more innovative ideas—all of these things are happening in the CUSO space. And if you were to come to the NACUSO, which is the trade association, if you come to the NACUSO conference, you’ll see all of this happening in that couple of days, right there at the event; it’s great to see. One of the big bold ideas is collaboration, credit unions coming together, cooperatives cooperating, right? And credit unions coming together and working together to solve a problem is so rewarding when you see it happen in my space. One of the more recent examples of this is fintech. So fintech is really really hot right now, right? Everybody wants to talk about fintech. It’s almost every other word out of their mouth, right? Well, the credit union’s connection to fintech was, yes, we need digital transformation, we need to get these things, but how can we do it better? There are a group of credit unions that came together and formed Curql, which is a strategic investment fund, with the idea of saying, look, how can credit unions be more relevant in the fintech and digital mobile space? And the credit unions collaborated together and they said, look, the best way to do this is to come together and create a fund of money collaboratively so we can invest in fintech and then also influence fintech—have a seat at the table and create an ecosystem around how we can better bring fintech to credit unions. So it’s again, a bold idea within this CUSO space and there are plenty of them but that’s just one that’s most recent and I’m really proud to have been a part of structuring it. We actually started during COVID in that work group, and we were on Zooms once a week for the whole time, at home, all of us on Zooms and working through it. It was a group of about six of us and we worked for about 18 months until we were ready to get that going. And I’m really proud of that.
Doug English 04:48
Interesting. So let’s talk a bit about that. I have had Brian Kaas from TruStage on here talking about the perhaps parallel initiative that they have been involved in. How does Curql work? And is that something that is open to credit unions continuing to join? Or is that closed?
Brian Lauer 05:09
So it is closed right now; Curql Fund 1 is closed right now. I believe they’re contemplating the next fund, Curql Fund 2 if you will, I don’t know what they’ll call it. But it is closed now. But however, the ecosystem is not closed. So again, the idea here was not just to be an investment fund—the idea was to bring fintech to credit unions. And so the collaborative nature of that group was to say, look, we have to close the fund at some point, we can’t just be continually raising dollars, right? But we don’t need to close the ecosystem. And so they bring credit unions into that ecosystem as subscribers. You can come in and be just like any other investor, from an introduction perspective, getting information on fintech. They have all sorts of ways they’re introducing fintechs to the credit union space. And so it is an open ecosystem but the fund itself is closed.
Doug English 06:04
I would think one of the great challenges is vetting the technology, vetting the concept, the capital structure of the fintech—all of those things are complicated and time consuming. And doing it on a credit union by credit union basis is inefficient. If you’re part of the Curql ecosystem, has some vetting been done with the players? Or is it like anyone can come and advertise to the group? How does that work?
Brian Lauer 06:32
So you nailed it, you nailed it. One of the reasons Curql was so important to create is exactly because with credit union by credit union, you don’t necessarily have the advanced investment management team to be able to vet and do the due diligence. And like you said, look at the capital structures of these companies, understand the valuations. And so one of the reasons Curql was created was because we felt bringing credit unions together would be able to allow them to hire a professional management team that would be able to manage that investment, due diligence and the like. And so Curql actually has an outside third party that they have hired; it’s a venture capital firm that actually runs the fund from a day-to-day management perspective, with regard to investments, due diligence, and maintenance of those investments—following and understanding where the companies stand today. And they have a pipeline where all the fintech is coming into that sort of CRM, if you will. They’re doing all of that vetting and due diligence, and nothing gets presented to the credit unions in the ecosystem until it’s far along in that process. But another cool thing is that venture capitalists don’t necessarily know or investment fund managers don’t necessarily know what credit unions want and need on a day-to-day basis. So as things move through that pipeline, and the investment due diligence is happening, they loop in that ecosystem to be able to give them feedback on whether this fintech is actually relevant to the credit union, or could be relevant to the credit union and what they like and don’t like about it. So from an operational perspective, they’re still using the credit union feedback to help them.
Doug English 08:25
Are there any stories of wins or losses you can tell us about from Curql Fund from some fintechs they took a position in and have done really well or really badly?
Brian Lauer 08:39
Luckily for Curql, it’s too early for true losses, if you will. They’ve been investing for about two years into portfolio companies. And so I believe they have about roughly 20 companies they’ve invested in; they did have one exit that was not was not planned. A time horizon on these kinds of things is really more five to 10 years. And so they weren’t really even thinking they’d have any kind of exit, only being around for two years. But they did, in fact, have one company that sold for a profit for the investors, so that was good. Obviously, there’s some downturn in the market, just in general due to the economy, right? So valuations are maybe leveling off, maybe coming down a little bit. So we may see a little bit of a downside, those losers, if you will, but everything seems to be moving forward really, really well right now. And just to be clear, this is really cool to bring it back around to CUSOs. Curql is a CUSO that is using credit union dollars to invest. Now, it is only investing in other CUSOs. So all of the fintechs they invest in have to be CUSOs. And so we work with a lot of those fintech companies as well to make sure they understand what a CUSO is, how credit unions fit into the financial services ecosystem and the like. So it’s really kind of a fantastic story. And the reason I brought it up is because first of all, it’s recent, right? But also, it’s just a really fascinating story about how credit unions collaborating together can actually feedback loop and reinforce the credit union industry in general. And so it’s just a really cool story to tell.
Doug English 10:36
Yeah, it’s an interesting thing to think about CUSOs investing in CUSOs, that ecosystem is going to be very significantly smaller than the broad market of fintechs. I imagine some of the things that are eliminated because it’s only born and bred of the credit union movement could be significant.
Brian Lauer 10:59
You’re absolutely right. And so what we do is we work with those fintechs to be able to create a credit union branch, if you will, or a subsidiary. So the CUSOs can invest in that because it’s actually serving the credit union space but they’re getting access to broader technology that may be more useful in other areas. We’re not limiting fintechs to their ability to serve all verticals but they’re investing in the credit union part of it.
Doug English 11:30
Interesting. We discussed the Curql Fund in a traditional way—is it making money for its investors? But perhaps the bigger question is, is it creating an improved member experience or return on capital or impact to the credit union members? Have you seen anything there from the Curql Fund impact?
Brian Lauer 11:59
Yeah, so I mean, again, thinking about it through this lens of the Curql Fund, and this is happening outside of the Curql Fund as well, in other circumstances, for sure. But you will see that with these individual portfolio companies, they are all about driving, first of all, it’s technology solutions that create better member outcomes. And so, I think about some of the portfolio companies they’re working with, like a company called Silver, which is a financial technology app that supports individuals as they move into retirement. So it helps with the process of choosing Medicare, the process of when you should take Social Security, as well as many other decisions that are relevant for individuals as they age. This really fits this kind of member-focused member service-driven type of application is really, really driving the same mission credit unions have, and then on the other side, there’s companies like Goalsetter, which is a financial technology application that is meant to be used by parents and children so if you’ve heard of like Greenlight, Greenlight is an example. Goalsetter is just a credit union-focused company that’s doing the same thing. But it’s this idea of first of all, it’s financial education for teens. But it is also a way for teens to have access to a debit card that is connected to their parents’ account. The idea is that it’s a dedicated account the parent can put funds into. For instance, if your child has an allowance, the parent in the application can keep track of whether the child is doing their chores, right? So they can tick off they did—they made their bed, they emptied the dishwasher, whatever it may be. And then when they finish those things, a parent can then say yes, and send $20 or $50 to their account.
Doug English 14:08
Wow, Brian, you pay really well for dishwasher unloading. I’m pretty sure when I was growing up, I got around a quarter for that.
Brian Lauer 14:21
Listen, let’s not show our age, Doug. Okay. Inflation.
Doug English 14:28
Interesting. So well, both of the examples, Goalsetter and Silver, in the financial education, financial technology area. Can you give us some more examples of Curql Fund investments?
Brian Lauer 14:43
Sure, Curql Funds also invested in the operations side. They’ve invested in a chat AI and voice AI company called Posh. And so Posh helps credit unions and other financial institutions implement an AI, natural language-driven chatbot and voice bot, essentially cutting down on your call center needs, right? So that’s been really, really interesting to watch over the years. That one’s pretty cool too; it came out of Digital Credit Union in Massachusetts. Posh was actually part of their incubator they had started where they would bring in technology companies for six months, and give them free rent and free access to the credit union staff and members, and so forth to teach them or give them the space to grow their company from a from an idea but also give them the ability to chat and talk to credit union folks to see how their company can interact with the financial services industry. So really kind of a cool idea. And so Posh came out of that, now is a CUSO and Curql investment in Posh. They’ve also invested in a company called Illuma Labs, which is again on the back office operations side. Illuma Labs is a company that does voice recognition software for security and fraud purposes. When someone calls the call center, you can implement their technology to be able to authenticate someone by their voice. It’s a lot more secure than using mother’s maiden name and those kinds of things, right? When people are calling and it’s all connected it can tell if you are using the same phone that is registered as your phone and you basically just talk to the person and as they’re talking, you can recognize their voice and authenticate that way. So it’s all sorts of interesting things that are helping credit unions be more advanced but also credit unions being able to still be relevant to their members and serve their members in a relevant fashion.
Doug English 16:59
Yeah, especially the chat AI Posh couldn’t be more tip of the tongue these days. The Curql Fund, how many credit unions are part of that?
Brian Lauer 17:09
So there are 68 limited partners in that. We were hoping to raise $50 million, a nice pot of money to go and do the things I’ve just been discussing, right? Due to so much interest they raised $250 million. And that’s when it closed. So 68 limited partners, differing amounts of investment from each. But I think it was a max investment of $10 million from one institution. And so yes, 68 limited partners.
Doug English 17:40
So we have those 68 credit unions. I assume just because you are an investor does not necessarily mean you’re also a user, or does it?
Brian Lauer 17:50
So in this instance, I think what you mean is user of the underlying technologies, right? They’re all technically users of the Curql Fund because they put their money in, and they’re part of the investment process. So Curql Fund is just a limited partnership fund. That’s why I said 68 limited partners but it’s one of its general partners, or lead general partner, that is Curql Collective, we call it. All 68 of those limited partners have one unit of ownership in Curql Collective. So it’s like a cooperative, right? And the collective is the entity that is actually running the ecosystem I described. And so Curql Collective keeps track, going back to your question, Doug, Curql Collective keeps track of all 68 limited partners as well as the subscribers I mentioned earlier. So credit unions that have come on that are just subscribers, it keeps track of all of them, and how many products and services they’re using. Don’t hold me to these numbers, but I believe all 68 limited partners are using at least one of the portfolio companies, there are a bunch of them that are using two, a slightly smaller group that are using three. And I believe there is one or two that are using four or five of the portfolio companies. But the idea behind the processes is to again, bring those companies to credit unions. Just because you’re a limited partner, Curql doesn’t want to be in the business of forcing technology on you. Every credit union needs to make their own decisions, they have their own processes in place for doing due diligence and reviewing and vetting vendors. We talked about investment, due diligence, but there’s also due diligence on whether you want to go with this particular partner or another, right? We’ve talked about Posh; there are other chat AI systems out there that you may find would be better for you. And so credit unions will do that due diligence on their own. But the idea behind Curql is, in fact, to try and find the best of the best and bring the best of the best to credit unions. So the hope is that over time, there’ll be a whole lot of adoption moving forward of these companies.
Doug English 20:12
Is it correct that the 68 credit unions are probably all in the billion dollar plus club?
Brian Lauer 20:19
That’s a good point. So of the 68 limited partners, I believe the majority of them, if not the super majority of them, are in the billion plus. That’s mostly because the investment piece of it is dollars, right? And not all the smaller credit unions when you get down to like 500 and below, not all of those smaller credit unions have the capacity or the want to be able to put that much capital into a fund to get that investment return. But it doesn’t have to be all about investment return. That’s why I was talking about the ecosystem, right? Those credit unions can become subscribers. And so there are a lot of smaller credit unions that are subscribers. And in fact, what they did in this round, the first funding round, they actually have a league that invested in Curql Fund. And what the league did was went out and raised funds from the credit unions in their state of a smaller variety so they were able to get access to Curql and something like Curql. They’re not going to want to raise 200,000 here, 200,000 there, but they are willing to take say $2 million from the league. The league can go raise that money however it sees fit. So that was a way smaller credit unions are getting access to Curql as well as again, the subscriber piece of it where you can subscribe to the ecosystem.
Doug English 21:46
Yeah, I want to dig a little further into this subscriber side of things, especially since the fund is closed. How does the subscribers system work? Pretend the credit union is listening and wants to understand from the very beginning? What do you do? How does it work?
Brian Lauer 22:02
I mean, it really is as simple as contacting the Curql Collective. The folks at Curql Collective would let you know what the contract is. It’s just a simple contract to subscribe to the ecosystem, and then it’s an annual fee. I don’t recall the fee off the top of my head, to be able to share with your listeners today. It’s not the kind of fee where you think, oh, that’s cost prohibitive. It really is not. I want to say it’s somewhere around $15 or $20,000 a year, which, again, it’s not small potatoes but it’s not break the bank numbers.
Doug English 22:37
And then you’re a subscriber and the venture capital firm is vetting any companies that you’re going to see at a meeting or read about in the newsletter. Tell me if I’m right but I’m assuming anything you’re going to be exposed to through Curql has already been vetted through the Curql system. Is that right?
Brian Lauer 22:58
So that is correct. So the portfolio companies, certainly all of that investment, due diligence has been done, there’s been a lot of due diligence from the Investment Committee at Curql on the viability of the product and its ability to serve credit unions. One of the things the fund does is when they’re vetting a portfolio company or a potential investment, they’re always looking for a company that wants to serve the credit union industry, can show a viability for actually serving the credit union industry. And oftentimes even has two or three credit union clients already. So it’s already in this sort of wanting to be in the ecosystem. But then there are other fintechs outside of the portfolios that will also maybe subscribe to the ecosystem, if you will, come into the ecosystem. In those instances, there’s not as much investment or due diligence being done on those guys, right? It’s not a matter of Curql wanting to do all of that due diligence to invest, they’re not interested in investing or maybe it’s just not right or ready for their investment. So they’re not doing all of that due diligence. However, they are still going through the funnel to determine they are viable fintech options for credit unions in the same ways I just described. Are they wanting to serve the credit industry? Are they showing a capacity to do so? And does it seem to be a viable product?
Doug English 24:30
I see. Okay. So it’s not taking it to the full due diligence level. But there is some screening that increases the viability, at least to some extent. And then assuming you’re using the system to get educated on this complex, fast moving space and then you can kind of see what ways to increase your participation, either directly with the fintechs themselves, or through future Curql Funds. Is that how it would work?
Brian Lauer 25:01
That is exactly right. Yeah. So the idea is that if you’re subscribing, you’re getting access to all the things I just mentioned. And as a subscriber, you would certainly be in line, if you will, for a future fund when they decide to do that.
Doug English 25:19
The other fintechs that are also at the meetings are a part of the educational effort are all CUSO fintechs. Is that still the case?
Brian Lauer 25:31
They’ll either be CUSOs already or willing to become a CUSO, so willing to take on credit union or CUSO ownership interest and become a CUSO.
Doug English 25:42
Some time ago last year, I talked with a fellow named Tom Novak from Visions Credit Union. He did a great job of illustrating their digita-first initiative and the way they’re partnering with fintechs in a very substantial way. At Visions, I don’t think they were putting capital in; they were partnering in other ways. Have you seen subscribers participate with fintechs in ways like that? And can you share any examples?
Brian Lauer 26:13
So I don’t know if I have any examples for you, Doug. But I think the Visions example is a great one in that you don’t have to invest to have a digital-first perspective. And frankly, I would say if you don’t have a digital-first perspective in 2023, when we’re talking right now, you’re in trouble. It is going to be tough to be relevant to your members, and to grow and survive in the financial services industry, if you are not moving digital first in this day and age. What Visions is doing is deciding, we’re not going to invest, we’re just going to create good partnerships, and create that digital-first perspective. And certainly other credit unions can follow that model. Being a subscriber in Curql may be a good opportunity for you to get access to those new innovative technologies you may not be hearing about, or you may not even be aware or possible, right? And so that’s a good way to get involved. But I would say also, as I mentioned at the start of our conversation today, if you go to the NACUSO Conference, which again, is sort of the tip of the spear in this innovative space for credit unions—if you go to the NACUSO conference, you will see a lot of these fintechs and financial technology companies there, and whether they’re CUSOs or not, you can work with them to be able to provide that digital-first perspective or strategy.
Doug English 27:40
I hate to ask you to tell me about others, but I had not heard of Curql before this conversation today. And again, given that the fund is closed, are there other credit union activities of this nature the movement should be paying attention to?
Brian Lauer 27:57
So I think there are absolutely. One of the interesting things I think is going on today is that we have balance sheet management issues, right? And frankly, we had them two years ago when there was tons of liquidity and not enough loans, and you’re trying to find loans, right? And now it’s not enough liquidity—you’re trying to find deposits. I don’t have an example of someone solving that today, that issue. But what I would say to you that I think is an interesting sort of concept of, as we discussed Curql, and innovation and collaboration, I think there should and could be ways to solve collaboratively the kind of balance sheet issues we’re seeing in today’s marketplace, right? Maybe there’s a way for credit unions to come together, get scale, and be able to develop relationships with companies that create deposits, right? Or develop relationships with companies that are generating loans, and then maybe within that collaboration, spreading that risk and those deposits around so a CFO, if you will, sitting in a credit union is able to have tools it can use to be able to manage the credit union’s balance sheet in the best way possible. So again, that’s more back office in a way but it’s also front end too, because it’s a way to grow membership and be relevant to your members. So I think while I don’t have an example of a CUSO of doing that, I would say to you today, I think collaboration ultimately is going to be with CUSOs. I think collaboration is a way to look at that issue we’re working on today, we’re living through today, and try to solve it.
Doug English 29:42
Yeah, credit unions’ competitive advantages are the willingness to collaborate and as an industry to collaborate. I talked to Sam Brownell from CUCollaborate, talking about his really innovative idea for this data consortium of the entire industry so as an industry we have more predictive power for what our members are going to want to consume and when. I love that part about the credit union industry, that they collaborate in service to members.
Brian Lauer 30:16
Absolutely, I completely agree.
Doug English 30:20
Well, Brian, it’s been a great conversation. I love the work you’ve been doing, helping the credit union movement create bold ideas around CUSOs. And the Curql Collective and the Curql Fund are very interesting strategies. So if a credit union wants to kind of get plugged into the conversation, what should they do? What should they look up and follow on their social media or newsletters? Where should they start?
Brian Lauer 30:49
Well, certainly you can start by just reaching out to me at cusolaw.com. I’m happy to connect, one of the things I’m really proud of in the industry is being able to connect folks. And so it’s not about generating clients for myself, but instead if I can make the industry better by connecting people, I’m happy to do that. So cusolaw.com is our website, our contact information is on there, feel free to contact me and I can connect you with anyone. And I’ll even say it like this, Doug, if you have an idea, I’m happy to talk through your idea with you. If you are wondering if someone is doing something already and I know I will connect you with them. And anything we’ve talked about today, certainly I’m happy to connect to you as well. So, yeah, please reach out.
Doug English 31:32
Wonderful. Thank you, Brian. Thank you for your work with the credit union movement. I will look forward to seeing you and the Curql Fund do big things in the future.
Brian Lauer 31:42
Sounds great. Thanks.
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