A Lessons Learned Review of the Credit Union Expansion Project

Produced on behalf of the ABCUL Board in response to a members’ motion to the 2018 ABCUL AGM

February 2019

CONTENTS

1. Preface 3 2. Executive Summary 5 3. Introduction & background 20 4. Responses to survey feedback 39 5. Responses to survey questions 66 6. Summary of interview feedback 77 7. Contribution from independent review committee member – Antony Elliott 84 8. Contribution from independent review committee member – Gary Cuddy 85 9. Conclusions & Lessons Learned 87

Appendices

i. Financial disclosures 93 ii. Project timeline 96 iii. Full interview summary 99 iv. List of participating credit unions 140

Acknowledgements

The ABCUL board and review subcommittee would like to thank those that have contributed time and input to the review process for their support for this important process. This includes those credit unions that submitted feedback to the initial survey, the 14 interviewees and those that provided feedback and advice throughout.

1. Preface from the ABCUL board

At the Annual General Meeting of the Association in March 2018, the ABCUL membership voted in favour of the following motion:

Be it resolved that ABCUL exercise its power of control and oversight over Cornerstone Mutual Services Ltd to understand the reasons for the problems in the management of the CUEP project and ensure that lessons are learned for future working and further reputational risk is avoided. Following this exercise of powers that ABCUL review the current governance structures and revise them if they do not allow transparency and oversight by the ABCUL Board of Cornerstone strategy and operational effectiveness. That the results of these investigations are reported back to the membership.

The report that follows represents the board’s attempt at fulfilment of this motion. We sincerely hope that the report will demonstrate that ABCUL is committed to being held accountable for the Project’s disappointing outcome and to learn the lessons from this painful episode in our shared history.

In opening the report, the Board would like to take this opportunity to apologise unreservedly for the disappointing outcome of the Project.

The Project began with high hopes for the impact it would have in terms of modernising and digitalising the services of participant credit unions with a view to bolstering their sustainability and providing a robust platform for future growth and development. In this goal, the Project fell well short of its aims despite a substantial injection of investment from government and significant effort and commitment on behalf of participant credit unions.

Everyone at ABCUL recognises and acknowledges the disappointment and frustration that participant credit unions experienced as a result of the outcome of the Project and accepts responsibility for this. That is not to say that only ABCUL and its subsidiary Cornerstone were at fault within the Project, but to the extent that we are responsible, we are sorry.

As the report will elaborate in detail below, the ABCUL board delegated the operational delivery of the Project to Cornerstone Mutual Services. Our apology does not suggest otherwise. But equally we recognise that it was ABCUL’s strategic vision which gave birth to the Project at its outset and contracted with DWP to deliver it.

In conducting this review, the ABCUL board considered a number of models. We recognise that there will be some among the membership that would have liked a full, independent inquiry. On balance, however, it was decided that the board should own the process of review and limit the scope of the review to a high-level overview of the key issues within the Project.

The board delegated the review’s delivery to a committee of its own number with support in a secretariat capacity from the ABCUL staff. This was bolstered by independent membership of the committee, providing insight and challenge to the process. We believe that this approach best reflects the balance of interests among our members – those that participated, and those that did not – and delivers on the substance of the motion.

We appreciate that a report of this nature is unlikely to satisfy everyone, but we hope that what follows will be seen for what it is – an honest and transparent attempt to learn the lessons of the Project and provide closure.

The Project did not deliver on its promise but the challenge of relevance for credit unions has only deepened. To tackle this successfully, credit unions and ABCUL will need to continue to collaborate. We hope that this report goes some way to healing the wounds left by the Project and provides us with a platform to move forward, together.

Karen Bennett Robert Kelly ABCUL President ABCUL Chief Executive

2. Executive Summary

The Credit Union Expansion Project review was instigated by a motion to the ABCUL Annual General Meeting in March 2018 which was supported by a majority of assembled members. The motion read as follows:

The motion came in the light of the Credit Union Expansion Project (hereafter the Project) closing without achieving its objectives in February 2018. It can be broken into two distinct requests of the ABCUL board:

1. Review the Project’s outcome and establish lessons learned for future working 2. Review current governance structures in relation to transparency and oversight of Cornerstone in relation to the ABCUL parent.

The review takes these questions in reverse order and deals first with the governance structures of the ABCUL Group as they related to the Project and its outcome. It then engages in detailed review to produce lessons learned.

Review structure and approach

In responding to the motion, the ABCUL board considered a range of options and decided that the most effective and reasonable approach would be for it to conduct the review on its own behalf, with support from the ABCUL Group staff team and challenge from independent members of a committee established for the purpose of conducting the review. The committee overseeing the review was as follows:

- Andrew Wright, Chief Executive 1st Class Credit Union & ABCUL Director for Scotland (Committee Chair) - Karen Bennett, Chief Executive of Enterprise Credit Union, ABCUL Director for North West and ABCUL President - Grenville Bingham, Director London Community Credit Union & ABCUL Director for London & South East - Rosemary Britten, Director, Wyvern Credit Union & ABCUL Director for the West Midlands & South West - Carol Strand, ABCUL Group Financial Controller & Executive Director, Cornerstone Mutual Services - Antony Elliott, Founder, Fairbanking Foundation (Independent Member) - Gary Cuddy, Director, Kizmit Solutions (Independent Member)

Secretariat:

- Robert Kelly, Chief Executive, ABCUL - Matt Bland, Head of Policy & Communications, ABCUL - Abbie Shelton, Associate, ABCUL

Independent members, Antony Elliott & Gary Cuddy were selected as they each bring a unique perspective to the process:

- Antony, as founder and former Chief Executive of the Fairbanking Foundation, has a strong knowledge of retail banking financial services from his long career in the banking industry and, more recently, as leader of the Foundation in its aim to encourage banks and other financial services companies to adopt products, services and practices which support financial wellbeing. In doing so he has worked closely with credit unions in accrediting their loan services and did provide some limited, unpaid advisory services to the Credit Union Expansion Project in its early phases. - Gary, as Director of IT consultancy Kizmit Solutions, and formerly having worked extensively in the banking and retail sectors in IT transformation projects has extensive experience of the technical project management challenges of delivery in complex technical projects of a similar nature to the Credit Union Expansion Project.

Each of the independent members of the committee provides a section below on their reflections on the Project’s outcome and the review process.

Constraints and limitations of the review

Within this review process we wish to be as open and transparent as possible. However, we are nevertheless constrained by certain legal and practical barriers to full disclosure.

Firstly, we are bound by certain confidentiality requirements in relation to the main sponsor of the Project – the Department for Work & Pensions – and the main supplier to the Project – Fiserv. As such, in places we will only be able to allude indirectly to the role played by these key third parties in some of the key failings of the Project and its ultimate outcome. We hope that this will be clear throughout.

Secondly, we are constrained by available time and resource in terms of the nature of the review process. While we seek to be as open and transparent as possible, we have not had the available resources to conduct a thorough trawl through the many thousands of documents and governance papers that relate to the Project. This would be a huge task and we believe that it is possible to identify and explain the key lessons coming out of the Project without such a detailed process.

Finally, we are limited by the still-live nature of the Project in terms of credit unions that remain on the Agiliti-powered Model Credit Union platform developed under the Project. Cornerstone Mutual Services is working hard to provide a clear path to resolving the uncertainty that the closure of the Project created for these credit unions but it would be inappropriate for this review to look into these matters too closely. The Review will comment on some of the high-level issues relating particularly to the migrations of these credit unions to the platform but beyond that will not comment.

Review process

The review has taken into account a range of different views and evidence:

- Credit union survey responses – the ABCUL annual credit union survey (of both member and non-member credit unions) sought feedback from credit unions on what they felt were the weaknesses and failures as well as the strengths and successes of

the Project. It also asked for questions that respondents wished the review to answer.

- Internal review – the secretariat has conducted a thorough process of research through key documentation and information in relation to the Project. This included reviewing: contractual and tender information, media reports, Project communications, governance documentation, financial accounting data.

- Interview feedback – individuals from within the governance and leadership of the Project were approached for interview in order to offer their thoughts on the reasons behind the Project’s outcome; its strengths and its weaknesses.

- Independent review – each of the two independent members of the review committee has challenged the review throughout as well as providing a section each on their views as to the reasons for the failure of the Project.

Report structure

The report is broken into the following sections:

- Introduction & background – this provides background to the review itself as well as providing an account of the ABCUL Group governance structures and how they related to the Project and a narrative account of the Project’s life.

- Response to credit union survey – this provides the review’s response to the feedback and questions that were put to it in the ABCUL annual credit union survey.

- Summary of interview feedback – this provides a summary of the interview feedback provided by those from within the Project and from participating credit unions that gave the review an interview.

- Independent member contributions – this provides the insights and reflections of the independent members of the review committee into both the process that the review has conducted and the lessons to be learned from the Project.

- Conclusion & lessons learned – this provides the reviews key conclusions on the governance structure question and sets out the key lessons learned that the review process has identified.

- Appendices –

o Financial disclosures o Project timeline o List of participant credit unions o Detailed interview feedback summary

Introduction & background

In relation to the governance of the ABCUL Group of companies and the Project, the review finds that the key reasoning behind the creation of Cornerstone Mutual Services fell into two broad areas: firstly, to insulate the ABCUL trade body from the risks and liabilities that might

arise from commercial service provision and, secondly, to provide a different profile of skills and experience to the strategy for successful delivery of said services.

In terms of the insulation of financial risk and liability, the creation of Cornerstone as a subsidiary has certainly served its purpose as – both as a result of the Project’s outcome and the weak performance of the wider commercial product offering – Cornerstone has sustained significant losses and accumulated liabilities which might otherwise have undermined the ABCUL service for the wider trade body membership.

The second key reason behind Cornerstone’s establishment is less well demonstrated given the poor performance of the subsidiary. Clearly the skills, experience and composition of the Cornerstone board were not sufficient to produce the desired outcome in terms of performance. However, it is neither clear that the ABCUL board having a more direct controlling role would have delivered a better outcome.

What the review does accept is that there are definite grounds for the ABCUL board to review how it informs and mandates strategy for subsidiary companies in future. While ABCUL – as the sole A member of Cornerstone – had significant discretion over Cornerstone’s governance, leadership and strategy, it chose not to exercise these powers to their fullest extent. Though the review doesn’t believe that to have done so would have resulted in a different outcome, since many of the Project’s difficulties were driven by the Project contract, it also believes that ABCUL should set a clearer mandate for subsidiary companies in future.

Similarly, the governance and leadership structure of the Project and Cornerstone in hindsight appears overly complex and decision-making and accountability was insufficiently clear at points throughout the Project’s delivery. Of particular note in this regard, is that the review is of the clear opinion that it would not be advisable to maintain a joint Chief Executive of ABCUL and service subsidiaries akin to Cornerstone in future in order to provide clear lines of accountability between parent and subsidiary.

The Project grew out of long standing strategic commitments for ABCUL in terms of establishing a shared services company for British credit unions and pursuing a role in financial inclusion in partnership with Government. In the lead-up to the Project’s 2013 launch, ABCUL had worked hard to establish political support for this despite the context of widespread consolidation of public sector spending. This is a critical contextual factor for the Project which was secured against the political odds giving additional impetus to thinking around accepting the terms of the investment despite how challenging they would be to deliver.

Also important to note here was the way in which the amount of investment committed fell from £73 million at the point of the initial announcement, to £51 million at the point of the feasibility study, to £38 million at the point that the Project contract was awarded.

The tender process took place in 2012 with contract awarded in April 2013. ABCUL was the bidding party, rather than Cornerstone, due to requirements around length of trading history which made Cornerstone ineligible. A critical conflict arises at the point of the tender whereby, firstly, there was a well-understood and communicated concern at the level of ambition required by the Project at the point of the tender to the extent that ABCUL- Cornerstone executive leadership sought reassurances from DWP on the delivery timetable and its flexibility since it was felt that delivery in two years was unrealistic. However, at the same time the ABCUL-Cornerstone bid significantly exceeded the minimum requirements of

the DWP’s tender document. This calls into question, at an early stage, the management and governance around the risk management of the Project.

Shortly after completion of the original contract, it was quickly understood that the contract was flawed in the way that it tied investment and funding to already-delivered credit union growth but that the growth committed-to was predicated on that prior investment. This took more than one year to renegotiate and sucked significant early energy from the process. It highlights, once again, significant limitations in capacity and due diligence in the early management of the Project.

The key project deliverables were as follows:

- ALD - Central services – procurement, HR, collections - Treasury management - Marketing – websites, FYCU, Common Sense with Money B2B toolkit, local campaigns - Banking platform & payments integration

While ALD and marketing were delivered to a great extent and largely successfully, central services, and treasury management had a weak delivery throughout and ultimately became marginalised by the focus on delivery of the banking platform and payments integration – which became known as Model Credit Unions.

In relation to the core delivery of the Model Credit Union, the report notes the following aspects of the delivery process:

- Staffing and resource – staffing of the project was a contentious point throughout the Project’s life. The initial ambition to resource the Project through permanent staffing was pursued through a team of permanent recruits and credit union secondees but this gave way quite quickly to a contractor and consultancy-based resource due to the departure of key staff, such as Simon Blissett (initial Project Director) early in the process and the changing focus of the Project both in terms or a narrowing of the objectives – towards the delivery of a payments and banking platform – and the linked need to increase technical expertise and experience.

Similarly the time pressure on the Project to deliver created a need to seek temporary staffing resource to manage the Project’s delivery, most obviously through Grant Thornton, which was especially the case due to delays brought about by the immediate contract renegotiation.

Another dynamic was that between Cornerstone staff and Project staff which saw a number of personalities come and go and which was a key tension throughout the process. Finally, as the Project came towards its conclusion, contract staff were replaced by permanent staff in order to manage Project costs.

The dynamics created by the weighting of resource towards temporary, technical expertise and away from credit union expertise and permanent, accountable staff were of critical importance to the Project’s outcome.

- Communications and engagement – communication and engagement with participating credit unions and more widely during the Project was heavily criticised throughout the Project. But it was not a static picture.

Heavy early engagement with credit unions at the outset of the Project in relation to, for example, the development of the Target Operating Model, gave way to more limited engagement as the Project got into technical design and development. However, following the critical account provided by participants in the DWP- commissioned survey conducted by Liverpool John Moores University in 2016, a renewed effort was made to communicate with and engage credit unions in the Project with new dedicated staffing and fora.

Ultimately, though, the poor experience of credit unions at migration demonstrated an inadequate engagement with and understanding of credit union operations by the Project during the design and development phase and in terms of training and support. This was a key factor in the very damaging experience of migrating credit unions.

- Funding – credit unions received funding in the following forms during the Project:

o Payment by Results for growth in members, lending and deposits totalling £3.2 million o Transformational incentives for those adopting the Model Credit Union totalling £745,000 o Out of pocket compensation from Fiserv for delays in Model Credit Union delivery of £148,000 o Expansion Fund support for mergers, HR and other consultancy support of £458,000

The total amount spent on the Project by DWP was £29.3 million. The above amounts received by credit unions total c. £4.5 million but around £1 million of the PBR payments were retained by Cornerstone under the agreement in the original Project contract in which credit unions committed to a 25% contribution from PBR for development costs.

Total Cornerstone spending funded by DWP under the Project was £25.6 million. Around £4 million of this went to Fiserv for system development. £13.6 million was spent on contractor and consultancy resource. The remaining sum was spent on core costs and salaries, other third party costs and overheads.

- Banking platform selection – Fiserv Agiliti was selected as the provider of the core banking platform under a competitive selection process supported and advised upon by consultancy AT Kearney at the behest of DWP. The selection was driven by the flexible Software as a Service model and the market-leading mobile and payments integrated aspects of Agiliti. The tender process ran through January and February 2014 and Fiserv signed an initial Statement of Works to develop the Model Credit Union in July 2014.

2014 and 2015 saw a succession of renegotiations with DWP around the parameters of the Project. These were largely necessitated by the original April 2015 deadline proving impossible to meet. They also saw an intensive process of design and development involving the sign up of 32 credit unions for the adoption of the Model Credit Union with a ten year commitment. This was a difficult process with significant tension produced by the fact that a commitment was sought even before Fiserv had formally contracted with Cornerstone for the delivery of the platform (not agreed until January 2016).

reailCURe became the first credit union to go live on the platform in February 2016 which was a process which ran comparatively smoothly – relative to the later migrations – thanks to retailCURe’s status as a new start credit union with no legacy business to migrate. They assisted the Project to develop the platform as a green field test bed.

However as 2016 progressed, tensions grew with the Fiserv platform delayed in its delivery causing increasing impatience on the part of credit unions waiting to adopt the platform. Tension also grew with DWP which had expected around 20 migrations to have taken place by mid-2016.

East London Credit Union did migrate to the platform in September 2016 but the process descended into a chaotic situation quickly after a relatively successful initial migration. This took significant resource to stabilise and highlighted significant shortcomings in the management of credit union readiness, the completeness of the system, and the lack of adequate contingency arrangements.

Following the highly problematic ELCU migration, late 2016 and early 2017 saw a number of key developments. Firstly, the political sponsor of the Project – Lord Freud – retired from Government and key officials left the Department leaving the Project with weaker support from its sponsors. This coincided with a major review of the Project contracts as further extensions became required to provide the Project with a future. Ultimately a contract was agreed in July 2017 which placed all financial risk for delivery upon Cornerstone which would only be paid upon successful migrations.

Within the Project, the contract and consultancy staff was replaced in late 2016 and early 2017 with permanent staffing. This was necessitated by the financial position of the Project and in order to prepare the Project for steady-state, business as usual.

In March 2017, under pressure to deliver successful migrations, the Project migrated Voyager Alliance Credit Union to the Model Credit Union platform. Though the process was more successful than that of East London six months prior, the credit union was quickly destabilised due to a number of operational decisions, a failure to effectively ready the credit union for the change and functional gaps in the system. This experience demonstrated that the delivery schedule required to successfully deliver the Project was not feasible.

Despite efforts to assure itself and the DWP of the ability to deliver the Project following the Voyager experience, without a change in the way the Project was funded and resourced, the reality of migration and the pace it would need to be carried through, the Project could not contemplate further migrations given the risks demonstrated by the Voyager and East London experiences. Ultimately, in February 2018, with no further migrations attempted, the DWP exercised its contractual right to terminate the Project.

Since the termination of the Project, Cornerstone has been engaged in an exit and resolution process for the Project. This has been and remains a challenging process and the first priority of Cornerstone has been to secure a viable path forward for the live credit unions within Cornerstone’s capability to provide that.

Following a critical review of Cornerstone’s future during 2018, the decision has now been taken between the ABCUL and Cornerstone boards to pursue an orderly wind-up of the subsidiary and a plan to deliver this while meeting contractual obligations to all Cornerstone customers is underway.

ABCUL plans a major Town Hall consultation to reset the sector’s vision for the coming five years. While the Project failed to deliver on its objectives, the need for credit unions to collaborate in order to meet members’ digital expectations and remain relevant is more pressing than ever.

Survey feedback

As part of the review, in the ABCUL annual credit union survey feedback and questions were sought in order to inform the review process and to provide an opportunity for credit unions to provide their input. 71 credit unions responded to this and provided feedback on what they felt were the strengths and successes of the Project as well as its weaknesses and failings. Respondents were also given the opportunity to ask questions that they would like the review to answer.

Within the report, we have reproduced the feedback grouped in common themes and responded to each area of feedback as thoroughly and openly as possible. As might be expected, the negative feedback provided significantly outweighs the positive. We have also reproduced questions that survey respondents put to the review and sought to answer these to the best of the review’s ability.

This material and the process of providing a response has been crucial to challenging the review to consider the range of factors behind the Project’s failure to deliver its intended outcomes and in informing the ultimate conclusions and lessons that the review has identified.

The key feedback on the weaknesses and failings of the Project focussed on the following areas:

- Reliance upon consultant and contract resource without an expertise in credit unions - A lack of open and honest communication - Weak project management discipline - The wasted money and opportunity represented by the Project - That the Project was unrealistic and too ambitious

Other feedback in terms of weaknesses and failings focussed on the over-emphasis on technology, the problems of governance and accountability, the inappropriateness of the solution and its cost structures and the negative impact the Project had on credit unions and the reputation of ABCUL and Cornerstone.

The key positive feedback on strengths and successes (of which there was much less) focussed on the following areas:

- The project focussed vision and ambitions for the sector - Initially the Project promoted collective effort and collaboration - Payments by Results for credit unions - The Web Front End service - The directly employed staff that were hired (towards end of the Project)

Finally, respondents sought answers to the following key areas of questioning:

- How the original tender process, bid and assessment of Project feasibility was conducted

- What mechanisms were and might be in place in relation to governance and accountability - What structures, methodologies and strategies were used in relation to the Project delivery - Whether credit unions would be compensated for the Project’s outcome - How ABCUL and Cornerstone would address the reputational impact of the Project

The reader is referred to the main body of the report for more detail in relation to feedback, questions and the review’s responses to these. Many respondents sought financial information from the review and this is provided throughout and in summary in the financial disclosure appendix.

Summary of interview feedback

Interviews were held with fourteen people who were involved with the Credit Union Expansion Project in one or more ways; through paid or governance involvement in ABCUL or Cornerstone and/ or through employee or governance involvement in a credit union that was part of the Project. Summaries of the interviews were approved by interviewees ahead of their inclusion in the report and are only representative of the views of the individuals. Some respondents chose to submit written responses to the interview questions, as opposed to participating in a full interview. The current Cornerstone board also contributed via a workshop session.

A precis of some of the answers given is set out below. We focus here on the failings of the Project identified by respondents and the areas suggested that might be done differently. A fuller precis with sample quotes is provided in the main body of the report and a full thematic summary of the interviews and details of the participants can be found at Appendix iii.

Interviewees referenced a number of aspects of the Project as key failings in relation to the following themes:

 Vision and ambition o The vision was identified as a good thing, but targets set were seen as too ambitious

 Design o Flaws with the DWP contract were identified o Failure of the Project to deliver on central services o View expressed that too much money was spent on marketing o The effect on behaviour of financial inducements o No intellectual property retained within Cornerstone o Model Credit Union watered down as delays went on o Customer facing aspect of Agiliti platform was viewed as good, but a number of faults identified within the system itself. o Some interviewees questioned whether the right supplier was chosen.

 Communications o Communications with credit unions were seen as poor at times, credit unions were not kept up to date with what was happening

o Lack of credit union understanding within team led to difficulties in understanding needs o Credit unions identified a lack of communications and assistance since the closure of the Project o Individual examples of communications which led to breakdown in trust, including the project being seen as oversold and difficulties in negotiations.

 Delivery o Project was seen as losing sight of what credit unions wanted o Going live or withdrawing support before credit unions and / or platform was ready o Plan too ambitious

 Training and readiness o Issues with timing and focus of training o Trainers sometimes had to be trained in what they were delivering o Lack of understanding of credit unions and underestimation of the learning curve of credit unions

 Staffing and leadership o High turnover of staff o Overreliance on contractors and consultants, limited understanding of credit unions o Lack of consistent leadership o Need for a separate Chief Executive for Cornerstone

According to the same themes respondents provided examples of things that might be done differently in future to address these failures.

 Vision and Ambition o Retaining the vision and the collaborative way of working was viewed as important o It was questioned whether ABCUL always needs to be the prime mover in innovation for the sector o The need for a move to an independent service organisation structure was raised

o Short term wins should have been revisited o It was questioned whether such a contract should be entered into again o It was suggested that ABCUL should not have attempted to deliver such an ambitious project o It was questioned whether the right supplier was chosen, due to lack of understanding of the British sector

 Communications o Communications should be delivered in a more upfront way o Risk should have been explained better, not leaving credit unions to rely on faith and trust in ABCUL o A sincere apology and thank you to those who took part should have come sooner.

 Governance o Should be more clarity in who could make decisions o More credit union representation o More controls and measures

 Training o More resource needed in BAU o Input needed in credit unions from accountant / financial expert o Need to ensure credit unions understood the scale of change o Ensure training all in place before implementation

 Staffing / Leadership o Separate Chief Executive needed for Cornerstone o More discipline and leadership in terms of project management o More effective and efficient use of contractors and consultants o Earlier move to permanent staff model

Independent member contributions

The two independent members of the committee, Antony Elliott and Gary Cuddy, have fully participated in oversight of the review process and provided insight and challenge throughout. They have also each provided a short report of their own which are published in full within the main body of the report.

Their overall conclusions focus on the failings in relation to risk management within the Project, particularly around key go-live decisions at East London and Voyager Alliance, but also in relation to the Project’s risk management overall. They also focus on shortcomings in governance, credit union training and readiness, and management and executive leadership.

They also offer reflections on the process itself.

Conclusions & lessons learned

The review has attempted to answer the substance of the members’ motion as openly and thoroughly as possible. The question is asked can be broken into two areas:

1. whether or not the outcome of the Project may have been different had the ABCUL board had a more direct role in its governance, rather than through Cornerstone Mutual Services; 2. to conduct a lessons learned exercise into the causes of the Project failing to reach its objectives for the benefit of any similar future collaborative projects.

In relation to the governance question, the review concludes that questions of governance, leadership and risk management were certainly part of the reasons for the Project’s failure to deliver its intended objectives and these are covered in the lessons learned below. However, the review does not accept that the lack of direct control by ABCUL’s board over the Project and Cornerstone was materially at fault for the disappointment. Indeed, in relation to the primary function of Cornerstone – namely insulating ABCUL from financial risk – the structure has performed its function well.

While the review does not believe that a more direct controlling role for ABCUL would have resulted in a better outcome for the Project (since its structural challenges were driven by the Project contract), it does note that the ABCUL board had power in relation to Cornerstone – as the sole A member – which it did not exercise. In future, it is likely that ABCUL ought to take a more direct role in mandating and prescribing the role of a service subsidiary. A key recommendation in this respect is that it is unlikely that maintaining a joint Chief Executive of ABCUL and a subsidiary is conducive to effective governance, leadership and accountability.

In terms of lessons learned, the review has established the following eleven lessons which we hope credit unions will take into account in future collaborative projects in order to ensure more successful outcomes.

1. Establish a clear, shared vision for all parties to any project – CUEP suffered throughout its life from divergent visions between various parties to the Project about what it was seeking to achieve and who it was seeking to help. These conflicting and competing visions of the Project’s aims were a continual challenge to its success, which was hard to define, let alone achieve. For the success of future projects it is critical that all parties are bought in to a shared vision at the outset and that this is maintained and kept in mind throughout the project’s delivery.

2. Ensure that management capacity is consistent with demands of the project – CUEP’s ultimate failure is in many respects a failure of management. This is true in particular to the achievability of the timeline and scope of the Project. There are questions around whether or not it should have been known at the outset how difficult a successful outcome was likely to be and whether it was right to rely on informal reassurances around flexibility in committing to proceed. The ultimate outcome of the Project and the breadth of these lessons suggest that delivery of the Project was outside of the capacity of its management personnel and structures. Any future project should be careful to determine whether the existing management capacity is sufficient to deliver successfully and, perhaps more importantly, to recognise and respond (including by not pursuing a project) where it is not.

3. Adopt a more gradual approach to developing collaborative business models – CUEP sought to transform the complete end to end credit union business model 80 times in one “big bang” and the challenge of landing such a fundamental overhaul of business models, processes and cultures ultimately proved too difficult. A more

gradual approach that builds confidence and creates an effective implementation protocol is likely to be more successful in future.

4. Manage funder expectations to ensure that they are consistent with the agreed vision – CUEP was driven to a great extent by the expectations of the DWP as the Project sponsor and these expectations were not always in keeping with successful delivery of the Project’s vision (bearing in mind, lesson 1 on the weakness of that vision). Likewise, its understanding of, and buy-in to, the Project were not consistent throughout the process. Future projects need to be clear around the expectations of funders whether or not they are desirable or deliverable; if funder expectations are considered undeliverable, then a project should not proceed. Consideration should be given to credit unions self-funding elements of the project deliverables so that interests are better aligned with a common vision.

5. Ensure clarity in governance, leadership and decision-making – CUEP had a relatively complex governance, leadership and decision-making structure and there were a number of iterations of leadership and structure within the Cornerstone and CUEP teams within the life of the Project. While there were understandable reasons for this and control over personnel and structure was not always within the organisation’s control, the complexity and opacity of decision-making was not conducive to success. A key conclusion is that having joint Chief Executives for ABCUL and a subsidiary is unlikely to be an effective structure. In future efforts should be made to provide clear governance and decision-making and keep relevant structures as simple as possible.

6. Achieve the right balance of staff skills, experience and commitment – CUEP relied too heavily on contract employees who were expert in some technical discipline but had too little understanding and awareness of credit unions. Likewise there was often too little accountability for delivery within the temporary staffing. While some technical expertise is definitely required, it should be tied to specific deliverables to ensure accountability. Technical expertise should be balanced with credit union expertise and permanent staff who are more personally invested in project success. It is also crucial to properly resource, at a senior level, the oversight and management of third party contract and consultant workers. Project management expertise within the credit union internal staffing structures would also complement this future approach.

7. Effectively communicate and engage with credit unions and stakeholders – CUEP was heavily criticised throughout for failings in communication and the engagement and involvement of credit unions. It is clear from the experience of the two migrations and in relation to the broad range of expectations about the Project’s vision (as noted at lesson 1) that this was not detailed enough in terms of ensuring consistent understanding and buy-in from credit unions, especially in relation to the cultural change that the Project implied for credit union operations. Likewise the reality of credit union operations was not reflected in system design. Similarly, there have been failings in terms of managing messages in relation to stakeholders to the Project (particularly funders as noted in lesson 4), so that there was insufficient clarity on aims and feasibility which ultimately undermined delivery. Efforts must be made in future to ensure clear, consistent and effective communication and engagement with both participating credit unions and stakeholders.

8. Ensure rigorous risk management and appropriate risk tolerance levels – given the ambition and timeline CUEP was a high risk Project from the outset but as it progressed, it accumulated significant risk in terms of its component parts which reflected too high a risk tolerance for a project that was high risk overall. This was particularly apparent as risk crystallised with the migrations of the two live credit unions calling into question the risk management around those decisions. In practice there should have been a lower tolerance for risk in specific areas given the overall risk profile of the Project meant that small variations from plan could be critical.

9. Transformational business model and system change requires significant change to credit union staffing and operations – CUEP’s experience of migrations demonstrated that despite the complexity and detail of the build and design process, insufficient time had been spent developing a detailed understanding of both the general and the specific credit union business model, the gap between the Model CU and existing practices, and the pre- and post-migration support and training needs that credit unions would have to ensure a smooth transition. This would include technical training expertise around the business model evolution and areas such as change and risk management. A detailed and substantive understanding of business models and required change will be required to make success more likely in future projects.

10. Engage in appropriate contractual due diligence – CUEP’s original contractual arrangements compounded and magnified the challenges of delivery necessitating a long and costly renegotiation which put the Project on the back foot from the beginning when it was already ambitious and high-risk. This could have been avoided by more effective contractual due diligence and negotiation at the beginning of the process. It is imperative that future undertakings of the nature of the Project benefit from more effective contractual due diligence to avoid the disruption caused by early renegotiation.

11. Do not ask credit unions to sign up for a system that has not been designed or built – CUEP required credit unions to sign up to a new system in the Model Credit Union which was yet to be designed, let alone built. Not only that, the commitment was over 10 years. This created a number of problematic dynamics for the success in terms of putting off strong, ambitious credit unions that lacked the burning platform to change and distorting expectations among credit unions that signed up. In future, systems should be developed before long-term commitments are sought.

Concluding thoughts

The ABCUL board and staff would like once again to reiterate their regret and apology at the outcome of the Credit Union Expansion Project. This was not how any of the ABCUL team hoped the Project would conclude.

Having undergone this review process, we hope that the ABCUL membership will agree that we are keen to be held accountable for our role in this failure and that with new leadership we hope to learn the lessons of the Project and move on together. To that end, Cornerstone is in the process of being wound up and the team will be launching a comprehensive Town Hall consultation at the Annual Conference 2019 on the 2025 vision for credit unions and ABCUL’s role within that and we hope that this will mark the beginning of a bright new chapter of our shared history.

Finally, we would like to note that while the delivery of the Credit Union Expansion Project was wrong in so many ways, the ABCUL board is firm in its resolve that it was right to pursue this ambitious agenda because credit unions in the UK, to remain relevant and competitive in today’s fast-moving society, must embrace collaboration and co-operation – both within the sector and with our many friends and stakeholders. We hope that this document provides a useful resource for all future efforts to that end.

3. Introduction & background

At the ABCUL AGM 2018, members supported a motion binding upon the ABCUL board to conduct a lessons learned review of the Credit Union Expansion Project which closed without achieving its core objectives in February 2018. The motion also referred explicitly to the need for a review and reconsideration around the governance arrangements between ABCUL and Cornerstone, its trading subsidiary. The motion was supported by the ABCUL board and passed with a large majority of the assembled members.

The motion read as follows:

This document responds to that motion and seeks to provide a clear set of lessons for any future similar endeavours undertaken by the credit union sector. It is not intended to be an exercise in laying blame but a constructive process of review and learning for the future.

Review structure and oversight

Secretariat:

- Robert Kelly, Chief Executive, ABCUL - Matt Bland, Head of Policy & Communications, ABCUL - Abbie Shelton, Associate, ABCUL

Independent members, Antony Elliott & Gary Cuddy were selected as they each bring a unique perspective to the process:

Each of the independent members of the committee provides a section below on their reflections on the Project’s outcome and the review process.

Constraints and limitations of the review

Within this review process we wish to be as open and transparent as possible. However, we are nevertheless constrained by certain legal and practical barriers to full disclosure.

ABCUL Group structure, Cornerstone Mutual Services and Project governance

A key aspect of the member motion which led to this review demands that the ABCUL board examine the governance arrangements within the ABCUL group and how they related to the delivery of the Project to establish the extent to which this contributed to the Project’s failure to deliver its objectives. This section will seek to elaborate on and clarify these questions in order to set the review in context and to hazard a tentative response to the suggestion that the ABCUL board’s delegation of responsibility for the Project and Cornerstone to separate board structures was in some way responsible for the Project’s disappointing outcome.

As part of its long-standing ambition to pursue the development of a central shared services organisation (elaborated below) and resulting from the practical realities of delivering such

services in the form of the Credit Union Current Account, the Credit Union Prepaid Card and the Experian-powered Automated Lending Decision (ALD) tool, ABCUL established a trading subsidiary, Cornerstone Mutual Services, in February 2012. At the point of incorporation, ABCUL invested a £300,000 subordinated loan to support Cornerstone’s initial operations and provide working capital. It also transferred the commercial products listed to Cornerstone.

This was done both in anticipation of the Credit Union Expansion Project tender but also in recognition that the growing stable of commercial products offered by ABCUL increasingly exposed it to a range of risks which may ultimately undermine the financial position of the Association and its services to its wider membership (since only a minority of ABCUL members, and some non-member credit unions, used these commercial services). Similarly, there was a recognition that the delivery of commercial services to support credit unions’ practical day-to-day business is a very different proposition from a skills and knowledge point of view and would therefore need a different governance structure and staffing complement.

The creation of Cornerstone Mutual Services as a wholly-owned subsidiary of ABCUL created a new dynamic within what then became the ABCUL Group and the relationship between Cornerstone and ABCUL from a governance, control and legal perspective became a source of much confusion thereafter. This was further complicated by the fact that the eligibility criteria for the Credit Union Expansion Project tender required bidding companies to have an established trading history which meant that, despite being (at least partially) established in order to (potentially) deliver the Project, Cornerstone could not proceed as the bidding party. Therefore ABCUL was the bidding party and the contractual partner of DWP upon its successful selection in that tender process.

Despite being the contractual partner for DWP, ABCUL’s role in the Project was limited. Its primary role was to pass through to Cornerstone the financial support it received throughout the Project’s life for the satisfaction of its financial obligations – the payment of staff, suppliers, credit unions etc. The ABCUL Group shared core functions in terms of finance, HR and IT and there was an element of shared staffing. At the senior levels the Chief Executive of ABCUL was also Chief Executive of Cornerstone and a member of both the Cornerstone and Project boards. Similarly, the Director of Shared Services was an Executive Director of Cornerstone, a shared managerial resource and key control point in relation to the finances of the Project. In addition, but to a lesser extent, the wider ABCUL staff team provided support and advice to the Project – particularly in its early days – in terms of providing an understanding of the credit union sector, supporting the tendering process and throughout the Project’s life, supporting the communications and public affairs activity of the Project.

However, as noted above, the governance and delivery structures of the Project itself and Cornerstone’s commercial contracts were separate from the governance structures of ABCUL. This is an important distinction to get clear and to keep in mind for the purpose of the review findings as we proceed. It was the Cornerstone Mutual Services board, and the Project board beneath it, which signed off on the delivery process of the Project, and Cornerstone entered into contractual arrangements with suppliers to the Project – principally Fiserv and Grant Thornton – as well as with the participating credit unions.

In order to maintain Cornerstone’s role in insulating ABCUL from the risks that Cornerstone ran in delivery of the Project and its other products, the ABCUL board maintained this remove from the operational and strategic decisions of Cornerstone throughout its life and still today. To take a direct controlling role could have brought upon the Association and its

member credit unions the liabilities of Cornerstone. ABCUL’s board therefore did not act as a direct controlling party for the Project.

ABCUL – as the only A member of Cornerstone – has significant discretion in terms of determining the composition of the Cornerstone board (the ABCUL board signs off all appointments to the Cornerstone board) and defining the roles and balance of executive and non-executive members in the Cornerstone board structure. In practice it relied upon recommendations of the Chief Executive, but always had the final say on appointments. It also had broad powers in appointing senior Executive Directors – such as the Chief Executive – of the Cornerstone board and a key decision in that respect was to have a joint Chief Executive for both ABCUL and Cornerstone, an arrangement which has remained consistent throughout Cornerstone’s life. Furthermore, as the only A member, ABCUL has 100% control of voting at Cornerstone general meetings and therefore has broad discretion in terms of prescribing the strategic direction of Cornerstone. Despite these broad powers, the ABCUL board did not actively take advantage of them and act in a directive manner towards Cornerstone. Whether or not it was right to do so, is dealt with further below.

In terms the composition of the Cornerstone board ABCUL determined that the key link between Cornerstone and ABCUL would be the two ABCUL board directors among its number. There was a protocol put in place to establish the basis upon which the ABCUL Directors and joint CE would conduct themselves in relation to their dual roles. Broadly, this respected the right for Cornerstone and ABCUL to act confidentially with respect to one another where appropriate but to define, from time to time, the information they would require of each other – particularly ABCUL from Cornerstone. The board was then made up of a number of independent non-executive members bringing specific knowledge and expertise and a smaller number of executive directors from within the ABCUL and Cornerstone staff. Cornerstone’s staffing arrangements evolved significantly throughout the Project’s life but ABCUL-Cornerstone has always had a joint Chief Executive and other Group-level Executive Directors, such as the Director of Shared Services and the Group Financial Controller. Various Project Directors and Cornerstone Managing Directors also acted on the Cornerstone board at various stages. The personalities involved and various iterations of the staffing structure will be expanded on below as we review the sequence of events in the Project.

The Project’s governance was complex. It was subject to two specific layers of governance. Immediately responsible for Project delivery and accountability to the primary Project sponsors – the Department for Work & Pensions – was the Project Board. The Project Board had within it representatives of the Cornerstone Board, the executive delivery team, nominees of the DWP and credit union participant representation, which was elected from within the Project cohort. The Project board was responsible solely for overseeing the delivery of the Project itself, and had only incidental regard to the wider questions of Cornerstone as a whole, the relationship with ABCUL or any other broader context. It oversaw the key decisions in terms of project management, risk management, gated project delivery decision points and, crucially, go-live decisions for the credit unions that ultimately migrated to the platform.

Secondly, the Cornerstone Mutual Services board oversaw both the Project but from the point of view of the wider interests and demands upon Cornerstone its non-Project services (principally prepaid card) and the relationship with the ABCUL parent. As noted above, it had a mixture of independent non-executive directors, executive directors from the Project and Cornerstone staff teams as well as two appointed representatives of the ABCUL board. The Cornerstone board had a different role to the Project board but the two were closely linked. Its primary responsibility was to manage the strategic interests of Cornerstone as an

entity, ensure it could satisfy its obligations to partners such as DWP, Fiserv, ABCUL and, crucially, its credit union member-customers. This was very intimately bound-up with the Project’s successful delivery but the two were not always given equal consideration – particularly as the Project neared its end. Most notable here were issues in relation to non- Project products, in particular the prepaid card proposition.

In terms of personnel, the following table sets out membership of the two boards. (Note – these lists do not provide dates of tenure but seek to identify all those who played a significant role on either board).

Project board Cornerstone board Executive Directors Executive Directors Mark Lyonette Mark Lyonette Carol Strand Annette Warne Thomas Annette Warne Thomas Carol Strand Ewen Fleming Louise Galbraith Chris Thompson Vincent Thomas

Non-Executive Directors Non-Executive Directors David Dickman (Initial Chair 2012-2014) Elaine Draper Robert Kelly Lesley Beecher Angela Hampson Richard Aitken-Davies Steven Roberts (Chair during 2014) Lord Hunt Lesley Beecher Carol McHarg Elaine Draper Clive Rix Lord Hunt (Chair 2014 – 2018) Rosemary Britten Richard Aitken-Davies Robert Kelly Carol McHarg Clive Rix

Regular Other Attendees Regular Other Attendees Simon Blissett - CUEP Programme Director Vincent Thomas – Head of CU Assurance Ewen Fleming - Grant Thornton Matt Bland – ABCUL Head of Policy & Comms Ges Richmond - CUEP Programme Director Rosanna Donovan – ABCUL Head of Caroline Roberts - Interim Project Director Membership Services Vikki Harmon - Programme Manager Sally O’Hara – CUEP Head of Delivery Nicola Harrison – CMS Head of Commercial Joe Hegarty – CU Rep Beth Welsh – CU Rep Ed Bozzard – Programme Manager

A number of those listed as directors have been approached and the majority have participated in interviews as part of the review process. The output from these interviews can be found at section 6 and at appendix iii below.

There are a number of issues which the structures of governance for the Project, Cornerstone and the wider ABCUL group raise in terms of their impact on the success of the Project overall. But in terms of the high-level goal of insulating ABCUL from the risks of the Project and Cornerstone’s wider commercial ventures, the review believes that the basic

separation of responsibility between ABCUL and Cornerstone has served its purpose well. The current financial position of Cornerstone, both as a result of the Project outcome and the poor performance of its other ventures (namely the prepaid card) is very weak – it ends the financial year 2017/18 with negative reserves of £101,000 – and its potential liabilities beyond this remain significant. The Group structure and limited liability of Cornerstone provides ABCUL with protection in terms of managing any exposure to Cornerstone liability that it may wish to incur beyond the £300,000 initial investment. Given the parlous state of Cornerstone’s finances, a decision has now been taken to initiate an orderly wind-down of the company.

However, as noted above, the fact that the ABCUL board made such little use of its discretion and powers of control over Cornerstone is one that deserves consideration. Firstly, the review does not believe that ABCUL taking a more active controlling role in itself would have changed the outcome of the Project. Our primary reason for this conclusion is that the Project’s fortunes and difficulties were primarily driven by the challenging nature of the Project contract with DWP which was signed up to by the ABCUL board originally in any case. Meddling with structure and personnel is unlikely to have made much difference to his.

On the other hand, were a similar venture to be undertaken which was not so tightly defined by an overarching contract in the way that the Project was, it is likely that ABCUL would want to exercise more power in defining its expectations of Cornerstone and holding it to account for delivery. A key consideration here is whether, in light of the Project, the decision to maintain a joint Chief Executive of ABCUL and Cornerstone was the right one and whether in future it would not be more effective to separate this key role. The review understands the reasons why the ABCUL board decided to maintain a joint Chief Executive, given the newness of Cornerstone and the importance of continuity but ultimately believes that the reason why the ABCUL board took such a remote stance in relation to Cornerstone was because the existence of the joint Chief Executive gave the impression that the two bodies were aligned and equally held to account.

It is clear that the interrelationships between the three boards and the partially-shared and partially-independent executive staff teams at various points within the Project’s life created confusion as to the lines of responsibility, clouded decision-making and added undue complexity to the decision-making and accountability processes. This may have contributed in certain cases to decision-making that did not support a successful outcome and had these structures been clearer, personnel more stable and the overall web of relationships less complex, it may have helped generate a better outcome.

There are clear lessons to be learned in terms of structuring future projects and establishing effective governance in doing so. In particular, the ABCUL board should consider being more prescriptive in terms of how it instructs a subsidiary and within this should be clear about how it holds the subsidiary accountable for delivery. In this connection, the review believes that a joint Chief Executive is unlikely to be conducive to effective accountability.

But, finally, the review stresses that all of the decisions taken in terms of governance arrangements and structures were taken with the best of intentions and with the Project’s success in mind and does not feel that these were unreasonable at any stage, though perhaps ultimately not effective. Likewise in relation to the precise arrangements between ABCUL as parent and Cornerstone as subsidiary – though we believe that changes would be recommended in future – the fact that in respect of the Project the Cornerstone agenda was set so tightly by the need to successfully deliver the DWP contract, and that this was

agreed to by ABCUL initially, suggests that a more involved role for ABCUL is unlikely to have resulted in a more successful outcome to the Project.

Background and history of the Project

With the remainder of this section, we will set out the basic background and timeline of the Project delineating some key structural questions which are important to bear in mind throughout. These issues will inform the later sections of the report in which we seek to respond openly and honestly to the verbatim feedback and questions raised by respondents to the Annual Membership Survey and later when we come to set out our key lessons learned.

The historical and political background

The Credit Union Expansion Project came out of a long-standing strategic commitment of the ABCUL board which was to establish a central services organisation for British credit unions along the lines of those that are common to credit unions internationally. This had been repeatedly considered, debated and supported by the ABCUL membership over preceding decades given how critical to the success of credit unions sectors around the world that such structures have been.

Prior to the advent of the Credit Union Expansion Project, there were a number of more- limited collaborative projects within the sector and involving ABCUL which indicate the long- standing nature of these ambitions:

- In the late 1990s, the Tony Blair Labour Government identified financial exclusion as a key policy area to be addressed and established commissioned Policy Action Team 14 to report on the subject and make policy recommendations for government. This identified credit unions as a key vehicle for extending inclusion and led to an ultimately abortive process to explore the establishment of a central finance and servicing vehicle led by Fred Goodwin of RBS. - From 2006 to 2011, the Department for Work & Pensions established the Financial Inclusion Growth Fund which provided capital for on-lending to those at risk of financial exclusion and indebtedness. Over this period around 150 credit unions provided 317,000 loans totalling £137 million in value. It was supported centrally by the ABCUL DELTA project which sought to develop capacity within the credit union sector through training and other interventions. - 9 credit unions, ABCUL and the Co-operative Bank in 2006 launched the Credit Union Current Account which provided transactional banking services to these credit unions’ members powered by a collaborative investment by credit unions in developing a distinct platform on the Co-operative Bank system. The CUCA closed in 2017 following the well-publicised difficulties of the Bank and their resultant change of strategic focus. - The Credit Union Prepaid Card was developed by ABCUL and provided to a peak of around 80 credit unions between 2013 and 2017. This was credit union-owned and, unlike many prepaid card solutions in the market at the time, retained credit union member data within the sector and funds on credit union balance sheets. - The Automated Lending Decision (ALD) tool was a partnership between ABCUL- Cornerstone and Experian to develop a bespoke credit reference and credit decision tool for credit unions. It began with a grant to kick start the development in 2011 from Santander Foundation and was later incorporated into the wider Credit Union Expansion Project with all CUEP participant credit unions required under the original contract to adopt the service.

A key theme within these precursors to the Project was their focus on the provision of payment and transactional banking services to credit union members. This remained a key ambition and area of focus for the Project itself and while this review does not seek to challenge this focus, since it is outside of its scope to do so, there is a question as to how important this focus is to the future of credit unions which the sector needs to resolve going forward.

The financial crisis of 2008/9 and the subsequent election of a Coalition Government in 2010 was a key moment in the genesis of the Credit Union Expansion Project and it is important to successfully understanding the full context of the Project to spend some time considering this context. It had become fairly clear that Gordon Brown’s Labour Government was likely to lose the general election in the years following the financial crisis. There was also a political crisis around MPs expenses which dominated the scene at this time and led to unprecedented turnover of MPs in the 2010 election as many disgraced figures exited the political scene.

ABCUL had been preparing for a likely change of government for some time having built strong links with the expected City Minister, Mark Hoban MP, and the to-be Secretary of State for Work & Pensions, Iain Duncan Smith MP, through the think tank he founded and initially led: the Centre for Social Justice. However, it is an indication of the uncertainty of the time that we had also secured commitment to support a central services organisation and a potential link to the Post Office in the Labour manifesto for the 2010 election.

As most readers will recall, the Coalition Government came to power with a strong electoral mandate to consolidate and stabilise the public finances. In July 2010, the new Chancellor of the Exchequer, George Osborne MP, held an Emergency Budget in which he announced radical cuts in public spending, there would be no further extension of the Financial Inclusion Growth Fund which was shortly disbanded, along with the Financial Inclusion Taskforce which oversaw it (and the ABCUL Chief Executive sat on), and the Saving Gateway which many credit unions had spent months preparing to deliver was cancelled immediately prior to its launch. There would then be a Public Spending Review, complete with Ministerial Star Chamber, and public sector spending would see one of the biggest reductions in modern history with major ramifications for the country at large.

It was in this political context, that ABCUL sought to build political support for an investment in centralised infrastructure for credit unions on three key bases:

- Through capital investment in central services the Government would be making a clean break with the subsidy-based system employed under the Growth Fund of the predecessor government. It would develop a sustainable credit union sector capable of supporting the Government’s wider policy goals. - A sustainable, modernised and digital credit union system would be in a strong position to support the needs of Universal Credit claimants as credit unions would be enabled to offer transactional account services to UC claimants. - Credit unions would be able to provide more competition and choice in the banking sector which was considered a key aim post-financial crisis with the Challenger Bank movement typified by the launch of Metro Bank in 2010.

It is testament to credit unions’ political capital at this time that ABCUL, with the support of our members, was able to successfully make the case for such a capital investment in the context that it did. This political capital was also instrumental, with the support of the All- Party Parliamentary Group on Credit Unions, Chaired by Damian Hinds MP, to securing the

final passage of the Legislative Reform (Industrial & Provident Societies & Credit Unions) Order 2011. However, this increasingly uncertain, divided and financially-pressurised context would later come to play an important role in the conclusion of the Project.

In 2011, the Secretary of State for Work & Pensions, Iain Duncan Smith committed to a £73 million investment fund and feasibility study into a project to expand the credit union sector through investment in collaborative back office infrastructure to deliver access to payment services and enhance the commercial sustainability of credit unions through greater digital accessibility of services, automation and use of technology generally. The feasibility study was delivered by a committee chaired by Barclays executive Deanna Oppenheimer and reported in May 2012. It concluded that the proposed project was feasible and ought to be supported with up to £51 million investment from government. The following September and October saw a competitive tender process to select a delivery consortium for the Project.

Finally, in April 2013, the Minster for Welfare reform announced the award of a contract to ABCUL following the tender process to select a delivery partner for what was to become the Credit Union Expansion Project with a value of £38 million. The reasons as to why this contract was awarded to ABCUL and not Cornerstone Mutual Services are set out in the section on the ABCUL Group structure and Project governance, above.

The tender process, set-up and early delivery phase

As noted above, ABCUL tendered for the Credit Union Expansion Project contract but only as a result of the fact that Cornerstone’s lack of trading history made it ineligible under the tender criteria. In putting together this tender, ABCUL had to demonstrate a level of commitment and buy in from credit unions to participate in an ABCUL-Cornerstone-led consortium as well as certain regional and geographical reach. Similarly, it had to demonstrate credentials in respect of expertise and understanding of the sector as well as key stakeholder relationships and partnerships to enable successful delivery. Finally, delivery plans and growth forecasts were provided.

ABCUL had a clear advantage in this process having been a key part of the process of thinking through and developing the concept of the Project in the first place and having built this concept through years of thinking and development of relationships with international counterparts and key suppliers and sector stakeholders. In particular ABCUL had a track record in having developed and delivered the Credit Union Current Account with the Co- operative Bank and a number of credit unions. This was in addition to the success of the DELTA support project alongside the Financial Inclusion Growth Fund delivered by ABCUL and key partnerships with banks such as Barclays – through the PEARLS project.

Even before the CUEP tender was launched, ABCUL had secured funding from the Santander Foundation of £250,000, announced in 2011 for the development of an automated credit referencing tool. The development of this product – what became the Automated Lending Decision (ALD) tool – had already begun and was well underway at the time that ABCUL was successful in bidding to the CUEP tender in the spring of 2013. ALD was developed with Experian and a group of credit unions and aimed to harness the power of credit data to make recommended decisions for credit union lending but on the basis of credit unions’ own risk appetite. At its peak, over 70 credit unions were using ALD services in the early days of the Project which, upon launch, took over the ownership and delivery of ALD and subsumed ALD into its wider structures.

A key point to make at the point of the tender process was that it was understood by the ABCUL board and executive team that at the time of the tender process, the two-year delivery timetable suggested by the Department for Work & Pensions was highly ambitious and would be extremely challenging to meet successfully given the whole model would need to be developed, suppliers identified, system built and scores of credit unions migrated onto the new service within this two-year period. To proceed and bid for the Project was not a decision that was taken lightly in this context but ultimately the decision to proceed was taken based on assurances received from DWP that the original two-year timetable would ultimately be flexed to be more realistic in practice provided early delivery was successful. Indeed, with the Project ultimately concluding in February 2018, this proved in fact to be the case.

However, a critical point to be noted here is that while the DWP tender documentation for the Project required the consortium to expand credit unions to a new 500,000 members and have at least 15 credit unions involved at the Project’s outset, a decision was taken within ABCUL-Cornerstone management and board to significantly exceed these minimum requirements with its bid. The ABCUL-Cornerstone bid committed to expanding membership by 800,000 and involving 25 credit unions at the outset, rising to more than 80 within a year. The reasons for this over-bidding are unclear but it must be noted that doing so made an already ambitious Project even more challenging and set a context for under- delivery from the very outset of the process.

Upon successfully securing the tender and entering into a delivery contract with the DWP in spring 2013, Cornerstone set about establishing a staff team to develop and deliver the CUEP proposition. This involved the recruitment of a Project Director who was directly employed as well as a staff team made up of experienced project managers and a number of credit union secondees who were to bring to the Project expertise in credit union delivery on the ground. This process was completed by summer of 2013 and delivery began in earnest in late 2013 with the rollout of ALD – use of which was a requirement for participant credit unions under the CUEP contract.

Quite quickly into this process, the Project leadership realised that there were critical flaws in the construction of the Project contract’s financing which meant that the bulk of capital funding to be received by the Project was tied to the successful delivery of growth by the participating credit unions in terms of membership, savings and loans as against ambitious growth forecast numbers. However this failed to recognise that the growth to be delivered by the Project was reliant upon the investment in systems and service development coming to fruition and driving the efficiency and delivery gains required to service the growth. This created a kind of Catch 22 which needed to be resolved before the Project could proceed at full capacity. It also meant that those fast-growing credit unions within the cohort did not receive their payments for growth until the whole cohort had achieved its overall growth targets which limited the incentive effect of the PBR structure.

As a result of this, a renegotiation process was set in train almost immediately within the Project and between ABCUL-Cornerstone and DWP to re-establish contractual arrangements which would provide the requisite up front funding to allow the development of the Project’s interventions alongside parallel PBR structures which rewarded credit unions on an individual basis instead of collectively. This took until October 2014 to complete to everyone’s satisfaction and certainly set the delivery of the Project in its early phase back significantly.

Core project deliverables

Alongside this, the Project team set about scoping a range of central services that the Project would deliver to support the sustainable and modernised growth of the credit union participants in the Project. These were:

These services were developed and delivered to some extent in every case. Those that had very challenging delivery experience were particularly central services and treasury management as the business case for these services proved very challenging to develop sustainably. Both services were predicated upon an assumption – felt to be reasonable at the outset of the Project – that scale buying would result in better rates of return or cheaper costs and while this hypothesis was never proven false, the logistical reality of co-ordinating such efforts and the appropriate price-point for different credit unions proved to be near insurmountable. Similarly, the complexity and resource profile of the core deliverables – particularly the banking platform – was so great that the Project struggled to make an effective attempt at developing thee services. Ultimately they were never progressed.

On the other hand, significant progress and success was had in delivering a number of the other services envisaged:

- ALD – the ALD platform was developed, rolled out and widely-used by all of the CUEP participant credit unions from late 2013 onwards. This provided many credit unions with access to credit data-powered decision-making where this hadn’t existed before. It coincided with a faster growth in lending among the user credit unions than was evident in the wider credit union sector. It also created a jointly-developed set of credit union risk profiles and recommended decisions for credit unions which were powerful examples of the benefits of collaboration. Later on in the Project’s life a motion was passed at the ABCUL AGM in 2015 to seek a commitment for the integration of ALD with Kesho’s Curtains system in order to eliminate the need for re- keying of loan applicant data. In line with the governance arrangements of the Group, the ABCUL board wrote to Cornerstone’s board seeking their commitment to explore this development and this was carried out. Unfortunately it was not possible to reach agreement with Kesho on mutually-acceptable commercial terms and so this was never pursued further.

- Marketing – throughout the Project’s life there were a number of significant and positive marketing developments which supported credit union growth and development:

o DEEKS consultancy report – the Project’s marketing interventions were informed and defined by initial market research undertaken by the DEEKS consultancy. This work was authoritative and comprehensive and sought to define the market position and potential of credit unions. They found that there was generalised low unprompted awareness of credit unions on name alone 7% for loans and 5% for savings and an even lower knowledge level

around what credit unions actually offered (only 15% knew a lot about what credit unions actually offered). It also found that around 8% would consider credit union services from the general population while only 2% were actively using them. It found that credit unions’ market positioning was confused and services inconsistent and recommended a more coherent and clear proposition and marketing message. o FYCU – the Find Your Credit Union website had been running since 2010 with some success. However it lacked a modern web experience with mobile optimisation and the search functionality it possessed was crude. Therefore, the Project invested in updating and improving the FYCU service and launched a revamped version of the service in 2016. This was a longer development process than had originally been hoped which resulted from a number of abortive versions of the site and difficulties around the common bond search functionality but the current version of the site represents a significant improvement on its predecessor. o Common Sense With Money – the Business to Business toolkit was a set of marketing resources developed to assist credit unions in promoting themselves to potential employer partners. It involved the production of a marketing brand – Common Sense With Money – as well as a set of video and static media resources to support credit unions with engaging with employers and marketing themselves to their employees. o Funded local marketing campaigns – the Project funded a series of local marketing campaigns supporting credit unions to market their services locally to residents in their communities or to employees within their employer partners. These had mixed impact but overall were a positive contribution to the marketing experience and expertise within credit unions, provided modern and well-designed marketing resources and had some positive impact in terms of new membership.

Increasingly as the Project progressed it more and more tightly focussed on the delivery of the banking platform which was the centrepiece of the Project and would be the key enabler for the growth that the Project aimed to deliver. It was intended to provide a robust, modern basis for participant credit union operations which would enable increased automation, standardised offer of payment solutions by credit unions, straight-through-processing of member transactions to allow self-service and digital online and mobile delivery channels.

Thematic review of core Project delivery phase

The Project was a complex and dynamic process involving a number of overlapping and competing forces and processes which are challenging to untangle clearly in a chronological process. Therefore, the following section will seek to bring out key themes and issues and give a thorough account of each before moving on to a exploration of the factors surrounding the ultimate conclusion of the Project.

Staffing and resource

The staffing and resourcing of the Project is a highly contentious issue for many participant and spectator credit unions. This section will seek to clarify and explain some of the key issues here from the review’s perspective.

As has been set out above, the Project began with an ambition to staff itself with permanently and directly-employed staff primarily, supported by contract and consultant

expertise and credit union secondees. The early months of the Project’s delivery were spent in recruiting for a building the staff team on this basis.

Simon Blissett was appointed from Nationwide Building Society as the Project Director and announced in the role in August 2013. Some of his team, particularly the credit union expertise, had been recruited in parallel to Simon’s appointment but the team developed further under his leadership. Simon led the team in its early design and scoping phase and early on recruited Grant Thornton as key Project advisers and consultants in a range of capacities.

Simon also led the renegotiation of the original Project contract along with the Cornerstone executive team at the time. This took up much of the early part of the Project’s life and was only concluded with a revised Project with a more-viable financing structure October 2014

Late in 2013, Simon Blissett took the decision to resign his position and left for new opportunities. His tenure had seen good progress made in initial design and scoping but was clearly hampered in its success by the negotiations which were needed to release the necessary funds to proceed at full delivery pace. Given the time pressures this created in an already challenging timescale for delivery, a decision was taken at this stage to appoint representatives of Grant Thornton as Project Director and to rely heavily on their capacity and staffing to proceed with delivery at pace. This had some key implications for the Project’s outcomes which will be elaborated upon below but it is important to understand that this was a decision which was taken in a particular context due to expediency.

Another key staffing issue within the Project was the distinction between Project staff and Cornerstone staff. In August 2014 the Cornerstone Board appointed a Managing Director, Louise Galbraith, whose role was distinct from the Project delivery team. Louise and her team was tasked with setting up Cornerstone as an entity distinct from the Project, holding the Project team to account for delivery, and ensuring the viable future of Cornerstone following on from the Project’s time-limited delivery. Cornerstone at various points employed a number of staff whose accountability and role was to Cornerstone as opposed to the Project and who were responsible in these terms. Louise left Cornerstone in August 2016 and was replaced in broad terms by Chris Thompson who acted as Cornerstone Chief Operating Officer on an interim basis from August 2016 to December of that year.

Another key factor within the staffing and resourcing of the Project was the credit union secondee expertise. For a variety of individual reasons, many of those initially appointed to the Project from within the credit union sector left at various stages in the Project’s life and were not directly replaced or recruited for. There were different factors behind this in each individual case but overall it reflected the move from design and scoping work during the early part of the Project towards technical development and delivery of the banking platform towards the end of the Project’s life. This is another key point of controversy and frustration within Project participant credit unions and we explore this in more detail below. For now, suffice to say that the evolution of the Project changed the focus of staffing and credit union representatives were part of this process as the Project progressed.

The final key development in terms of staffing came at the very end of the Project and involved the marked shift away from contractor and consultancy staffing towards a permanent staff team. We will explore this in more detail below.

Risk management

Risk management was a key issue throughout the Project’s life and ultimately was found to be inadequate given the crystallisation of risks at the end of the Project’s life, particularly in relation to both the migration experience of the two credit unions that migrated from an incumbent supplier, the delivery of the key supplier before that and the appetite of the key sponsor to continue to support the Project at its ultimate conclusion. In terms of methodology, the Project followed standard project management disciplines in terms of gated decision milestones and clearly mapped dependencies and interrelationships.

However, it is clear that the appetite to carry risk, particularly the cumulative effect of multiple risks, and the ability of the boards to accurately identify and describe the key risks and their overall impact on the Project’s deliverability and viability was not consistent with successful delivery. There may be a number of reasons for this, notably the time-pressure under which the Project always operated and its ambition, but there are definite lessons to be learned around how the Project’s governance allowed an accumulation of risk to the extent that they did and did not successfully mitigate these.

Communications & engagement

Communication during the Project was a key issue that needs elaboration. It was a point of contention and has come out strongly within the feedback the review responds to below. But it was not a static picture and needs to be explored in some detail.

Early in the Project communications and credit union engagement took place at a detailed and multifaceted level. There were a number of engagement events which took place, including at ABCUL’s own conference events and Cornerstone engagement events direct to Project participants. This was augmented by credit union participation directly in the Project via secondees dealt with above. In addition there were various credit union design groups which took a role in the development of the Target Operating Model (TOM), the ALD credit risk parameters and other aspects of the Project’s delivery.

However, it is clear that as the Project progressed the emphasis that was placed upon communication and engagement with the wider credit union cohort took a less prominent role as the pressure of contract renegotiation and then platform procurement and design took precedence. By the time that the DWP commissioned Liverpool John Moores University to review credit unions’ experience of the Project in 2016, it was clear that communication and engagement (or the lack of it) had become a key point of contention.

This led to renewed efforts to communicate more regularly and clearly with participant credit unions as the Project progressed. This was characterised by the institution of regular “town hall” conference calls to update participant credit unions, regular broadcast communications on Project progress, the appointment of Vincent Thomas as dedicated credit union engagement and Project accountability lead (officially, Head of CU Assurance), and the reinstitution of various consultative and design groups involving Project participants led by Vincent to work through outstanding design gaps and issues.

As we will see below, ultimately the failure to adequately engage and communicate with the credit union participants and to, as a result, understand the extent of their readiness for migration and understanding of the operation of the platform was a key factor in the outcome of the Project.

Funding

Credit unions that participated in the Project benefitted from financial support of a range of different types. The wider participant group received Payments by Results (PBR) for achieved growth milestones in respect of membership, lending and savings. The aggregate amount that credit unions received under this programme was £3.2 million.

This was a key issue for the Project in terms of how the original contract tied the funding for the Project’s core developments around product and service development to prior achievement of these growth milestones. This has been dealt with above and is considered further below.

In addition, the Project provided incentive payments to credit unions that signed up for what became known as Transformation – or the adoption of the new Model Credit Union system based around the Fiserv-Agiliti platform – for various aspects of the Project’s delivery and credit unions’ participation in these. These included incentives for signing up to the contract at all, going live on the system, adopting websites and other services provided by the Project. These payments totalled £745,000. There were also funds dispersed by Fiserv to cover out of pocket expenses that credit unions had incurred in relation to delays in system development. These totalled £148,000.

Finally, credit unions benefitted from the Expansion Fund which provided support for local marketing campaigns, mergers, and certain business support services such as HR and other consultancy expertise. These amounts were allocated on a more ad hoc basis but totalled £458,000.

In total, therefore, from the overall DWP spend on the Project of £29.3 million credit unions participating in the Project received more than £4.5 million in direct payments. However, around £1 million of this was retained by Cornerstone according to the original contract under which 25% was retained in order to fund its core development costs.

Furthermore, Cornerstone received funding based on delivery milestones in terms of progression against the plan set out in the Project contract between ABCUL, Cornerstone and DWP. This was what ultimately funded the development of the Model Credit Union platform, the other central services, and the provision of the Model Credit Union service to the live credit unions for the period between going live and the Project’s closure.

This was the vast bulk of the funding received by the Project totalling £25.6 million. Around £4 million of this was received by Fiserv for its services and system development. £13.6 million was spent on contract and consultancy staff. The remaining sum was spent on core costs and salaries, other third party support (such as marketing agencies, Experian, Dow Jones etc) and overheads.

A full disclosure of the different aspects of funding received by the Project and what they were spent on is provided in Appendix i.

Banking platform selection

Fiserv Agiliti was chosen as the core supplier of banking software technology for the Project in a competitive tendering process open to all bidders and participated in by several of the key incumbent IT technology providers to the sector. The tendering process ran throughout January and February 2014 with Fiserv ultimately signing a Statement of Works for delivery of the Project in July 2014.

The tender process was heavily overseen and influenced by the Department for Work & Pensions who insisted on enlisting the services of consultancy AT Kearney to advise on and run the tender process in conjunction with Cornerstone Mutual Services. Key features and aspects of the delivery that were asked of the bidding parties was a service that would be flexible and that could develop as technology developed – i.e. Software as a Service – and proven track record in delivering market-leading online and mobile solutions as well as integration with payment systems and sponsor banks.

There were a number of incumbent software providers to the sector that bid as well as a number of banking sector IT providers of some standing and reputation. The process was competitive and based on delivery to the tight timetable that had been set by the DWP’s overall Project contract. The process involved participation in the selection panel from credit unions involved in the Project as well as Cornerstone, DWP and AT Kearney involvement.

Ultimately Fiserv Agiliti was selected in 2014 on the basis of its track record in delivering technology solutions to credit unions in the US, its client roster in the UK, its innovative Software as a Service proposition under the Agiliti brand and its commitment to delivery to the tight timetable required.

Delivery and late project

Finally in this introductory and background section, we will look at the delivery of the Project in its later stages and the circumstances that led to its final termination by DWP.

Model Credit Union delivery

2014 and 2015 came and went with a number of renegotiation processes with DWP which ultimately derived from the fact that the original Project contract envisaged the Project to conclude by April 2015 which was not achieved. It also saw an extensive process of design, development and credit union engagement and sign up to the full Transformation proposition, ultimately adopted by 32 credit unions. A full timeline of these events is available at appendix ii.

This was a difficult period for the Project as credit unions were invited to sign up to a platform that was yet to be developed in practice (indeed Fiserv didn’t sign an agreement to deliver until January 2016) and over a 10 year commitment which was a significant long-term commitment to make. Likewise, it became evident (as had been earlier anticipated) that the high-level timetable would not be achieved and so DWP’s promised flexibility had to be prevailed upon. retailCURe became the first credit union to “go live” on the platform in February 2016 but did so as a new start credit union with no legacy business and no migration challenge to overcome. It also did so with the platform remaining under development and effectively became part of the design team in assisting the Cornerstone and Fiserv teams to refine and improve the platform’s functionality and user experience.

Ultimately the Fiserv delivery of the Agiliti platform to the specification required by Cornerstone was not forthcoming in the timeframe originally hoped. This required extensive renegotiation and concessions by Fiserv, a process concluding in the December of 2016. Meanwhile, the Transformation credit unions were awaiting their “go live” window and looking forward to adopting the platform at the appropriate time but becoming increasingly frustrated at the continued delays in the platform’s readiness.

Tensions increased in intensity throughout 2016 as delays in delivery continued and credit unions’ became increasingly impatient. Cornerstone sought to allay the concerns of credit unions and DWP (who had expected as many as 20 credit unions to be live by mid-2016) while encouraging a more rapid development of the platform by Fiserv-Agiliti. Finally, in September 2016, the first credit union – East London Credit Union – went live on the platform two weeks before its financial year end.

The initial data migration was broadly successful, but it became clear very quickly that there was not sufficient understanding of the functional gaps in the platform and that training and support provided to the credit union (though extensive) had failed to bring them up to the required standard of competency to successfully operate the platform. The credit union quickly descended into a crisis state and major support efforts were required to stabilise the credit union’s operations.

The factors behind this were multi-faceted and resulted from a failure of risk management and technical understanding of the migration challenge on all sides coupled with an intense pressure to proceed despite the risks of doing so. This pressure came from both DWP and the wider credit union cohort but also East London Credit Union itself.

What is now clear is that no party was really prepared for the complexity of what was being undertaken, the risks being run and nor were there adequate contingency plans in place for circumstances such as those that arose. It was a collective failure to grasp these factors on all sides which led to the situation that arose. Needless to say it set the Project back by months.

Late Project

At the point that East London went live, the DWP’s contract with ABCUL-Cornerstone required the delivery of credit union migrations onto the Model Credit Union platform at the rate of several per month. The experience of ELCU in practice called the feasibility of this seriously into question.

Meanwhile, in parallel the political sponsorship of the Project had begun to unravel. In March 2016, Iain Duncan Smith had dramatically stood down from the cabinet as a result of disagreements over the introduction of Universal Credit. Then in the summer of 2016, the Brexit referendum took place which resulted in the resignation of the Prime Minister, David Cameron, a leadership contest to replace him and, upon Theresa May’s victory in that process, major changes to cabinet personnel. Closer to home, the Ministerial sponsor of the Project, Lord Freud, announced his retirement from Government in December 2016 just as the Project found itself in a significant crisis.

As this took place, there were also a number of key personnel changes at the official level within the Department for Work & Pensions. Key personnel that had overseen the Project throughout its life were moved onto other projects, a renewed sense of cost-cutting began within the Department and the Project came to be seen as a failing process which needed to be scrutinised and reviewed. A major review was initiated towards the end of 2016 with the then contract due to conclude at the end of the calendar year. Ultimately this led to the imposition of a new Project contract in July 2017 which placed all of the financial risk of delivery onto Cornerstone. Only after successful migrations would the Department provide further funding to continue the Project. It required 6 migrations to be completed by the end of 2017 and gave the Department the right to terminate the Project if this was not achieved.

Meanwhile, at the beginning of 2017, the Project staffing team was significantly restructured. Before the end of 2016 the Project terminated its relationship with Grant Thornton which had project managed the process under various personnel since December 2013. A range of contractor staff were allowed to leave and replaced by a permanently employed staff team led by Head of Delivery, Sally O’Hara. This was motivated by needing to significantly reshape the cost and resource profile of the Project in light of its then-precarious contractual and financial position.

This change of circumstances within Government and the Department left the Project in a very difficult and precarious position in early 2017 and made the success of the next migrations critical to the continuation of the Project altogether. It was in this context that Voyager Alliance Credit Union migrated on to the Platform in March 2017. Despite significant improvements and a much smoother initial migration for VACU than that experienced by ELCU 6 months prior, it became evident that once more there were issues in delivery which required intensive support and resource provision by ABCUL-Cornerstone to stabilise the credit union’s operations.

Without entering into the fine detail of the specific reasons for the problems experienced by Voyager Alliance, there were a combination of realisations around recognition of functional gaps on the part of the credit union, readiness of staff and training, certain system design flaws and a lack of time to iron out issues that were unforeseen in advance of going live. Ultimately however, this experience demonstrated that the delivery timetable that the Project envisaged in order to satisfy the demands of the contract was not possible to satisfy.

A process of detailed review and intensive engagement with the Department then took place within Cornerstone. Cornerstone set out six questions that it would need to satisfy positively in terms of its ability to deliver migrations with a reasonable level of risk as well as whether the Project’s continuation was able to be funded.

Ultimately, though Cornerstone felt that there was a reasonable basis for it believing it could continue with Project delivery, this would only be on the basis that the Department be willing to provide funding to continue the Cornerstone operation and to fund migrations prior to their completion. The Department showed no willingness to consider these requests and no further contractual negotiations were ever formally initiated despite vigorous efforts to do so from Cornerstone.

Throughout the latter months of 2017, there were increasingly frustrated conversations and town hall engagement calls with the Transformation cohort. Towards the end of the year and the beginning of 2018 it became clear that there were no updates to be had and little or no progress was being made. However, Cornerstone throughout this period found significant difficulty in communicating the position given its dynamic state and hoped-for renegotiation with DWP.

As 2018 began, there was neither a realistic prospect of renegotiation nor satisfaction of the existing contract and Cornerstone therefore began the painful process of making its staff team redundant for lack of financial resources. In February 2018, DWP exercised its contractual right under the June 2017 variation to terminate the CUEP contract and in turn Cornerstone terminated its contracts with the Transformation credit unions.

This marked the end of the Project and initiated exit planning and negotiation between Cornerstone and its suppliers as well as with the three live credit unions.

Cornerstone now

Since the termination of the Project contract by DWP in February 2018, Cornerstone Mutual Services has been in settlement negotiations with Fiserv and exit planning with the three live credit unions. This has been a difficult and challenging process but is nearing a conclusion at the time of writing. Cornerstone and ABCUL are committed to ensuring, to the best of their ability, that the live credit unions have a clear and secure path forward but this is not necessarily an easy thing to achieve.

Following a strategic review by the Cornerstone Mutual Services board and in consultation with the ABCUL board as parent and given its chequered history, weak financial state and poor delivery record, a decision has been taken to wind up Cornerstone while meeting existing contractual obligations and providing continuity of service to existing customers.

In terms of defining the future role of ABCUL in relation to the challenges addressed by the Project and the future of the wider credit union sector, a major Town Hall consultation exercise will be undertaken by ABCUL launching at the Annual Conference 2019, to set a vision for the credit union sector and ABCUL within this for the coming five years.

While the Project itself has failed to achieve its objectives, the policy focus around issues of financial inclusion and the need to support the expansion of affordable alternatives like credit unions is as great as ever. Welfare reform, austerity and changes in the economic structures of the UK with the growth of precarious and insecure work, all suggest that the need for a responsible and ethical alternative financial service will only grow in the coming years.

If credit unions are to remain competitive and relevant in this context, there is an even greater need now than there was in 2013 at the outset of the Project for credit unions to become digitally accessible and enhance their levels of automation and technological capability. Thankfully, one very positive outcome of the CUEP period has been to invigorate the market for suppliers to credit unions and the proliferation of FinTech companies seeking to provide solutions and support to credit unions’ collective challenge.

Similarly, we remain of the view that in order to successfully address these challenges there is a crucial need for credit unions to collaborate. And ABCUL will continue to have some role in convening this collaboration. What this role is we hope will be decided by ABCUL and our members, together, during the course of 2019.

4. Responses to survey feedback

The following sections take feedback received in ABCUL’s annual credit union survey from the spring of 2018 and seek to respond both to feedback provided directly on respondents’ views of the strengths and weaknesses / successes and failures of the Project and also to direct questions asked by respondents. In total the survey received 70 responses from ABCUL member credit unions, Project participant credit unions and non-ABCUL member credit unions that did not participate.

The review secretariat has conducted a grouping analysis of the feedback and questions to give this process some structure and so feedback has been grouped thematically with similar themes and questions answered together.

Responding to verbatim feedback

In relation to the verbatim feedback, the following table sets out the feedback received in broad headings or themes. It is accompanied by a summary of the review’s response to each point. Thereafter we publish a fuller response to each point in turn.

In what follows the review offers its best attempt at responding to feedback openly and honestly and as we proceed we seek to identify lessons to be learned for future projects to be drawn together in the concluding section

Weaknesses / failures Number of Review feedback respondents Lack of expertise in The review accepts that the balance between credit union and technical expertise was not correct credit unions / reliance within the Project and that in future a better balance should be sought. The migration experiences on consultants of credit unions demonstrated the shortcomings in the levels of credit union expertise employed. 16 Contract and consultancy resource was also a very expensive way to run the Project and led to a less accountable team. However, the review maintains that some technical expertise and flexible resource will always be required for a Project of this nature. Lack of (honest) The review accepts that communication and engagement throughout the Project was not effective communication enough for successful delivery. Efforts in relation to communication and engagement were inconsistent with more effort at the beginning and end of the Project and particularly weak 16 communications during the middle design and planning phase. The impact of this was evident at the migrations where a poor understanding of the migration challenge and credit union needs, as well as known system gaps, caused huge disruption. ABCUL / Cornerstone The Project was well equipped with project management discipline and gated decision processes. weak project However, the Project’s risk management was weak. For a Project that was high-risk from its 13 management discipline outset, too much risk was accepted in relation to key elements of the Project’s delivery whereas these tolerances should have been lowered by the Project’s overall risk profile. Wasted money / The review does not accept the characterisation of the Project as a total waste but accepts that that opportunity 11 the big prize of the Project was not delivered and the opportunity lost. For this the ABCUL and Cornerstone boards apologise unreservedly. Too ambitious / The review does not accept that it was unreasonable to bid for the Project contract and notes that unrealistic this decision was taken with significant concern at levels of risk – particularly in terms of the timetable – which were allayed by reassurances around available flexibility. However, the review 10 also notes that despite this, the ABCUL bid significantly exceeded the minimum targets, creating an even-higher bar for delivery. Risk management was weak within the Project but its failure was a collective one. Staff turnover The review maintains that a certain level of staff turnover in a Project of this scale was inevitable 9 but also accepts that a more permanent staff team with a more balanced set of expertise and accountability would have been better equipped to succeed. Wrong choice of All incumbent suppliers had the opportunity to bid for the banking platform contract and several supplier / dismissal of went through procurement, but unsuccessfully. The procurement was heavily supervised by DWP 9 incumbent suppliers and their chosen consultancy, AT Kearney. Fiserv were selected on the basis of their ability to delivery the technical specification on banking, payments and mobile apps. Whether this was the

right focus is outside the scope of the review but will be subject to ABCUL consultation imminently. Too much emphasis on The review accepts that the Project’s scope narrowed during the course of its life from a broad software – not enough range of centralised services to the banking platform delivery. This process ultimately became 8 on other areas dictated by the Project contract and points to lessons in terms of broader engagement and a clearer shared vision for any future Projects. Not cost-effective / The review does not accept that this was a key reason for the Project’s failure given that pricing affordable solution for 7 was aligned with a considerable technical capacity in terms of the platform. credit unions Lack of individual While many respondents felt that individuals should have been held more personally accountable accountability the review is seeking to hold the whole process to account and to learn meaningful lessons for 7 future similar efforts. We have sought to be open and transparent in this and believe this is the most valuable form of accountability. Reputational damage to The reputational impact of the Project’s failure is considerable. ABCUL and Cornerstone take this ABCUL / Cornerstone / very seriously and apologise for the impact it has had. The ABCUL board and leadership take the 7 sector task of rebuilding reputations very seriously and plan a process of consultation on the future of the sector with members and stakeholder to underpin this rebuilding process. Failure of DWP to We do not enter into a discussion of DWP specifically other than to note that the government’s manage delivery body sponsorship of the Project created a number of expectations and drivers from outside the credit 7 union sector which were not always consistent with the sector’s aims. It also put the Project at the whim of political changes. Lack of information for We accept that there was a desire for non-participants to have more information but the review 7 non-participants does not accept that this was a primary driver for the Project’s disappointing outcome. Credit unions wasted The review is very mindful of the impact of the Project’s failure on credit unions waiting for it to years waiting for CUEP deliver for them. The ABCUL and Cornerstone boards are very sorry for this negative impact. 6 However, the Project was never intended to be a silver bullet solution for business model problems and ought not to have prevented any development within participating credit unions. The fact that many saw it like that is another failing in terms of communication and engagement. Failure of corporate ABCUL reiterates here that it was the Cornerstone board that was responsible for delivery. The governance / board not review accepts that the governance of the Project tolerated too much risk and was overly complex 6 holding management to and unclear. However, the boards acted in good faith on the best available information. account

Conditions and The review accepts that the government’s expectations of the Project as primary sponsor led to demands of government certain unfortunate outcomes where their expectations diverged from those of the credit unions. funder 6 This points to lessons about aligning investor and credit union expectations and vision and the role of credit unions in funding future Projects.

ABCUL should focus on The review thinks the decision to establish a trade body-owned commercial subsidiary was trade body activities – reasonable and based on relevant international experience. However, the Project’s outcome does 5 not service organisation point to tensions and challenges which arise where a trade body seeks to deliver commercial products. Lack of clarity on The contract underpinning the Project provided some level of clarify in relation to objectives but it is objectives / weak or lack trues that strategy for the successful delivery of the Project’s objectives was not apparent. 4 of strategy Similarly, in terms of the needs of a successful implementation there were substantial gaps in terms of understanding the needs of credit unions. Too automation- The suggestion that the Project increasingly focussed on Model Credit Union at the detriment of focussed other aspects is a reasonable one that the review accepts. However, automation and digitalisation 3 are key areas for credit unions to improve upon if they are to remain relevant to modern consumers. Not for small credit The review doesn’t accept that the model was only for large credit unions but does accept that only 3 unions credit unions with plans for growth and expansion were addressed by the Project. No apology or humility The review accepts that there has been too little apology in the past. The ABCUL board from ABCUL / 3 apologises unreservedly for the outcome of the Project in this review process. Cornerstone Negative impact of The review accepts the enormous disruption and negative impact that the experience of migration migration on “live” credit had upon East London Credit Union and Voyager Alliance Credit Union. ABCUL and Cornerstone unions 2 deeply regret this and are committed to doing what we can to support the two credit unions in stabilising their position. The experience of these migrations demonstrates the need for better engagement with participating credit unions and in relation to managing an mitigating risk. Ineffective marketing The review does not accept that the marketing initiatives under the Project were entirely ineffective. The Common Sense With Money toolkit, Find Your Credit Union revamp, local marketing 2 campaigns and Web Front End developments all had substantial impact. However, the review accepts that some would have preferred to see marketing given a higher priority and that this points to issues with vision and engagement around Project objectives. Need for credit unions to The fact that the Project asked credit unions to commit to joining a technology solution that was yet 2 sign-up to “vapour ware” to be built was a significant challenge. The availability of appropriate solutions was a major part of

this. But there are lessons to be learned in terms of the particular challenges that “vapourware” present in terms of the dynamics of a Project. In general, there should be a presumption against “vapourware”. Length of (10 year) The length of the commitment sought – particularly in light of the fact that the solution was yet to be transformation built – was a major issue. It led to credit unions with a less pressing need to change not 2 commitment committing to the product and created unhelpful dynamics as a result. In general future Projects ought to set more realistic expectations in terms of length of commitment. Financial structure / The original Project contract and its expectations of growth before capital investment was made incentive payments was a significant structural flaw in the design of the Project and took a long time to resolve at the outset of the Project. Similarly, at the end of the Project, tying funding to successful prior migration 2 delivery also constrained the availability of funding. These issues point to lessons around the desirability of government funding, the need for long-term investment up front and the role of credit union investment to achieve buy in. Model too rigid and not The Project was predicated on the need for standardisation and harmonisation of business model accommodating of around shared infrastructure. Therefore, it does not accept that that the inability to accommodate a different credit unions’ 2 range of bespoke arrangements was a cause of its failure. Indeed, the fact that so many credit needs unions sought their own version of the solution is evidence of the failure of the Project to effectively engage and communicate with credit unions. Narrow focus on The review accepts that as the Project progressed, it became focussed on transformation and the transformation Model Credit Union at the expense of other aspects of the Project. This was driven by the Project

contract. It points to lessons in terms of shared vision and managing the deliverability of Project objectives. Failure to migrate more The review accepts that this is the key failure of the Project. than 3 CUs ABCUL to recommend / This is outside the scope of the review. ABCUL intends to launch a major Town Hall consultation evaluate providers – not shortly following the conclusion of this review to establish its role in relation to providers in future. be a provider Initial migration should The East London Credit Union migration went ahead with the full authority of its board. However, not have proceeded the review accepts that risk management and mitigation plans around these migration decisions were inadequate and must be strengthened for any future Projects of this nature. Lack of regard for The review accepts that better use could have been made of the DEEKS market research. It DEEKS consultancy probably should have taken place prior to key strategic commitments being baked into the Project work contracts. Market research in future should precede strategic decisions to inform market positioning.

Tried to adapt to too This is opposite to feedback received on a lack of flexibility. It speaks to the challenge in balancing many CUs’ operating these competing demands. The key lessons this points to are around the need to achieve buy in to models a shared vision and to consistently communicate and engage around that vision throughout.

Weaknesses / failures

Lack of expertise in credit unions / reliance upon consultants

Perhaps the most consistent criticism of the Credit Union Expansion Project by credit unions participating and not participating alike was the level of reliance that the Project put upon consultant and contractor labour to deliver the Project and the limited levels of knowledge that these people had about credit unions, how they operate and their business challenges. This is a fair and reasonable criticism which contains a great deal of truth. It is certainly true that if a similar Project were undertaken in future then a different approach to staffing would be adopted in light of this experience.

The review does not accept that the use of consultancy and contractor labour per se was a problem for the Project. Indeed, due to the complex and technical nature of the banking platform development, some level of external expertise of this kind was absolutely required and would be required again were the Project repeated.

Likewise, it is important to note some of the sequence of events and drivers behind the reliance upon this staffing model. Firstly, the initial Project delivery team was envisaged as a directly-employed mix of credit union secondees and banking professionals supported by consultant expertise. However, the initial team recruited, for a variety of reasons, was short- lived (particularly in relation to senior leadership) and its replacement and development was constrained by the pressure of the delivery timetable set out by DWP and the contract renegotiations that were required very early in the Project’s life.

Thereafter, over time those remaining credit union secondees gradually were replaced in the Project delivery team as the scope of the Project narrowed, various individuals left for their own reasons and the skill-base required for the delivery of a banking platform shifted. However, during this period efforts were made to establish a staffing structure within Cornerstone distinct from the Project team in order to hold the Project delivery team to account on behalf of Cornerstone.

That said, it was clear that at the mid-point in the Project, as DWP commissioned a review by Liverpool John Moores University, there was significant disappointment and concern among the credit union population at the lack of engagement and involvement of credit unions in the design and delivery of the banking platform and a feeling that the Project was being “done to us, not for us”. This led to meaningful and concerted efforts to reinvigorate the engagement and communication with credit unions by the Project.

The review accepts fully that ultimately a lack of effective understanding of credit unions, resulting partly from an over-reliance upon consultant and contractor labour from outside the credit union sector, was a key factor in the disappointing outcome of the Project. It is certainly true that the platform design and implementation would have been better served by a more detailed understanding of the realities of credit unions operations and technical capacity. Similarly, a staff team that had more directly invested in the success of the Project would have been more likely to deliver successfully. This is a key lesson from the experience.

However, the review does not accept the premise that if credit union people had delivered the Project without some level of external expertise and support that that would have been successful either. The key in future projects will be in striking the most effective balance between credit union expertise and wider expertise and also creating the right mechanisms to hold those responsible for delivery accountable for their success or failure.

Finally, we also beg some understanding in this from the membership given the time pressure and constraints that the Project operated within which alludes to key structural considerations in relation to the funding of any future projects and the role of government which are ever-present in this review and are dealt with in more detail elsewhere.

Lack of (honest) communication

A lack of effective, transparent and honest communication was a key shortcoming of the Project for many respondents and a key theme throughout the Project’s life and in previous reviews such as that undertaken by Liverpool John Moores University. The review accepts and apologises for the failings in communication that were evident throughout the Project. There were various attempts throughout the Project’s life to improve and enhance communications, particularly towards the end of the Project’s life following the LJMU review but we accept that this was too little, too late.

The review would like to broaden this point to communication and engagement and has no dispute with the notion of accepting this as a key lesson to be learned. Without effective communication and engagement any Project of this kind is likely to face significant difficulties in delivery. Any such Project relies upon the confidence and buy-in of the key participants and beneficiaries and transparency and openness are critical to maintaining this. But perhaps more importantly, for a technical project of this nature, a meaningful and detailed understanding of the realities of credit union operations and the key capacity constraints, training needs, business planning processes and assumptions, financial resources – to name just a few – is absolutely fundamental to success. It is clear from the experience of the two credit unions that migrated to the platform (as distinct from the third which was a new start only ever trading on the platform) that so much attention was paid to delivering the technical package, far too little was given to how it would be successfully implemented in a live credit union environment.

To say this is by no means to suggest that these issues were entirely neglected or not considered at all, nor does it absolve credit unions themselves from responsibility for ensuring they were ready to adopt a platform and understood the risks of doing so, but it is clear that communications and engagement were critically under-prioritised in the Project with severe consequences for the Project’s success. It is therefore a key lesson that detailed and meaningful engagement and communication are critical to any similar project’s future success. It is also important to once again note that failings in this regard were certainly driven by structural factors in relation to timetable, funding and sponsor expectations and that providing adequate time and resource for such a process in future is imperative.

ABCUL / Cornerstone weak project management discipline

Another key piece of feedback from survey participants was the suggestion that ABCUL / Cornerstone’s project management discipline was at fault for the failure of the Project to achieve its goals.

Firstly, we must point out here that ABCUL had no role in project managing the Project’s delivery. It was the contracting body but all delivery responsibilities were Cornerstone’s alone. In terms of Cornerstone’s project management capacity, the Project employed skilled and experienced project management professionals to deliver the Project who employed industry-standard gated project management methodologies to the delivery of the project.

So from this point of view, the review does not agree with the suggestion that a lack of project management expertise per se was at root of the Project’s outcome.

What the review would accept, however, is that throughout the Project delivery process the risk tolerance adopted by the Project Board and Cornerstone Board alike was likely to have been too high which compromised the ultimate deliverability of the Project’s objectives. For large portions of the Project’s life, and particularly towards the end of the process, the Project was carrying significant risk in a number of critical ways and at a variety of levels. It is arguable in hindsight that this risk tolerance was inappropriately high and fatally compromised the Project’s success potential.

Given that the risk profile of the Project overall was high from the outset, it would have been prudent to lower the risk tolerance levels in relation to specific deliverables because, for a Project with such high overall risk, even small variances from plan and delivery schedules can be sufficient to undermine the likelihood of delivery overall. Instead what appears to have happened in some cases is that a high risk tolerance at the macro-level was conflated with a high risk tolerance on the micro-level.

However, we must also point out that at the time that the Project commenced there was significant flexibility and buy-in from the key Project sponsor which allowed the Project board – which had funder representation within it – to carry a higher risk than otherwise would have been accepted. Unfortunately these conditions changed adversely during the life of the Project which significantly shifted the impact level of the risks that the Project carried.

A key lesson to learn for future Projects therefore is that realistic and prudent risk tolerance levels are required to ensure that a shifting external environment does not raise the potential for risks to crystallise unexpectedly.

Wasted money / opportunity

The review certainly does not accept that the Project experience has been a total failure or wasted opportunity. The strengths and successes section below – though admittedly much shorter than the current section – includes some significant positive progress and development which the Project delivered. We should not adopt an overly pessimistic view of the Project and accept the premise that it was entirely negative.

However, the review does accept that this was a great disappointment to the credit union sector’s expectations and hopes to see the Project end as it did. The ABCUL Board and the Cornerstone Board both apologise unreservedly for this disappointment and for the opportunity that the Project represented not being realised to the fullest extent.

The review committee hopes that the Project’s failure to deliver on its objectives at least provides us with an invaluable opportunity to learn key lessons of how any future such projects can avoid a similar outcome and meet with success. This document is a key element in that process and we hope will provide a strong basis for the future of collaborative projects in the credit union sector.

Too ambitious / unrealistic

A common criticism of the Project was that it was too ambitious and its delivery expectations were never realistic. The review committee accepts the principle of this feedback which is an obvious conclusion to draw with the benefit of hindsight.

In the context that it was originally undertaken, the Credit Union Expansion Project was the only form of central Government support and investment available to credit unions and the credit union sector was extremely fortunate to receive this support at all given the drastic public spending cuts that were being carried through across Government at the time. While the ABCUL and Cornerstone boards both knew at the time of the Project’s commissioning that it was a high-risk, high-stakes Project to pursue, it was also felt to be an opportunity which would not come along again and strong reassurances were received from the sponsors of the Project that the delivery timetable – which was perhaps the most ambitious aspect of the Project’s structure – could and would be flexed to reflect the realities of delivery provided the initial delivery went to plan.

Neither the ABCUL nor Cornerstone boards entered into the Project lightly nor without serious consideration of the risks and the very ambitious objectives that were being committed to. However, in light of the contextual factors and reassurances received a calculated risk was taken in order not to pass up an opportunity that would rarely come along.

As has been noted above, however, it is important to acknowledge that despite concerns about ambition and risk identified even at the tender stage, the decision was taken to bid beyond the minimum requirements of the DWP’s original invitation to tender. This demonstrates that risk management, realism and effective management were all lacking from the very beginning of the process and addressing this is certainly a lesson to be learned in future similar efforts.

It could not have been envisaged ahead of time that the political landscape in which the Project was undertaken would shift so dramatically during the Project’s life, nor could it have reasonably been forseen that the delivery of the core banking platform proposition would be so delayed; neither was it expected that the landscape for FinTech and sector providers would shift so dramatically during the Project’s life.

None of this is to suggest that the project was not ambitious and high-risk, but it must be acknowledged that a range of parties and partners came together – including participant credit unions – in the shared belief that the Project was deliverable and achievable. It is also true that the significance of implementations and their success of failure was critical within the Project narrative and had the implementations of East London and Voyager Alliance been more successful, even in the wider context of the Project, it may have been successful at least in terms of its continued support from Government and – albeit at a slower pace – in achieving higher levels of adoption for the Model Credit Union.

There are reasons why the Project was to fail to achieve its goals ultimately that arise from within the Project’s delivery and these are being expounded and learnt from in this process; likewise there were reasons why the Project fell short that came from external factors. Nevertheless, the review’s conclusion and that of the ABCUL board is that it took a reasonable decision to pursue the Project at its outset with the best information it had available and that while in hindsight it seems too ambitious, few people said so at the outset.

Wrong choice of supplier / dismissal of incumbents

The Project’s choice of core delivery partner in Fiserv was informed by a rigorous and detailed tendering process led by AT Kearney at the behest of the Department for Work & Pensions as Project sponsors. All incumbent suppliers to the sector were given the opportunity to bid for the contract and were assessed by an objective set of criteria with independent checks and balances in built.

Fundamentally, the Project’s ambition to deliver a payments-integrated banking proposition with mobile app, internet banking, self-serve account management and straight-through processing of loans and membership applications was not within the reasonable capacity of any of the bidding incumbents.

It may be suggested that the Project’s ambition and focus as determined by the tender exercise was not the right one and the review does not seek to answer this question which is beyond our scope. However, the ABCUL board intends to take forward these questions with a fundamental review and consultation around our shared vision for the future of our sector in the hope that we may answer some of these questions within the sector and provide the basis of a shared platform for the sector’s future.

Staff turnover

Staff turnover within the Project has been consistently identified as a key issue both during the Project’s life and in the survey of members we are responding to here. The review understands the concern that this created and the link that people have made between this and the Project’s ultimate failure to achieve its objectives.

The review believes that a significant amount of the staff turnover is explainable by the nature of the Project and the extreme demands and pressures that it placed upon the people within it. Likewise, the nature of contract and consultancy labour which was employed in many roles within the Project is such that short-term tenure is not unusual.

However, we also accept – as detailed above – that a lack of a more permanent workforce which had more personal investment in the success of the Project did play a role in the ultimate outcome of the process as did the lack of a surviving and material expertise in credit union operations throughout the life of the Project. There are key lessons to be learned about the nature and accountability of the workforce for any similar Project undertaken in future and turnover is one factor within this.

Too much emphasis on software – not enough on other areas

It is definitely true that the Project’s scope narrowed as it proceeded from a Project based on a wide range of interventions in support of credit union modernisation and competitiveness to an increasing focus on the shared banking software platform. The reasons for this are largely related to the time pressures and the constraints of the various iterations of the core Project contracts. However, the strengths and successes section above does highlight a number of key areas beyond the platform which were usefully addressed.

It is unfortunate that the focus of the Project was not being driven primarily by the core constituency for the Project: the credit union participants. A key lesson, therefore, has to be that any future similar project should be informed by a robust process of engagement, consultation and development which identifies the key areas for intervention, develops realistic and deliverable interventions and delivers them at a pace that is achievable and with the buy-in and confidence of credit unions throughout.

These are some of the key reasons as to why ABCUL now proposes a significant process of member engagement and consultation with a view to delivering a shared vision for the future of the sector with a clearly defined role for ABCUL within it.

Not cost-effective / affordable solution for credit unions

The review does not believe that this is a fundamental reason for the Project’s outcome. While pricing is always a contentious issue, it must be balanced against the value proposition delivered and we believe that the functionality and user experience offered by the Model Credit Union platform justified the cost despite it being significantly more expensive than many incumbent systems.

The value proposition of the Model Credit Union, at least conceptually, was ultimately demonstrated by the number of credit unions who were committed to adopting it and signed up to the transformation cohort. Their business planning assumptions and cost-benefit considerations demonstrated that the price was justified.

We believe the failure of the Project to deliver its objectives was due to implementation and delivery rather than pricing.

Reputational damage to ABCUL / Cornerstone / sector

The reputational damage to the credibility of ABCUL, Cornerstone and the sector is an inescapable impact of the Project outcome which the ABCUL and Cornerstone boards both deeply regret and apologise unreservedly for. The Project’s outcome has definitely undermined the credibility of credit unions and ABCUL in the eyes of government and ABCUL’s standing with the credit union sector itself has been severely damaged also.

The ABCUL board and leadership accept the reality facing us and are resolute in their determination to undertake the painstaking work of rebuilding trust and confidence in the Association both within and without the credit union movement over the months and years to come. We believe a core aspect of rebuilding this trust and credibility will be to embark upon a significant programme of consultation and vision-setting for the sector underpinned by a strong evidence base. We commit to beginning this process immediately with a view to establishing a new shared vision for the sector which can provide the basis for both ABCUL’s relationship with its members but also the credit union sector’s engagement with government and other stakeholders.

Failure of DWP to manage delivery body

We do not wish to use this lessons learned document as an opportunity to lay blame at any particular party and though this is a piece of feedback that many survey respondents have put forward the review declines to comment specifically on its content other than to say that the DWP was heavily involved in overseeing the Project in various ways throughout.

However, the review is clear that a key lesson to learn from this process is the nature of government investment in a Project of this kind and the implications it carries for government expectations and policy demands to exercise potentially undue influence over what should be primarily a technical and practical exercise. Similarly, changing political imperatives inevitably influence the prospects of success for any government-funded project. That is not to say that credit unions should never embark upon government-funded projects of this kind again but that all parties should be clear about expectations and what is feasibly achievable when embarking upon any such future project.

Lack of individual accountability

Many survey respondents felt very strongly that individuals within the leadership of the Project should be held personally accountable in some way for the failure of the process to achieve its aims. The review does not believe that holding individuals totally responsible in the way suggested at least by some would in fact achieve any meaningful progress or resolution.

We believe that the best way for the sector to move on is to do its best to learn the practical lessons of this episode and to put them into practice in any future endeavours of a similar nature. That is not to say that the ABCUL board collectively should not be held to account and there are clear democratic routes for the ABCUL membership to hold individuals to account should it wish to. Likewise, in conducting the current review the ABCUL board has been held to account by the membership through the Association’s democracy. We believe this is the most meaningful and valuable form of accountability in this context.

Lack of information for non-participants

While we appreciate that non-participant credit unions felt that they were not appropriately kept informed of the Project’s progress the review cannot accept that this was a substantive reason for the Project not achieving its objectives. We accept, and detail in these pages at length, that communication and engagement in general were not sufficient throughout the Project and we intend to address this in the proposed vision consultation. However, we are clear that a failure to inform non-participants – while perhaps not desirable – was not a significant reason for the Project’s failure.

What this feedback does perhaps reflect in some way, however, are some of the impossible demands that the Project structure created in its funding, delivery and successful implementations given the many competing interest groups with a stake in its success.

Credit unions wasted years waiting for CUEP

The review committee is very mindful of how the Project held up many credit unions in developing their businesses while they awaiting the Model Credit Union’s implementation. This is a very unfortunate reality which has impacted many of the committed credit unions who will now not benefit from the new platform at all, despite waiting for it for many years. The ABCUL board is very sorry that these credit unions’ development has been set back by this aspect of their participation in the Project.

However, we must point out that it is not the case that all credit unions approached their business development in this way during the period and many made meaningful and significant steps to develop their propositions and key relationships during the life of the Project. The Model Credit Union was never intended to be a silver bullet solution to the business problems of credit unions but rather an enabling intervention in support of wider developments.

That said, the fact that the impression was so widely held that the Model Credit Union would provide a generalised solution to business issues in this way does speak once again to the failures of communication and engagement that the Project clearly suffered in terms of even explaining the core proposition to credit unions well enough so that they could appropriately evaluate their participation, plan for post-migration activity and continue to develop their businesses appropriately in the meantime.

Failure of corporate governance / board not holding management to account

Many survey respondents make the point that the Project suffered from a lack of effective governance and we have acknowledged the merit in this argument in our comments above regarding risk management in particular. However, we must point out here once again that it is important to keep in mind the division of governance responsibilities between ABCUL and Cornerstone. ABCUL was not responsible for the delivery of the Project and was only the contracting party for reasons of eligibility in relation to trading history. It was certainly not the contracting board responsible for the Project’s commitments to credit unions or Fiserv as the core supplier and it carried all delivery responsibilities. Similarly, the Project itself had its own delivery board which held the Project leadership and management to account throughout.

The review is of the view that governance structures performed their role but in hindsight were too tolerant of the risk profile of the Project. However, this was in a certain context with certain information available to the board at a point in time and certain assumptions that were made within this proved to be unfortunately incorrect.

We do not suggest that the governance of the Project was above criticism, clearly not given its outcome, but the framing of this particular feedback seems to suggest that the board was aware of information but failed to act upon it whereas we are clear that all parties acted in good faith and to the best of their knowledge and judgement. This was a collective failure of governance and leadership across a range of organisations.

Conditions and demands of government funder

Once again, this review does not wish to enter into public criticism of third parties but in the interests of transparency we have published all feedback received. It is certainly true that the expectations and realities of working with a government funder had an impact on the fortunes of this Project and being realistic about this in future is a key lesson that the sector ought to learn from the experience of the Project.

This raises a question about how best to fund and own similar collaborative projects in future. Any investor or funder of a project of this kind will have objectives and interests which will have a bearing on the direction of travel for the project and call to some extent for compromise between the interests of credit unions and investor. It is important to align, as far as possible, the interests of all parties in order to have the best chance of success. It is also important to be clear with any investor or funder around the limitations and feasibility of any deliverable in order not to disappoint expectations as ultimately happened within the Project with definitive effects.

ABCUL should focus on trade body activities – not service organisation

The establishment of a central services organisation to support the commercial development of members through achieving economies of scale and realising the benefits of collaborative investment was a strategic commitment of the ABCUL board for many years prior to the foundation of Cornerstone Mutual Services and the pursuit of the Credit Union Expansion Project. This was based on the experiences of credit unions around the world, particularly in the USA, where collaborative business models developed through credit union-owned service organisations are almost ubiquitous in successful credit union systems. The review does not take a view on the merits or otherwise of this approach, but notes that it was a reasonable basis upon which to proceed with the Project in the first instance.

The experience of the Project has certainly demonstrated some of the difficulties which can emerge where a trade body undertakes to deliver a service organisation on a commercial basis serving its members. The dynamics and relations between members of a trade association and customers of a commercial service organisation are different and these divergent relations can create tensions and confusion where full clarity of ownership, accountability and strategic aims and direction is not evident. It is certainly the case that the relations between ABCUL and Cornerstone, their respective roles in relation to the Project and the relations between each and its respective memberships (and the group as a whole) were not clear enough throughout the Project and this created difficulties which may have been avoided.

Lack of clarity on objectives / weak or lack of strategy

The Project had a clear set of targets in terms of growth baked into the contractual arrangements underpinning it. It also had a clear set of deliverables in terms of shared banking platform, credit decisioning, marketing and other services and infrastructure (as well as financial incentives) which were expected to deliver the growth required to fulfil the contract. Therefore, a lack of clarity on objectives and strategy is a difficult criticism for the review to accept without qualification.

What the review would accept is that the strategy was not clear enough as to how exactly the deliverables in terms of system and product development would lead to the growth that was forecast and how realistic it was that, firstly, the systems could be effectively developed and implemented and, secondly, that their benefits could be realised within the budgetary and time constraints under which the Project was established. Within this was a significant lack of strategy in terms of an approach to business transformation and culture change within the credit unions that were to adopt the new platform and how this would be effected through the Project’s structures.

The review accepts therefore that the strategy – developed as it was under significant time and resource pressure – in hindsight contained some substantive gaps in thinking which ultimately proved critical to the Project’s success.

Too automation-focussed

We believe that this is referring to the fact that the Project increasingly focussed through time on the delivery of the Model Credit Union platform, as opposed to some of the other products and initiatives which were originally envisaged and particularly took focus in the earlier phases of the Project. This is a reasonable criticism of the latter stages of the Project certainly which the review accepts and has dealt with elsewhere in that it was driven by structural factors relating to constraints on resource and time.

However, the review would also point out that automation was certainly not the only focus of the Project given the investment it made in areas such as marketing efforts and the ALD development as well as around the development of thinking and strategies for enhanced credit union governance and investment. Similarly, the review does not accept that “automation” if broadened to digitalisation and the ability to allow members to self-serve through online channels was the wrong focus – it was a fact accepted at the outset of the Project and if anything even more evident at the time of writing that credit unions need on the whole to enhance their digital channel offering in order to remain competitive and relevant in the 21st Century.

The review does not apologise for this high-level strategic focus on digital, though accepts that this increasingly came at the expense of other interventions as the Project moved towards final delivery of the central development in the Model Credit Union platform.

Not for small credit unions

It is true that the Project’s developments were only realistically going to be viable and value- adding for credit unions above a certain size, but the review doesn’t accept that as a rule the product was in principle not for small credit unions. It was always intended to be a model that credit unions of a range of sizes and types could access but always predicated on a need to be ambitious and aim for growth.

No apology or humility from ABCUL / Cornerstone

The review accepts that it is a common view among participant credit unions that ABCUL and Cornerstone have not shown sufficient humility nor been apologetic enough for the disappointing outcome of the Project. It is the hope of the review committee and the wider ABCUL board and staff team that this document and the process that sits behind it demonstrates a willingness to say sorry for what has happened. While neither ABCUL nor Cornerstone accepts full and total responsibility for the Project’s outcome, we do accept that proportion which can be reasonably attributed to us and have gone to great lengths in this document to be open about these shortcomings. And we unreservedly apologise for the disappointing outcome of the Project and the impact its failure to deliver its intended outcomes has had on both participating credit unions and the wider credit union movement.

Negative impact of migration on “live” credit unions

The review accepts that the migration to the Model Credit Union had significant negative impact on the day-to-day operation of the two pre-existing credit unions that went live – East London Credit Union and Voyager Alliance Credit Union. We regret deeply the impact that this has had on the success of these credit unions over the last number of years. The underestimation of the challenge of migration and the sheer difference between operating Model Credit Union relative to preceding incumbent systems was a key factor in the Project’s outcome and properly addressing this would be a key lesson for any future project of this kind to learn.

We must also note, however, without disclosing sensitive details that in addition to Cornerstone’s underestimation of the challenges around migration there was a failure of the credit unions concerned to understand and manage the risks of migration and to take responsibility for understanding the impact it would have on their day-to-day running and the changes they would need to make to ensure readiness for it.

There was a general breakdown in ownership and accountability around migration which was enhanced between the experiences of East London Credit Union and Voyager Alliance Credit Union but in both cases led to significant disruption in migration. A better plan for migration and a clear understanding of risks and how to mitigate these, particularly on the part of the credit unions concerned, is a critical element of learning the lessons from the Project.

Ineffective marketing

The marketing elements of the Project focussed on providing resources, tools and campaigns to support credit unions’ marketing efforts locally. In terms of the Common

Sense With Money Business-to-Business Toolkit aimed at assisting credit unions to market their services to potential employer partners, this was a pretty successful delivery. Likewise local-funded marketing campaigns for individual credit unions met with some success and allowed credit unions to experiment with marketing strategies and techniques with third party funding mitigating the impact of this on credit unions’ budgets.

The marketing budgets of the Project also delivered a revamped and improved Find Your Credit Union service. While this was longer in development than it should have been, it has ultimately created a valuable asset for the credit union sector to utilise in linking to the public which has benefitted from expert design and development.

We accept that marketing did not receive the level of priority and investment under the Project as some within the sector would have liked but it was always a secondary focus after the Model Credit Union development. This speaks to lessons around engagement and clarity in terms of the purpose of projects of this nature which should be much clearer than the feedback in this review process suggests it was.

Need for credit unions to sign up to “vapourware”

It was certainly a significant drawback and challenge of the Project’s structures and approach that the selection of technology provider in Fiserv-Agiliti and their Software as a Service (SaaS) model meant that the service which was procured was not ready test and demonstrate for many months after the initial procurement exercise. Ultimately credit unions were asked to sign-up to a service before they could see it functioning which created significant challenges around securing commitments from key players within the sector which would have boosted the viability of the Project overall.

When the Project sought technology partners in the competitive tender process it ran there were limited bidding options available in the market. SaaS – with all the benefits that its flexible and supported approach as a model had for the nature of Cornerstone and our sector – was a relatively new concept relative to the market at the time the review is being written. There have been great strides made in these banking technology markets in the five years since the Project began. Similarly, the incumbent suppliers to the credit union market that bid did not have the capacity and track record in terms of digital channels and payments integrations that the Model Credit Union aspiration demanded.

Therefore, while the “vapourware” issue – i.e. the fact that the software was not fully built and developed at the time of procurement – was significant, it was accepted by the Project in the context of limited options and resource and time pressures.

It is certainly a lesson for future such developments, however, that both for individual credit unions and collectives of credit unions seeking to procure a new technology platform, the inherent risks in working on a “vapourware” basis should be well understood. Often the development challenge for a supplier is underestimated, leading to delays in delivery and this was certainly the experience of the Project. Likewise, for collective efforts, those credit unions that are best established and have the least immediate pressure to “transform” – while being important to the success of a project – are (rightly) less inclined to accept the risks of signing up to “vapourware”.

Length of (10 year) transformation contract

The length of the commitment demanded under the transformation contract was certainly a difficulty for many better-established and stronger credit unions that had the luxury of time

and options relative to some of the smaller more financially-stressed credit unions within the movement. As such the length of commitment demanded was a key barrier to wider, more viable participation from the sector and potentially distorted the motivations of those credit unions that did undertake to participate in the Project and commit to the lengthy transformation contract.

Ten years is a very long period for any commitment of this nature to run and necessarily limits the appeal of any technology solution. As such, it is certainly a lesson to be learned for future efforts that more realistic contractual expectations in terms of length of commitment should be sought in order to bolster interest and attract the broadest possible range of credit unions to commit.

Financial structure / incentive payments

The financial structure of the Project was a problematic aspect of its design throughout and was subject to multiple contract negotiations. The initial structure meant that the credit unions and Cornerstone would only receive certain payments from the Department, including credit unions’ Payments for Growth, provided the overall cohort of credit unions within the Project achieved certain predetermined growth targets in terms of membership, lending and savings. However, these growth projections were expected to be delivered as a result of the investment linked to the payments which were in turn triggered by the growth target fulfilment.

This created a kind of Catch-22 whereby the payment would not be received before the growth was delivered but the growth would not be delivered until the payment was received. As a result it was subject to a lengthy negotiation and the very outset of the Project’s life.

Once this negotiation was concluded, the financial structure of the Project was more aligned with the Project’s objectives in terms of providing incentives to growth and for deeper participation with the Project’s delivery. Credit unions received a range of incentive payments for reaching milestones in their transformation journey and in terms of delivering specific aspects of the Project, such as local marketing campaigns.

However, towards the end of the Project’s life – following a contract renegotiation concluding June 2017, the Department shifted the financial risk of the Project on to Cornerstone Mutual Services. It would only receive funding for an implementation upon successful migration by a credit union and that credit union exiting what became known as “warranty”. This meant that Cornerstone had to fund the delivery and execution of migrations from limited and dwindling resources while facing significant external pressure as the deadline for reaching migration milestones bore down on it. This left Cornerstone significantly exposed financially at the point that migrations began and as the migration experience of Voyager Alliance Credit Union went badly, this risk exposure crystallised.

The review believes there is a great deal to learn about appropriate financial structures for transformation projects of this kind from the CUEP experience. There are questions around the conflicts produced with accepting Government investment for this kind of Project and the conflicting aims that this gives rise to. Likewise questions emerge around the role in Payments by Results and its potential to skew and distort behaviour, sometimes with negative consequences. Similarly, the linking of payments to successful delivery without sufficient up front resourcing of necessary investment costs, is a question that arose both at the beginning and at the end of the Project’s life. Finally, there are also questions around the role that users – i.e. credit unions in this case – ought to play in terms of investing in these sorts of projects themselves in order to have “skin in the game”.

Certainly it is true that the financial structure of the Project was not successful in driving the right behaviours, mitigating risk and inculcating a sense of ownership and accountability. It left delivery precarious and lacked sufficient leeway for delivery delays and surprises. It would not be recommended as a structure for future such Projects.

Model too rigid and not accommodating of different credit unions’ needs

The review believes that this is primarily a symptom of a failure in communication and engagement.

The model of central services delivery and collaborative shared business models is that through compromise and shared investment, credit unions can reap benefits through economies of scale and access technology, channels and services and products which would not be accessible were they to act in isolation. By definition, therefore, some rigidity of model and failure to change to accommodate different credit unions needs is at least to some extent a product of the model and the cost of the benefits it (in theory) creates.

At least to some degree, there was a definite sense through the Project that attempts were made to create bespoke arrangements in design and delivery in order to accommodate some of the demands of the different credit union participants. This was the case, for instance, in relation to letters towards the end of the Project’s life. But we appreciate that some felt that this should have gone further.

The review primarily finds that this sense of the need to adapt to a greater extent in order to respond to specific credit union needs is a result of the failings within the Project in relation to communication and engagement with participant credit unions. Credit unions should have been better appraised of the rationale around shared systems and services and the need for commonality in order to realise the benefits that this model provides. Similarly, credit unions should have had a better sense of ownership of the common structures that were developed and implemented.

Narrow focus on transformation

Variants on this feedback have been dealt with above, but to reiterate the point the review believes that there was a progressive focussing down from a broad range of interventions at the outset of the Project to the delivery of Model Credit Union towards the end. This was a consequence of the primacy that the platform held within the Project’s contractual structures, the limitations upon the Project from a resource and time perspective and the increasing pressure to deliver as delays took hold. However, it is not true to say that this was the only thing that the Project delivered.

The key lesson that this speaks to is having clarity around delivery and feasibility of planning from the early stages of any future project and to be realistic about timetables and deliverables based on resource and time limitations. This also begs certain questions about the role of investors in setting the agenda and the problematic nature of public funding in this context.

Failure to migrate more than 3 credit unions

The review accepts that this was the fundamental failure of the Project which ultimately led to its closure by the Department for Work & Pensions as migration milestones failed to be met. There are myriad complex reasons for this that have been elaborated and set out in

the report elsewhere and we will not attempt to recapitulate these here. Suffice to say that the delivery was disappointing from every perspective and any future projects of a similar nature needs to be sure of a plan that is feasible and deliverable and takes proper account of the needs of participant credit unions in terms of business and cultural readiness.

ABCUL to recommend / evaluate providers – not be a provider

We have set out elsewhere in the document that ABCUL intends to embark upon a significant Town Hall consultation exercise to set the five year vision for the sector and for ABCUL within this. One key question that this process will be asking is what the sector believes should be ABCUL’s role in acting as a commercial business provider and supplier of systems and other products to credit unions.

This is not to suggest that ABCUL itself was the delivery agent in the Project, as we have set out this was Cornerstone Mutual Services, ABCUL’s subsidiary, but Cornerstone is a wholly owned subsidiary of ABCUL and was set in motion by ABCUL and the fortunes of the two are closely intertwined. As such, therefore, we accept that we need as a Group to be clear about our role in this in future in light of the disappointing fortunes of the Credit Union Expansion Project.

Initial migration should not have proceeded

The migration of East London Credit Union went ahead with the fullest possible information available to the East London team as Cornerstone Mutual Services could provide at the time and with full knowledge, authority and permission given by East London’s board. In hindsight it is easy to say that this should never have proceeded but it was a decision taken with the best information available at the time.

It does however demonstrate that due diligence and risk management on both sides should in future be much more robust than it was given the challenges that credit union quickly faced. And indeed, the process was enhanced and strengthened prior to the Voyager Alliance Credit Union migration but again, the experience was less than satisfactory. This demonstrates the depth and complexity of this challenge and giving sufficient time and energy to managing these risks and understanding the scale of change required for a credit union is and will be critical to the success of any such project in future.

Lack of regard for DEEKS consultancy work

The review understands and accepts that the depth and extent of the use of the DEEKS marketing consultancy work was probably not as full as it ought to have been. This is partly because, contrary to the best possible construction of such processes, some key structural questions about delivery and milestones were already taken in the contractual arrangements with DWP prior to the DEEKS work being conducted.

However, it is not true to say that no regard was paid to these findings and it was certainly instrumental in shaping the marketing messages around FYCU and Common Sense With Money.

There is a lesson to be learned here, though, in that rigorous and expert market research ought to precede key high level decisions relation to structure, product and delivery in any future projects of a similar nature. The DEEKS consultancy asked searching questions about the positioning and product set of credit unions relative to the wider market but the extent to which it was used was limited by the fact that key decisions predated it by some

distance. Once again this is also a function of the structure of the funding with a vision having to be sold to Government prior to unlocking investment which might suggest the vision needs to be amended.

Tried to adapt to too many credit unions’ operating models

This feedback is the converse of the feedback responded to above in relation to the model being too rigid and inflexible. This demonstrates the challenge of coordinating an ambitious collaborative effort of this kind well.

It is evident that in order to reap the benefits of collaboration, some standardisation and therefore compromise is necessary. However, it is also clear that there were some that would prefer to have some level of flexibility within an overall shared framework. Balancing these competing and, to some extent, conflicting vectors within a project of this kind is a key challenge.

There are lessons emerging from these themes which speak to the need to be quite clear and well engaged with the user audience for any such development and to involve them more closely in the decision-making process in order to ensure that there is clarity about the extent and need of standardisation and, where this is varied from, that the costs of flexibility to the model are properly understood too.

Strengths / successes Number of Review feedback respondents Focussed sector’s vision The review is pleased that the Project raised awareness of the digital transformation challenge and and ambitions focussed credit unions on the need for a clear strategic vision to remain relevant and sustainable. 8 It is also very encouraging that the need for collaboration was also supported by the process. Credit unions’ values coincide with those of the millennial generation but they demand digital services as standard. Collective approach / It is encouraging that respondents valued the collaborative spirit and effort in the early stages of the credit union involvement Project. It is a shame that the Project could not maintain this collective effort and is clear from the 5 (initial) negative feedback on a lack of communication and engagement that the quality of engagement is a key indicator of success. PBR payments Credit unions received £3.2 million in PBR payments for growth through the course of the Project 3 with 25% of this contributing to the Project’s core costs. These payments made a significant contribution to participating credit unions’ financial position. Web front end The Web Front End service delivered to 13 credit unions has made a positive contribution to those credit unions’ online presence. The Project’s wider marketing initiatives also had some meaningful 3 success. A focus on marketing investment and improvement is likely to be well received in future similar Projects. Those directly-employed As noted under the weaknesses / failures, the nature of staffing and the balance between directly- staff that were hired employed and contract or consultancy staff is a key lesson to get right in future Projects. It is 3 important to note that the nature and make up of staffing was not always within the control of the Project but it is vital to have a balanced and accountable team in future. Commitment of credit The review agrees that the commitment and investment made by credit unions in the Project was a unions huge positive factor. The ABCUL and Cornerstone boards are very grateful for this and apologise for disappointing these credit unions. However, it’s also important to note that there were also a 2 minority of credit unions intent on undermining the Project which was disappointing. The engagement and communication with credit unions to secure and maintain buy-in is critical for future similar efforts. ALD The review is pleased that the development and use of ALD was seen by some respondents as a positive contribution from the Project. The product was powered by Experian and launched in 2 2013. For many it was the first use of CRA data by credit unions. We recognise that the lack of integration with core systems and lack of ability to amend credit rules has undermined it’s longevity but it demonstrated the power of collaboration. Increased expertise in This is encouraging and we hope that this has been a by-product that benefits credit unions more

credit unions widely that the one that noted this in the survey. Some marketing We are pleased that the survey showed some recognition for the value of the marketing content material produced by the Project. Though we note this was outweighed by negative feedback on the same subject.

Strengths & successes

Focussed sector’s vision & ambitions

We are pleased that the Project seems to have tightened many credit unions’ awareness of and focus upon the need for a clear strategic vision of its future as the sector evolves from predominantly an anti-poverty and financial inclusion initiative, heavily reliant upon grant support to a self-sustaining and competitive sector of financial co-operatives providing invaluable competition and choice to the low- and middle-income family, otherwise underserved by the consumer credit and savings market. Similarly, it has coincided with a significant increase in credit union awareness of the challenge of continuing to meet the demands of the modern consumer – in particular as this relates to the need to be digitally accessible and automated in order to attract millennial consumers.

Credit unions have a huge opportunity in the millennial era as this group of younger households recognises and values ethical, local and community organisations and prefers an altruistic ethos to the dominance of the profit motive alone. However, this generation also demands digital accessibility and automated services as standard and credit unions, while scoring highly in terms of ethos and values, have yet to achieve digital accessibility to the levels required.

Collective approach & credit union involvement

Most feedback relating to this positive aspect of the Project was limited to the early days of the Project when there was significant engagement with the sector through design groups, involvement in supplier procurement and involvement of credit union staff and directors within the Project team. Nevertheless, there is a general sense in the survey feedback that the collective and collaborative approach – to the extent that it was apparent – was a positive aspect of the Project.

It is important to note this in light of some of the feedback received in relation to the negative aspects of the Project’s delivery which focus on later stages where communication with and engagement of credit unions became significantly less apparent under the pressure that the Project was under to deliver to a very tight timescale. The positive way that this was perceived in the early stages of the Project, doubly reinforces the lesson that future Project’s of this kind need to focus more heavily on the important process of engagement with credit unions in design, build and delivery of any collaborative and shared system or business service.

PBR payments

Throughout the early part of the Project, participating credit unions received Payments by Results (PBR) for growth achieved. Initially this was tied to the overall cohort’s growth but later was driven simply by the scale of growth achieved by individual credit unions. In total, participating credit unions benefitted by £3.2 million worth of growth payments (however 25% of this was retained by Cornerstone under the original contract to fund core systems development taking the net amount received by credit unions to £2.3 million). A full breakdown of the Project’s spend is provided in appendix i to this report.

This provided a significant boost to the financial position of participating credit unions and an incentive to drive towards higher levels of growth. While such incentive payments are controversial in some ways – particularly where delivery and payment are dependent upon

one another but payment is received only upon successful delivery – where growth is incentivised by payments and funded by an institution’s own resources the mechanism can work effectively. It certainly had positive outcomes for a number of credit unions under the Project framework.

Web Front End & some marketing material

We are pleased that respondents in the minority of credit unions that received – and still enjoy – free Web Front End upgrades are pleased with the product that they have received according to the survey results. While we accept the service is not without its flaws and has been somewhat undermined ultimately by the Project’s outcome we also believe that the service has demonstrated the positive benefits for credit unions of collaborating in order to fund access to a shared expert resource in terms of marketing support.

While not obviously supported by the survey results, we also note that there were some local successes of funded marketing initiatives for individual credit unions, the Business-to- Business toolkit, under the Common Sense with Money brand, that the Project developed was widely used with success in engaging employers and the revamped Find Your Credit Union has significantly improved the experience of the public searching for their local credit union. This, we believe, gives some support to the notion that there is potential in continuing to explore how ABCUL might co-ordinate and support marketing and digital member engagement in future which might be a key aspect of our proposed engagement and consultation initiative post-review.

Those directly employed staff that were hired

This observation is the converse of one that comes out quite prominently in the weaknesses of the Project delivery above. There is a clear sense among members and Project participants alike that a key failing of the Project was its reliance upon contractor and consultant staff who had to little invested in the ultimate outcome of the Project and therefore were not sufficiently accountable for successful delivery. It is therefore unsurprising that respondents felt that the permanent team that was employed towards the end of the Project in particular was more suited to successful delivery than those that preceded them.

We accept that the reliance upon contractor and consultancy staff was a key issue with the Project’s delivery. However, it is important to note the sequence of events through the Project’s life and in particular the fact that the original Project team was established on the basis of a permanent staff led by a directly-employed Project director. What happened subsequently, however, was the departure of a number of key individuals in the early phase of the Project and while the Project contract was initially renegotiated. This led to a need for a swift solution to take the Project forward in light of highly-pressured timescales for delivery. This caused the shift to contract and consultancy staff.

It must be remembered, too, however, that throughout the process various directly-employed permanent staff were brought in to establish and manage Cornerstone as opposed to the Project and who were accountable to the Cornerstone Chief Executive for ensuring that the Project was held to account by the permanent commissioning body in Cornerstone itself. However, it was only in the very last days of the Project that all contract and consultancy staff were let go and a permanent delivery team was recruited.

Ultimately the key lesson that comes away from this question is that whether or not a Project of this kind is delivered by a permanent team the mechanisms and vigilance through which

the Project delivery is held to account is critical to ensuring successful delivery and at various stages throughout the Project’s life this was unfortunately not apparent.

Commitment of credit unions

This was a clear positive submitted by respondents to the survey and the review committee agrees that the commitment of many credit unions was excellent with many hours dedicated to contributing to various engagement and other fora to support the Project’s development as well as a great deal of patience in relation to many set backs and delays during the course of the Project. For this the ABCUL Board and Cornerstone Board are extremely grateful and gracious in apologising for the disappointment that these credit unions suffered despite their commitment and energy.

However, it is also unfortunately also true that a minority of credit unions did seek to undermine the Project – both from within and without its structures – and this was a continual difficulty for the Project to successfully deliver and focus on the task at hand. This was manifest in various ways and at various times but does speak to the need for any similar future endeavour to secure and maintain the commitment and buy-in of participating credit unions throughout. Where this commitment is apparent it is invaluable to successful delivery but where it is lost it can create significant difficulties.

Ultimately this demonstrates the need for significant investment of time and energy in engaging and communicating with the credit unions that participate in any such Project in order to maintain trust, buy-in and commitment and to ensure readiness and capacity for implementation.

ALD

Another key strength of the Project was ALD. The Automated Lending Decision (ALD) tool was initially developed by ABCUL with funding and support from Santander Foundation and was later subsumed under the Credit Union Expansion Project and Cornerstone Mutual Services.

ALD – powered by Experian but overlaid with a credit union-designed decision-engine and risk appetite – provided a number of key advances for credit unions at the time of its launch. In 2013, many credit unions still did not routinely use credit data to make loan decisions nor did they report CAIS – Credit Account Information Sharing – data to any of the credit reference agencies. This meant that in many cases loan decisions were labour intensive and manual and were conducted without the benefit of data undeclared by the loan applicant. Likewise, it meant that credit union borrowers were not rewarded for their good paying by a boost to their credit profile.

ABCUL-Cornerstone is very pleased that the ALD system is recognised by some survey respondents as a positive contribution to the sector from the Project. We accept that not all credit unions began at the same starting point as regards credit data use and reporting but for those for whom this technology was new, the introduction of ALD made a meaningful contribution to modernisation.

However, we also recognise that there are shortcomings in the ALD product in terms of its lack of integration with core processing systems which necessitates double-keying activity and pricing considerations. However, we also believe that there is real value in a collaborative shared facility like ALD in terms of a generalised raising of awareness levels

around credit risk, loan decisioning and efficiency around loan processing. It also helps us to evidence the social impact of credit union lending.

It is fair to say that the wider Project took focus away from developing and enhancing the ALD proposition but Cornerstone is now very firmly committed to doing so and our developments around MI availability are just the first step in this process.

Increased expertise in some credit unions

It is encouraging that a respondent recognised that the Project enhanced the technical expertise of the credit union. While this was not an intended outcome of the Project, the review hopes that there has been an increase in technical and project management expertise within the participating credit unions as a by-product of being involved.

Some marketing material

The marketing efforts for the Project comprised a range of interventions including Common Sense with Money, the revamp of Find Your Credit Union, funded local marketing campaigns and the Web Front End service. There was also a raising of awareness around digital marketing and Google Analytics for some credit unions. We are pleased that some acknowledged the value in this though we appreciate that more thought that this was not valuable enough.

5. Responses to survey questions

As with the verbatim feedback above, we have sought to thematise the questions asked by survey respondents in order to provide some structure to the review’s responses. The table below sets out the key themes arising from the survey questions with a brief summary response.

The reader will note that the pages below do not respond to all of the areas covered. In relation to the questions asked in term of the review process itself, the review committee took these into account as the review took shape and proceeded and we hope that those that asked questions in relation to the process will be satisfied that the review has attempted to strike a fair balance between the practical needs of the process (in relation to cost, time and resource limitations, in particular) and the importance of thoroughness and detail.

Secondly, in relation to the demands for an apology, the review committee, ABCUL board and Cornerstone board as well as the Group’s staff team all take this extremely seriously. Therefore, while the report contains apologies at appropriate points throughout, we hope the reader will appreciate the effort that has been made to make the apology as prominent as possible by including it in the report’s preface.

In relation to questions in the “other” category, these were very specific to individual credit unions and not necessarily related directly to the Project and therefore have been dealt with outside of the review process.

As above with the verbatim feedback, in what follows we seek to answer the questions raised in by survey respondents as openly and frankly as possible and at all stages to identify key lessons to be learned for future projects of a similar nature.

Questions Number of Review feedback respondents Conduct of the tender 8 ABCUL established Cornerstone for the purpose of delivering commercial products and the Project process / decision to bid contract. ABCUL had to bid for CUEP, though, due to the need for a trading history. Concern was initially / feasibility of the expressed at the outset in terms of the feasibility of delivery but reassurances were received. project (initial and ongoing) There are lessons to be learned in terms of risk management, government and / or funder expectations, and contract due diligence. Similarly, project management capacity for projects of this nature needs to be significantly stronger than it was here. Finally, the experience calls into question the “big bang” approach of the Project. Proposed process for the 6 These questions were not answered in the review document but taken into account in the review review itself process as it was conducted. Compensation for 3 Unfortunately there is no compensation available for participating credit unions. The ABCUL and participating credit unions Cornerstone boards take the difficulty faced by participating credit unions very seriously and apologise for their experience. There have been tangible benefits from Project participation – such as PBR – but we accept that overall the Project was a disappointment. Some credit unions stalled their development plans while waiting for the Project and this is unfortunate – it speaks to the failure of the Project to effectively communicate with and engage its beneficiaries. Demands for financial 13 A full financial disclosure is provided in the appendices. The review is committed to being as information / information on transparent as possible. ABCUL has not profited from the Project and Cornerstone is currently into participation of credit negative reserves of £101k. ABCUL’s initial investment of £300k, subordinated debt is at risk. unions Demands for an apology 3 The review has taken the demands made for an apology very seriously and in addition to apologies made at various points throughout the report, the ABCUL and Cornerstone boards apologise in the preface to this report. Questions of the 8 The report is the ABCUL board’s attempt for the Group to hold itself accountable for the CUEP accountability of failure. We accept that leadership and governance are key weaknesses in producing the governance and leadership disappointing outcome – particularly in relation to risk management and mitigation – and these are key lessons to be learned for future efforts. The review hopes to product positive and valuable lessons learned for future and seeks to avoid laying blame. Addressing the reputational 2 The review recognises the significant reputational damage that has been caused by the Project’s impact of CUEP / disappointing outcome, particularly with Government. ABCUL is committed to addressing this by a maintaining Government slow and painstaking process of engagement and rebuilding. We anticipate that the planned Town support Hall vision consultation to be launched imminently will contribute to this process. Questions of ABCUL / 3 This question is outside the scope of the review but will be central to the Town Hall consultation to

Cornerstone’s future role in be launched imminently. supporting members’ digital challenge Questions on project 5 The review believes that the Project’s outcome was not for want of project management structure and delivery methodology but that there were key failings in terms of risk management within the project. This strategy / methodology was related to the unrealistic expectations originally signed up to. There are key lessons to be learned around the right balance of staffing and expertise, accountability and buy-in which are all highlighted by these questions and feed into the review’s overall conclusions. Ongoing impact on ABCUL 2 The Project’s outcome has had a significant impact on ABCUL but the trade body services continue operations to perform well, despite the additional pressure. Following a change of leadership, this will be supported by the imminent launch of the Town Hall consultation. Other 2 These were very specific and answered directly for the credit unions concerned.

Conduct of the tender process / decision to bid initially / feasibility of the project (initial and ongoing)

Why did ABCUL not withdraw from the tender process once the deadline was passed?

ABCUL conducted the tender process in accordance with the rules and timeframe established by the Department. Suggestions that the original deadline was missed are in error.

ABCUL established Cornerstone Mutual Services for the purposes of delivering the Project and developing shared services for the sector. This protected ABCUL from the risks inherent within the Project. However, due to CMS lack of trading history, it was ineligible to bid for the Project and ABCUL took this on instead.

Should the project have started given the significant concerns about the changed scope of the DWP expectations compared to their 2012 discussion document?

Concern was expressed at the time of bidding for the feasibility of completion in the timescales given, however in the political and economic context of the feasibility and bidding process, it was felt to be a once-in-a-generation opportunity which had to be seized. Some informal assurances were given to ABCUL / CMS as to the timetable for delivery

Was there a point at which the ABCUL Board had doubts about the viability of the project - and should the Board have acted sooner than it did?

The ABCUL board was never responsible for delivery of the Project which was led by CMS and the CUEP board. There were concerns about risk at every stage but these were not considered by or within the remit of ABCUL board. Neither did the board “act” in the last instance – it was DWP’s termination of the CUEP contract in February 2018 which finally concluded the Project.

What lessons have been learned about the process by which the decision was made to participate in this?

There are key lessons to be learned here in terms of the expectations and pressures that come with a Government-funded project – political timetables and a lack of proper understanding on the of the project’s aims in the procurement and contract – and whether or not these are manageable. Likewise, the political winds can change in the middle of a project and significantly undermine the government’s commitment to a scheme.

Ultimately, there are lessons about ensuring before embarking upon any project of this kind that there is a deep and thorough understanding of the risks and potential impact of these crystallising. These are magnified by receiving key funding from government which brings extra expectations and conditions which add extra complexity to the project management challenge.

Was there a point when the project could have been rethought/redesigned in order to continue?

There were critical issues with the original DWP contract which took a lot of time to unwind – principal amongst these was the fact that the original contract tied payment to successful growth delivery but growth was predicated upon the development that the Project was

funded to deliver. Several iterations of the contract were negotiated during the Project’s life in order to cope with these divergences of expectations.

In terms of mid-project redesign, it’s important to remember that the Project was not designed in isolation from the funders’ expectations as manifest in the Project contract against which the team was delivering (or seeking to deliver). It was not in the gift of ABCUL or CMS to simply change the Project’s aims and design at will.

Where is the delivery plan and when did it become obvious that it would not be met?

There were numerous iterations and versions of delivery plans and many complex documents including various contract documents which underpinned the Project. The ultimate point at which the viability of the project plan was called into question was when the Voyager Alliance Credit Union migration suffered significant challenges in terms of post- migration acceptance and user experience. This demonstrated that the roll out plan for migrations was not achievable according to the resource profile and timeline agreed at that stage. This led to a process of review and attempted renegotiation with the Department which ultimately was unsuccessful and ended with the Project contract being terminated in February 2018.

In hindsight it should have been clear much earlier that the delivery plan was not going to be met and this points to a number of key lessons from the process which include having a much better engagement with and understanding of credit union capacities and skills in accepting change of the scale of the Model Credit Union. It also probably points to a need for gradual, incremental change towards a bigger goal rather than the “big bang” transformation approach pursued by the Project.

What is the current status of the programme?

The Credit Union Expansion Project came to an end with the termination of the DWP contract in February 2018. There remain credit unions live on the Model Credit Union platform powered by Agiliti and negotiations are continuing to establish a clear route forward for these credit unions either on the platform or migrating to a new one. There is also a resolution process planned for White Label Solution websites developed under the Project but which are now unsupported by the original contractual framework of the Project.

Cornerstone Mutual Services continues to deliver its core ALD product for now but the Cornerstone and ABCUL boards have jointly decided to pursue an orderly wind down of Cornerstone while maintaining service continuity for Cornerstone customers. All customer credit unions will be kept informed as these plans develop.

Why it was ever felt this was right for credit unions given the apparent complexity of the system?

The Project aimed to establish a banking-industry strength banking and payments platform on a shared-ownership basis for the credit union sector. This was primarily with the question of credit union relevancy for the modern financial services market in mind. Increasingly consumers expect digital channels, self-serve solutions and automated processes and the Project aimed to deliver this for credit unions that participated.

The question highlights one of the key lessons of the process in that the challenge of moving from traditional solutions, incumbent suppliers and long-standing processes and procedures to a completely new way of working was entirely underestimated. This suggests that any

future projects of this nature should spend much more time building understanding and acceptance with credit unions but also adopt a more gradual and incremental approach.

Compensation for participating credit unions Is any compensation being offered to those credit unions who signed up to CUEP and waited nearly 4 years for the promise of market leading technology to be delivered in a timely manner, only to be kept waiting on a string before being unceremoniously dumped at the last minute?

What are you going to do to assist those CUs who have suffered through lack of development because they were waiting to go-live? They urgently need help to catch up and find an alternative, rewrite business plans, market themselves, etc.

What is going to be done to recompense and support those credit unions that had signed up early to support the project, prepared well for transformation, engaged constructively with the Cornerstone team, supplied help whenever asked, participated in all the events, workshops, reviews etc and done everything asked of them?

No compensation for active participation in the Project’s processes is unfortunately available. The ABCUL board and the Cornerstone board take very seriously the difficult position that the untimely closure of the Project has left participating credit unions in. We understand and apologise for the disappointment and frustration this has caused, as well as the financial and opportunity costs that have been incurred.

However, we must point out that participating credit unions received a significant amount of direct payments for growth, incentive payments, marketing support and in some cases free website development. Likewise the Find Your Credit Union website was developed to the benefit of all credit unions.

Similarly, while we accept that credit unions in many cases were focussing their attention and energy on readiness for transformation, we cannot accept responsibility for credit unions not continuing to develop their businesses during the several years of the Project’s life. Not all participating credit unions felt that they were unable to continue to develop while waiting for the Project to deliver and while it did necessarily impede decisions on systems and IT, it was never an absolute barrier to other business development activities.

We accept and apologise for the impression that many credit unions had that the Project was intended to be a silver bullet for flagging growth and profitability among many credit unions. While it was never realistically to be the case that the platform, in itself, would turn around challenged credit unions’ businesses, the fact that many had this impression and it was not effectively challenged does represent a symptom of the Project’s failure to effectively communicate and engage members and participants in its true aims and objectives.

In terms of what ABCUL might do next in relation to supporting credit unions in this space, a major consultation exercise is planned for 2019 on the vision for the future of credit unions and ABCUL within that. This will look at themes such as the challenges around digital and technology and the role of ABCUL in assisting credit unions to navigate this.

Finally, it is worth noting that the years since the launch of the Project have coincided with a significant increase in the numbers of FinTech suppliers to the credit union market and enhanced propositions from incumbents. This means that, in comparison to the market that

the Project initially confronted, there are a range of new options and solutions open to credit unions today.

Demands for financial information / information on participation of credit unions

There were a number of questions relating to the financial position of the Project, such as:

When will the full financial accounting be made public?

What percentage of all the money received from DWP actually found its way to Credit Unions, what percentage was spent on external consultants and contractors, and what percent was spent on payroll for staff who are no longer employed by Cornerstone?

Please account for every penny spent.

Where is the unspent money? Will it go to the sector?

The review is committed to being as transparent as possible in relation to the financial spend as we can be subject to the constraints we operate under as a result of the contractual arrangements we have entered into with participating credit unions, DWP and suppliers such as Fiserv, Experian and others.

A full financial disclosure is provided in an appendix i to this report.

In relation to the question of “unspent money” relative to the original Project budget allocated by Cornerstone, any funds not spent by Cornerstone and distributed to participating credit unions were never drawn down by the Project and remain in government budgets unspent. Funding under the Project was tied to specific milestones and was drawn down as and when these were met.

ABCUL received financial contributions from Cornerstone Mutual Services during the Project in line with the additional overheads that were incurred for shared services such as finance, IT, compliance, equipment, rent and management support.

However, in setting up Cornerstone, ABCUL invested £300,000 in a subordinated loan to act as initial working capital. Cornerstone’s 2017/18 accounts show that it stands in a negative reserves position of -£101k. Therefore, ABCUL has taken a significant financial hit as a result of the Project’s outcome. This is a key factor in the decision to wind up Cornerstone.

Questions of the accountability of governance and leadership

How many ABCUL directors will be following Lyonette and falling on their swords?

What lessons have the Board learned regarding setting SMART targets for executives and how to hold executives to account?

What lessons has the ABCUL Board learned?

Will the Board review its professional relationships and consider being honest about all conflicts of interest that added to the failure?

How would you prevent the leadership of ABCUL from ignoring its members in future?

Why has no one been held to account for this project failure?

Who has taken responsibility for the failure of the programme?

Why were there no reports back to the APPG?

ABCUL established Cornerstone to deliver the Project and its board takes full responsibility for the failure of the Project in its own terms. The fate of Cornerstone and its board’s standing demonstrates the accountability for the failure. The ABCUL board was not directly responsible for the Credit Union Expansion Project’s outcome.

This report is ABCUL’s attempt to stand accountable for the Project’s outcome and we are prepared to answer the difficult questions it poses.

ABCUL and Cornerstone have suffered significant disruption and financial stress as a result of the Project and its outcome, its leadership has changed both at board and management levels and its team is dedicated to rebuilding the Association’s standing and trust in the eyes of members and stakeholders in light of the CUEP experience.

In terms of Parliamentary accountability, neither ABCUL, Cornerstone nor DWP nor our suppliers has any desire to publicly chastise ourselves for this disappointing experience. We do not believe to do so would have any meaningful benefit for the long term future of the sector. However, should Parliamentary or other public bodies seek to hold us accountable for the use of taxpayers’ money, we will of course submit to and cooperate fully with this.

While this report is about being held accountable and learning the lessons of the Project’s outcome, the review does not accept the premise of some of these questions, namely:

- There is suggestion that somehow conflict of interest is to blame for the outcome but this is not explained or expanded. We do not believe this is accurate and without any kind of evidence it is hard to comment further. - There is a conflation of accountability and blame in some of the questions. The ABCUL board is committed to standing accountable and answering difficult questions as part of this review but does not believe that there is any value in seeking to blame individuals, nor is it a fair reflection on the complex set of interrelated factors at play in the Project. - There is a suggestion of ignoring members which the review does not believe is a fair characterisation. There are definitely lessons to be learned around improving communications and credit union engagement but we believe the suggestion that members were ignored is unfair.

In terms of governance and holding executive leadership to account, there is a complex set of relationships at play which require elaboration. The role of ABCUL in facilitating and delivering commercial services is under review following the closure process and a major process of consultation and engagement will be initiated in 2019 to establish a clear understanding of what role, if any, ABCUL might play in this in future. A key question within this is the Group structure and the Cornerstone entity which has been answered to the extent that it has been decided to wind Cornerstone up. Cornerstone was established to deliver the Project and other commercial services and so it was not the ABCUL board’s role to hold the management to account over the Project’s delivery.

Nevertheless, it is clear that questions of governance, project oversight and risk management are all key ones in relation to lessons learned in this project. The Project was

high risk and ambitious but tolerated too much risk and deviation from plan given its overall profile. Governance structures should have been stronger in holding management to account in this. All of these are key lessons for the future.

Addressing the reputational impact of CUEP / maintaining Government support

What steps are ABCUL taking to repair the reputational damage to the credit union movement?

What are they doing about maintaining government support or support in a new way now this project is over?

ABCUL recognises that we must now engage in a tireless rebuilding of our standing and reputation and that of our sector. We take this responsibility very seriously and will pursue it by means of resetting our processes of engagement and communication with members.

We recognise that perhaps the most serious failing in the Project methodology was a failure to appropriately consult with and listen to the credit union sector and to fully appraise the sector of the specifics of the Project’s aims and delivery. This resulted in a product being delivered which, while functioning, carried within it a number of issues in relation to the practical applicability of it to the reality of credit unions’ day to day operations.

More importantly, however, the Project team failed to recognise and adequately prepare for the sheer change required to implement the platform successfully within credit unions and the distance credit unions would need to travel in terms of their technical capacity in order to successfully and effectively operate the new platform. This caused huge upheaval within the credit unions that adopted the platform and massive disruption to their day to day businesses. It also made successfully adhering to the delivery schedule agreed with DWP almost impossible to achieve, without significant extra resource.

While we accept these points, it is also incumbent upon us to restate the fact that the Project team spent significant time and energy in seeking to assist credit unions to understand the scale of the change necessitated by the platform. We cannot accept that the credit unions that adopted the platform bear no responsibility for the decision to “go live” if they were not ready to do so and did not have confidence in either the platform and / or their ability to operate it.

In order to address these factors, we will now embark on an unprecedented vision-setting engagement exercise to rebuild trust with credit unions and to define our future direction as a sector. This will have the dual benefit of rebuilding trust and confidence among members and credit unions generally but also of delivering a clear vision with which to seek the support of government and other stakeholders going forward.

The Project experience has undoubtedly undermined government faith in ABCUL and in credit unions generally and for this we are truly sorry. However, we also do not believe that there are any other sectors with the fundamental strengths that credit unions possess in terms of our capacity to deliver on government’s financial inclusion policy objectives and nor is there any other voice within the CU sector that has the capacity to build and define a collective vision for the future of the sector that ABCUL does.

We are heavily engaged with the Government in relation to supporting credit unions through investment from its new Financial Inclusion Organisation which is being established with funding under the Dormant Bank and Building Society Accounts Act. We are also engaged

with HM Treasury in relation to other means of supporting the sector, including through Prize Linked Savings and reforming the Credit Unions Act. The All-Party Parliamentary Group on Credit Unions continues to support these efforts.

Questions of ABCUL / Cornerstone’s future role in supporting members’ digital challenge

What steps are ABCUL taking to ensure Cornerstone is disbanded so ABCUL can focus on core business?

What new technology is now being sought for members? Has this role been surrendered by the ABCUL Board?

How will credit unions be supported to address the tech challenges now that CUEP has failed?

ABCUL has made no decisions as to its role in supporting future developments in credit unions’ continued effort to grapple with the challenges of digital delivery and convenience that have only become more pressing since the Project was first conceived.

It is for this purpose that we now intend on embarking on a new vision-setting exercise for the sector in close collaboration and consultation with our membership.

One key decision that has been taken in this regard is that of the orderly wind down of Cornerstone Mutual Services but this is not to say that there could not be a role for ABCUL in this space in future.

We believe that there remains an extremely pressing need for credit unions to address these fundamental competitive challenges which we cannot abdicate from responsibility for. We believe there may well be a role for ABCUL in guiding and shaping credit unions’ engagement with FinTech and digital suppliers going forward which can add value without necessarily performing a delivery and service provider role in future.

Questions on project structure and delivery strategy / methodology

Should the project have been better gated to control problems with the development of a major IT platform?

In terms of Project strategy and methodology, it is the review committee’s honest belief that the failure was not for want of project management expertise and methodology. Much more significant was the ambition and deliverability of the Project in its own terms from the outset. There were definitely issues in relation to risk management and risk tolerance within the Project which relate to these questions but are not directly relevant to project management methodology.

Similarly, Government funding came with significant drawbacks in terms of unrealistic delivery timescales, unrealistic expectations in terms of seeking buy-in from credit unions in advance, unworkable contractual and procurement frameworks (which necessitated repeated renegotiation).

The ultimate responsibility for proceeding with a Project which was extremely ambitious and high-risk rests with ABCUL / Cornerstone. However, in the context of the decision that was taken and with the reality that this was a once-in-a-lifetime opportunity, it is not easy to say that the opportunity should simply have been passed over.

Publish details of the contract arrangements with Fiserv.

We will not be publishing details of the contractual arrangements between Cornerstone and Fiserv. These are commercially sensitive and subject to confidentiality. Furthermore we are not convinced that this would aid us in learning lessons as part of this process.

Why did CUEP ignore Deeks report and do nothing about brand identity and brand promotion?

Did the project lack leadership because of the failure to appoint a permanent manager?

We accept that there are many things that could have been done better, in particular the Project is likely to have been more successful had it been more focussed and more clearly informed by the market research that was conducted initially. Likewise, staffing and resourcing decisions are easy to criticise in hindsight but attempts to build a permanent staff team at the outset were unsuccessful which led to the model of contractors and consultants which ultimately followed under significant time pressure.

A key learning whichever way it is considered, however, is that project aims need to be carefully managed for feasibility and timescale and funders need to be chosen carefully for any project of this kind. Significantly more time than was given under CUEP, needs to be dedicated to defining, collaboratively, the aims of the development. It is also likely that a Project of this kind in future would be better advised to start small with a core group of credit unions and build out, rather than seeking a “big bang” impact at many divergent credit unions all at once.

Ongoing impact on ABCUL operations

How can the relationship damage with credit unions who have left in the last 6 years be repaired?

Has the failure influenced the recruitment of ABCUL staff? In particular, how is this the case?

ABCUL is always doing what it can to rebuild and enhance relations with credit unions that have left and ultimately see them return to membership. We do not accept however that ABCUL has stood still during the Project period and indeed in many ways it is as good in its trade body delivery as it has ever been despite the Project outcome. Likewise, many of those that are now not members did not leave in the time of the Project or because of the Project.

However, we hope that our proposed new process of engagement and consultation with the sector will demonstrate to all credit unions that ABCUL is committed to delivering a future for the sector that all credit unions can buy into and get behind, one that is informed and shaped by the membership and credit unions at large.

6. Summary of interview feedback

Interviews were held with fourteen people who were involved with the Credit Union Expansion Project in one or more ways; through paid or governance involvement in ABCUL or Cornerstone and / or through employee or governance involvement in a credit union that was part of the Project. Summaries of the interviews were approved by interviewees ahead of their inclusion in the report and are only representative of the views of the individuals quoted. Written comments were also received from Lord David Hunt of Wirral and the current Cornerstone board contributed their thoughts via a workshop session for the purpose.

Mark Lyonette was invited to participate in an interview but declined to do so citing his previous lessons learned as presented to the 2018 ABCUL Annual Conference. These lessons have been incorporated into the report.

A precis of some of the answers given is set out below, along with a small number of example quotes. A full thematic summary of the interviews can be found at Appendix iii.

The following individuals participated in interviews for the review:

David Batten – Chief Executive of Hoot Credit Union

David Dickman – Chair of Cornerstone 2012-2014

Barry Duggan – Chief Operating Officer of Voyager Alliance Credit Union and Maria Hughes, Operations Manager, Voyager Alliance Credit Union

Louise Galbraith – Managing Director of Cornerstone 2016 – 2017

Jonathan Glennon – Head of Delivery for retailCUre Credit Union (now working within Voyager Alliance Credit Union following merger)

Joe Hegarty – Chief Executive of Voyager Alliance Credit Union, CU Representative on the CUEP Project Board

Lord David Hunt of Wirral – Cornerstone Chair from 2014 – 2018. Due to time limitations, Lord Hunt provided written responses to the interview questions. These have also been included in the summary.

Don Kehoe – ABCUL Director and Director of CUEP (but non-transforming) credit union (London Capital Credit Union).

Robert Kelly – ABCUL Director and President until 2018. Cornerstone Non-Executive Director until 2013. Chief Executive of CUEP credit union (The NHS Credit Union) until 2018. Currently Chief Executive of ABCUL.

Matthew Redgrave – Chair of East London Credit Union.

Clive Rix – ABCUL Director until 2018 and Cornerstone Non-Executive Director until 2018, Director of ABCUL member and CUEP participant (but non-transforming) credit union (Nottingham Credit Union)

Vincent Thomas – Head of Credit Union Assurance at Cornerstone in 2017, Director of CUEP credit union (which signed up to transform) (London Plus Credit Union), CU representative on CUEP Project Board until 2017.

Stephen Walsh – Chief Executive of Pioneer Mutual Credit Union and Beth Welsh, Business Development Manager, Pioneer Mutual Credit Union, CU Representative on the CUEP Project Board

Q1 - What do you think were the key successes of the project?

Not all interviewees could identify any successes with the project, but a number of direct and indirect successes were cited including those set out below.

 Change in culture of credit unions, encouraged collaboration and modernisation  Led to credit unions having a higher profile and uptake.  Led to other suppliers innovating in services and products for credit unions  Some aspects / products including ALD, Employers’ Engagement Toolkit and website wireframes  Digital access for credit union members including faster payments  Investment in CUs through Payments for Growth

“The Project led credit unions to have the right kinds of conversations and be looking at modernising and trying to do that as a collective rather than as individuals.” Vincent Thomas

“It kind of kick started a whole load of other work which other providers have been doing. They had probably ignored credit unions before but when they saw that there was an appetite for growth and change, they kicked off from that.” David Batten

“The digital element of it is absolutely fantastic for the members. That was the whole reason why we went on the platform.” Maria Hughes

Q2 - What do you think were the key failings of the project?

General views are set out below. Specific views related to different aspects of the Project, including thoughts on both successes and failures are set out in the theme sections that follow.

 Not getting all credit unions onto platform and delivering the Project  Individual effects on different credit unions, including live credit unions now having to move onto different platforms and / or merge with other credit unions. “The failure of the project was particularly heart rending because it was nearly, nearly there, almost, almost right and just fell short.” Louise Galbraith

“The CUEP project has almost completely destroyed the credit union, we are being forced to either close or merge with another credit union and I would say that about 80% of the reason for that is this.” Matthew Redgrave

Interviewees were asked if they had anything to add regarding the following aspects:

 Vision and ambition o The vision was identified as a good thing, but targets set were seen as too ambitious

“This was the biggest ever joint initiative by the sector and it was right to undertake it.” Lord David Hunt

“I think the vision was good and bold and we should have modern ways of working, we should have digital services, straight through processing etc and it ideally should be done within the co-operative movement as a collective endeavour.” Vincent Thomas

“I think we were just being too ambitious in the first place in trying to decide something all singing, all dancing, that the movement wasn’t really ready for.” Clive Rix

“I think if it had succeeded, it would have been quite miraculous, given the constraints that being dealt with right throughout the project.” Name withheld at interviewees request

“There’s nothing wrong with the ideas, it’s what was prioritised and what was left to whither on the vine.” David Dickman

“We failed to deliver quick wins which eroded confidence, and that filtered through the rest of the structure and the project overall.” Robert Kelly

“I think it’s disappointing that with a little bit more work, all the credit unions could have gone live.” Beth Welsh

“Fiserv were running around trying to design things for individual credit unions rather than being ‘here you are, here’s a Model Credit Union, here’s what you get, here’s what you can do, this is aligning your products, aligning everything that you offer with this Model Credit Union and you go forward with this technology to help you grow.” Stephen Walsh

“[A big failing was] the whole lack of understanding of what a credit union is, how it operates.” Maria Hughes

 Communications o Communications with credit unions were seen as poor at times, credit unions were not kept up to date with what was happening o Lack of credit union understanding within team led to difficulties in understanding needs o Credit unions identified a lack of communications and assistance since the closure of the Project o Individual examples of communications which led to breakdown in trust, including the project being seen as oversold and difficulties in negotiations.

“I always say that if you inform people of the difficulties, they understand you are doing your best and are on the journey with you. They get no last-minute shocks or delays.” Don Kehoe

“Credit unions always wanted to know what was going on and maintaining the right level of information is quite difficult, I think.” Clive Rix

“With the delays and how the bad news was managed, sometimes meetings were cancelled, and it all sounded a bit panicky.” Jonathan Glennon

“It almost became a running joke when invariably there would be a new person who would roll up with bright ideas, looking all very fresh and bushy tailed and say, ‘I know nothing about credit unions, but I’m really looking forward to finding out’. David Batten

 Delivery o Project was seen as losing sight of what credit unions wanted o Going live or withdrawing support before credit unions and / or platform was ready o Plan too ambitious

“I think [Fiserv] may have been too big and too much focussed around delivering for large organisations.” Vincent Thomas

“It should only have been done for credit unions our size and bigger”. Joe Hegarty

“…nothing had been resolved and things had got even worse, so really [hypercare] shouldn’t have been withdrawn.” Matthew Redgrave

“I think it would have been much better if we’d have got their commitment of maybe Voyager and a couple of other large credit unions, build something that works for them, test it in the wild, fix any bugs and when it’s been in use for a year with one or two or three credit unions then think about selling it to other credit unions.” Vincent Thomas

“…from day one, we had very few levers that we could pull once Fiserv started slipping because we were more pre-inclined to meet our obligations to our customers in terms of penalties and in terms of compensation and stuff like that, and that was all meant to be back- to-backed by Fiserv and of course they failed us.” Louise Galbraith

 Governance o A confusing structure which led to lack of clarity in decision making and accountability o Issues around transparency o Too little involvement of credit unions o Lack of involvement of DWP on Project Board “I think in hindsight [the Cornerstone board] should have been more independent and have more authority in its own right. In Cornerstone, and obviously that was one of my reservations in staying on as chair, a lot was driven by the consultants, or ABCUL to a certain extent.” David Dickman

“It might seem odd to claim that governance was good when the project didn’t really deliver, but I thought on the whole that it was good; I thought the Cornerstone board was a quite impressive organisation to be in. I think the external directors we had were very good…they were challenging.” Clive Rix

“ There was the DWP then there was ABCUL which didn’t want to be under any kind of financial duty and therefore created Cornerstone as a separate legal entity, but in reality, it was the same people and then Fiserv.” Matthew Redgrave

“Why does it need to be so secret in the movement? This is a trade body and people know it, what was the reason for all the secrecy, I don’t understand it at all. The finances surrounding the project, were very, very secretive in the later days.” Joe Hegarty

“Whilst there wasn’t a system ready, it was perverse to try to get the credit union ready for a transformation.” Vincent Thomas

“We were left going live with quite a lot of outstanding training. Also, we were given a lot of training and then three months elapsed before we were due to go live again.” Beth Welsh

“We didn’t attract the right credit unions with the right representatives and the right voices…what we should have probably done is tried to involve more of the Cornerstone and project staff in the work that Prospect did with the credit unions.” Robert Kelly

“I think perhaps having a Chief Executive running Cornerstone at the same time as ABCUL was not a thing we should have allowed to happen, as he was stretched too thin.” Clive Rix

“The project should have been much more disciplined in terms of the project management. It needed leadership and leadership simply wasn’t there.” Stephen Walsh

“I think the reliance on external consultants at a senior level meant that the reason why we were all here got lost. And it turned into a delivery of the project regardless of whether it was the right thing for credit unions or not.” David Batten

“The turnover of staff at Cornerstone on the project was just horrendous, people just didn’t stay, they were there for two or three months and then they were gone.” Joe Hegarty

Q3 and 4 - In your opinion what are the key things that you would change /do the same about how the Project was envisaged and executed to achieve a more favourable outcome?

The answers to these questions about lessons learnt are summarised below, in no particular order and have been grouped in the themes discussed above, Design and Delivery have been combined.

 Vision and Ambition

o Retaining the vision and the collaborative way of working was viewed as important o It was questioned whether ABCUL always needs to be the prime mover in innovation for the sector o The need for a move to an independent service organisation structure was raised

 Design and Delivery o Those involved in design should have spent more time in credit unions o An incremental, or modular development should be considered o Need to establish a viable minimum entry point for credit unions o Short term wins should have been revisited o It was questioned whether such a contract should be entered into again o It was suggested that ABCUL should not have attempted to deliver such an ambitious project o It was questioned whether the right supplier was chosen, due to lack of understanding of the British sector

 Governance o Should be more clarity in who could make decisions o More credit union representation o More controls and measures

Q5 - (For Live Credit Unions Only) Is there anything that you believe you as a credit union could have done differently to secure a more favourable outcome from the Project?

o Live credit unions were asked if they thought they could have done anything differently that would have secured a more favourable outcome. While they did generally believe they had limited control over the outcome, interviewees did mention that they would have pushed back more, trusted their own instincts or not gone live at the time that they did.

“Firstly, if we had our time again, we would not have gone first, because it’s a general rule that you shouldn’t do it and there should not have been financial inducements to make someone make a mistake, so that’s a kind of governance error from Cornerstone in my opinion.” Matthew Redgrave

“We should have trusted our own instincts a little bit more, that was taken away from us early on, we lost control of our own credit union, if we did have to migrate to another platform, we’re better equipped now, we know how communicate with the members a little bit better, we wouldn’t hand over responsibility.” Maria Hughes

“With hindsight we would have got ABCUL to take the contracts on our behalf and cover ourselves risk wise…but that was at the advice of our trade body and DWP so there’s obviously that level of trust and I think we wouldn’t go in so trustingly in future to something like this.” Beth Welsh

“I think from our point of view we believed far too much far too early in what was said was going to be delivered and we hitched our wagon to this engine without knowing what it was that was going to come out at the end. And I think that was a mistake that we made.” David Batten

7. Contribution of independent review committee member – Antony Elliott OBE

Although the project has failed, it is not a conclusion of the report that ABCUL should never have started it. The need for a larger credit union sector in the UK, and for the members to be served with technology fit for the digital age, is not in question. Indeed, the fact that other options are springing up to fill the gap left by the CUEP is testament to the need.

This makes the failure of the project a great disappointment and a missed opportunity. The need for this soul-searching review is clear. One of my roles as an independent member of the review has been to ensure that this report is as clear as possible and that the many awkward issues are raised, in order that lessons can be learned. The committee has gone to considerable lengths to obtain opinions from key parties and to give as much detail as possible while producing readable, succinct output. Importantly, the committee has been receptive to comments from the independent members and many amendments have been made to this report at our request, which I believe have improved its transparency. We have not been through source documents, but those working on the report have put considerable effort into finding information and ensuring we have facts on which to base a view.

In my experience, when there is a major failure of this kind, it is very rare that there is a single cause; factors come together which lead to the disaster. The multiple failures mean that by the end of this project, it had reached a point where it was extremely likely to fail. For any person who previously had a narrow view that, “if only …. had been done”, I hope they will see the complexity of the situation that had evolved. A panoply of issues is laid bare. The project’s very poor start does not in itself mean it had to fail, but it would have required considerable general and project management expertise to have had a successful outcome.

Given the large number of parties with legitimate interest in the project and a constituency of opinionated onlookers, in my view, it was a poor decision to let the CEO of ABCUL and Cornerstone to be the same person. The interests of ABCUL and Cornerstone in the project were different; the joint-role appears to have blurred the focus required on the risks to the two entities of failure. This was particularly unhelpful in the context of the complex governance of the project highlighted in the report.

As a former Group Risk Director of financial institutions, I know it is easy with hindsight to point to risk management failure, but in this instance, it is unavoidable. Recent serious problems with system implementations at financial institutions have highlighted the effect on customers when things go wrong. There was a lack of risk analysis before key decisions were taken on this project and insufficient contingency arrangements if problems arose. In the final stages, there appears to have been so much pressure to go live that the launch was almost unstoppable. Those taking the decisions for the Voyager Alliance implementation were to some extent responsible, however, the build-up of momentum, combined with a poor understanding of the risks, made failure almost inevitable at that point.

In my view, some of the parties, external to the credit unions and ABCUL, that contributed to the failure of the project have been treated leniently in this report for various reasons. It was important to maintain focus on the ABCUL brief, but it is also important that readers realise it is not a balanced document; many additional learning points for key project participants are not researched.

The failure of the CUEP was unnecessary. The fact that there are so many lessons that could be learnt in this report speaks for itself about the inadequacies. In my opinion, the most important role that this report could perform is to enable the credit union sector to move on, put this unfortunate episode behind it and pursue new ways of achieving growth.

8. Contribution of independent review committee member – Gary Cuddy

Introduction

I joined the CUEP review committee in September 2018 as an independent consultant to provide external insights into the review of the Credit Union Expansion Project. I have over 25 years’ experience of delivering business change and systems implementation projects across several business sectors, including Finance and Retail.

Summary and conclusions

Firstly, I have found that the review process has been both extensive and open. The review committee have been extremely honest in the approach with a drive to clearly understand the failings of the project, to understand the causes and to identify remedies for the future. The review committee has been keen to listen to as much feedback as possible from all the key stakeholders of the project, especially from Credit Unions. The output of this review, in my opinion, is comprehensive and provides clarity of the issues experienced with the project and an understanding of how these issues could be avoided in the future.

From the inception of the Credit Union Expansion Project it was clear that the objective of the project was very ambitious both in terms of scope and timescale. The business objective of the project is not under question and it is still a valid requirement today, if not more so. However, there are some clear issues and failings regarding the delivery of the project which I will highlight in more detail below.

Before going into my summary of CUEP I think it is important to be cognisant of the fact that projects of this scale and complexity do have a high percentage level of not delivering the business objective as defined at the outset. This is not just public sector projects but across the private sector as well. This type of project requires significant business change and far too often projects do not pay enough attention to the impact that these changes will have on the operating model, business processes or impact to personnel. Many of these types of projects cite a lack of stakeholder management and insufficient risk management as 2 of the key issues contributing to a project not delivering against expectations. It should also be recognised that managing a multi-year project which has changing personnel on the project and business requirements which will naturally evolve is both complex and difficult to manage.

It is evident from the information gathered by the review committee that these issues were apparent in the CUEP. However, I also feel that these issues were exacerbated by the early decision to select a “solution” at the beginning of the project. There seemed to be a lack of a clearly defined or agreed “solution” for the project. This approach is not invalid and is an acceptable method of implementation where standardisation of operating process and data across an organisation is the key deliverable, but it needs to be clear and bought into by all parties. This lack of clarity from the outset created conflict for the project from the beginning. Stakeholder management was a key failing on CUEP. This was not solely communication between all parties, but there was a lack of engagement with credit unions to fully assess the impact that the project would have on their operating processes and to understand the benefits for the credit union.

The impact assessment of the change required by the Credit Unions was not fully understood throughout most of the project and therefore the risk for the project deliverable was not sufficiently managed. This coupled with the approach to deliver a total end to end solution meant that it was far too late in the project that these issues became evident and

even though the project team did recover some elements of this, as demonstrated by the ALD system working for Credit Unions, it was unable to fully reconcile the mismatch between functionality and differing operating processes.

Another significant failing of the project was the management of Risk and Governance. The scale and complexity of CUEP would have classed this as a high-risk project. However, the project seemed to accept more and more risk in the push to deliver a solution. For high-risk projects there is typically less tolerance to risk as the focus should be on reducing risk. I feel CUEP accepted too much risk particularly through the first phases of the project.

There seemed to a be a continual push to deliver the project despite the risk or mitigation. This became more evident at the point the project began to implement for the 1st credit union. The lack of understanding of the operating model and how the system would work created significant issues and led to a major rethink and restructure of the project in 2016. Today’s projects/programmes need to be nimble and it is a key learning that delivering project/programmes of this scale should be broken down into smaller deliverable projects to:

1. Reduce the risk of the overall programme 2. Involve the customer (Credit unions) in the early elements of the change 3. Learn and inform subsequent projects and evolve the detailed business requirements

However, it is still equally important that the vision for the programme is clear and agreed at the programme level. The shorter, sharper delivery projects are just stepping stones to the overall programme deliverable/vision.

I concur with the lessons learned that the review committee have defined and would, in addition to the points made above, draw attention to the following lessons:

 Achieve the right balance of staff skills, experience and commitment. Programmes of the scale of CUEP will need to introduce external resources to supplement internal resources and to bring in additional skills and expertise. It is important that internal senior management is assigned to the programme, preferably, leading the programme and having 3rd party management skills and experience.  Ensure clarity in governance, leadership and decision-making. All programmes of significant scale need to have in place a clear Governance structure and this clarity should provide a view of decisions which a project board should be able to challenge and accept or reject. Whilst there is likely to be change in personnel the governance structure should be able to accommodate this. CUEP did have in place a governance structure, however, the complexity of this seemed to reduce its overall effectiveness.

In conclusion, I think the review committee have taken on board the feedback received from all parties and went through an open and detailed analysis of these findings as well as the key milestones/decisions for the project. The report accepts the failings of the project and has identified some clear lessons that have been learnt which will improve project delivery moving forward.

9. Conclusion and Lessons Learned

We hope that the reader will appreciate the efforts that this review has taken to be as thorough and detailed as possible in exploring the factors that led to the disappointing outcome of the Credit Union Expansion Project. The ABCUL members’ motion passed at AGM 2018 which led to the review required the ABCUL board to investigate two broad issues:

Governance and the role of the ABCUL board

The question of the governance of the Project and the role of the ABCUL board was dealt with in detail in the introductory section of the report. The review committee’s broad conclusion within that is that the separation of ABCUL and Cornerstone Mutual Services through the subsidiary model served its primary purpose well which was to insulate ABCUL from the liabilities and risks that the Project and other commercial services necessitated relative to the comparatively low-risk activities of the ABCUL trade body parent.

This insulation and protection of ABCUL is most clearly demonstrated by the fact that Cornerstone, in its latest annual accounts for the year ending 30 September 2018, shows a balance sheet deficit of £101,000. It also carries significant potential liabilities in relation to the ongoing services it offers and the Project wind-down process. For these reasons a decision has been taken to wind Cornerstone up as a company.

The Cornerstone deficit is currently funded by a £300,000 subordinated loan from ABCUL to Cornerstone which was issued at the point that Cornerstone was incorporated in 2012. Therefore ABCUL does stand to lose a significant sum as a result of the Project’s failure as well as the wider commercial activities of Cornerstone but had this separation not been in place, the potential losses for ABCUL may well have been significant enough to put the Association’s continued solvency into question as well as Cornerstone’s.

In order to preserve this insulation of ABCUL, it has been imperative throughout Cornerstone’s life that ABCUL not take direct controlling decisions over Cornerstone’s activities. Therefore, the separate governance and board of Cornerstone has been critical to this fundamental function of Cornerstone within the group structure.

However, the review also concludes that ABCUL took a more remote stance from Cornerstone and its strategy than it strictly needed to. While ABCUL, as the sole A member of Cornerstone, had powers to select the whole board, choose Cornerstone’s Executive Directors and vote to impose restrictions and constraints on Cornerstone’s activity through its constitution it did not exercise the full range of these powers. Instead it limited its role to the nomination of two directors from the ABCUL board to sit on the Cornerstone board.

The review concludes that the wide use of these powers is unlikely to have caused a more favourable outcome to the Project because many of its failings arose from the contract commitments entered into between ABCUL and DWP. But despite this overall conclusion, the review also maintains that the decision by ABCUL to maintain a joint Chief Executive – though taken for understandable reasons – contributed to ABCUL’s decision not to make

more use of its powers of control and be more active in holding Cornerstone directly to account.

In summary therefore, while there are certainly lessons to be learned in terms of improving governance both in relation to the complexity of structures and risk management discipline (as outlined below), the review also concludes that the delegation of governance responsibility to a board that met more frequently, had an executive and non-executive mix and included skilled NEDs from the wider banking and financial services industry as a broad position was the right one in relation to managing a commercial venture of the nature of Cornerstone. The key exception to this is that the decision to maintain a joint Chief Executive for ABCUL and Cornerstone was the wrong one.

Given the nature of the Project contract, a more direct governance role for the ABCUL board is unlikely to have meant, in itself, a better outcome for the Project but in a different context, a more vocal parent is likely to be beneficial. Most importantly of all, the financial role of Cornerstone in insulating ABCUL from risk performed well.

Lessons learned

In the course of the review and in order to arrive at clear lessons learned, the committee has considered survey feedback from member and Project participant credit unions and sought to respond to that feedback; interviewed key figures within the Project’s leadership and governance as well as participant credit unions; and consulted the expertise of independent committee members. We have also sought to be transparent and to disclose as much relevant data and background information as possible.

The key purpose of the process has been to establish clear lessons learned to assist future similar collaborative projects. As we have proceeded through the sections set out above, we have taken note of lessons at relevant stages. Below, we seek to distil these into 11 key lessons.

3. Adopt a more gradual approach to developing collaborative business models – CUEP sought to transform the complete end to end credit union business model 80

times in one “big bang” and the challenge of landing such a fundamental overhaul of business models, processes and cultures ultimately proved too difficult. A more gradual approach that builds confidence and creates an effective implementation protocol is likely to be more successful in future.

Concluding thoughts

Having undergone this review process, we hope that the ABCUL membership will agree that we are keen to be held accountable for our role in this failure and that with new leadership we hope to learn the lessons of the Project and move on together. To that end, Cornerstone is in the process of being wound-up and the team will be launching a comprehensive Town Hall consultation at the Annual Conference 2019 on the 2025 vision for credit unions and ABCUL’s role within that and we hope that this will mark the beginning of a bright new chapter of our shared history.

Appendices

Appendix i. Financial disclosures – total spending under the Credit Union Expansion Project

A key demand from respondents to the CUEP review survey was for comprehensive financial disclosure information on the total spend under the Project. The following information provides a comprehensive overview of the key spend items.

Summary of total amounts spent by Project funded by DWP

The following table summarises the total amounts spent by the Project and funded by the Department for Work & Pensions in its 5 year life. The list below specifies what each line item refers to.

2013 2014 2015 2016 2017 2018 Total %age Payment by Results £276,459.00 £1,099,977.00 £1,144,459.29 £658,656.38 £3,179,551.67 10.87% Resource Costs £459,365.64 £2,762,858.13 £5,614,247.55 £5,401,856.00 £1,983,711.31 £98,500.00 £16,320,538.63 55.79% Central Services £242,354.28 £1,259,832.33 £144,525.96 £254,829.70 £1,980.25 £1,903,522.52 6.51% Marketing £80,764.31 £292,723.57 £236,084.65 £122,143.50 £42,915.03 £774,631.06 2.65% IT £109,629.82 £461,547.46 £1,775,000.00 £2,025,000.00 £4,371,177.28 14.94% Expansion Fund £126,164.70 £1,769,701.90 £62,749.91 £1,958,616.51 6.70% Transformational Incentives £240,000.00 £385,000.00 £45,000.00 £75,000.00 £745,000.00 2.55%

£1,168,573.05 £5,876,938.49 £9,280,482.15 £10,617,187.48 £2,136,356.50 £173,500.00 £29,253,037.67

Payments by Results (PBR) – denotes amounts received by credit unions in exchange for growth achieved by participating credit unions in terms of membership, lending and deposits

Resource costs – this covers staffing costs and contractor and consultancy support for the core resource requirements of Project delivery is also covers overheads and other non-person costs

Central services – this covers HR Services, Credit Control Services, Business Readiness (Prospect), Innovation Fund, Procurement Hub, Budget Account

Marketing – this covers marketing activity such as the re-development of Find Your Credit Union (FYCU), the development of the Common Sense With Money Business-to-Business toolkit for marketing credit union services to employers, and the Web Front End facility provided to 13 credit unions

IT – this covers development costs for ALD (broadly years 2013 & 2014) and Model Credit Union (broadly years 2015 & 2016)

Expansion Fund – this covers development costs incurred by Cornerstone and specific credit union initiatives such as funded local marketing campaigns, certain specific support like HR (REVIEW)

Transformational incentives – this covers incentive payments received by credit unions committed to adopting Model Credit Union upon reaching certain milestones

Split of funding received between Cornerstone Mutual Services (CMS) and credit unions (CU)

Funding received from DWP under the Project was split between Cornerstone Mutual Services and credit unions. The table below provides the split between the two. Under Payments by Results, the original CUEP contract between Cornerstone and each credit union established a 25% contribution of PBR payments from the credit union to Cornerstone to banking and marketing development.

CMS CU Payment by Results £794,887.92 £2,384,663.75 Resource Costs £16,320,538.63 Central Services £1,903,522.52 Marketing £774,631.06 IT £4,371,177.28 Expansion Fund £1,500,000.00 £458,616.51 Transformational Incentives £745,000.00

£25,664,757.41 £3,588,280.26

Credit unions also received a total of £143,501 from Fiserv in relation to costs incurred by “transforming” credit unions – i.e. those committed to adopting the Model Credit Union – as a result of delays in delivery of the platform.

Contractor costs

The following breaks down contractor costs by year and in total across the Project’s life. These are included under resource costs in the summary above.

2013 2014 2015 2016 2017 2018 Total Contractor spend £230,707.60 £2,111,263.33 £4,932,533.22 £4,807,954.35 £1,581,694.80 £18,735.00 £13,682,888.30

Staffing numbers for ABCUL Group

The following provides details of core staffing numbers for ABCUL group across Cornerstone Mutual Services and ABCUL throughout the life of the Project. This does not include contractor workers.

The trends reflect an increase in central services resource within ABCUL and commensurate reduction as the Project wound down. Likewise, within CMS, there is an increase in 2017 as contractor staff were replaced with permanent, directly-employed staff and then a sharp reduction in 2018 as the Project concluded.

BF 2013 2014 2015 2016 2017 2018 ABCUL 20 20 20 25 23 23 17 CMS 0 6 10 10 11 23 1 TOTAL 20 26 30 35 34 46 18

Appendix ii. Project timeline

March 2011 DWP announces £73 million fund to expand credit unions

June 2011 Feasibility study steering committee established to investigate funding expansion of credit unions

November 2011 Santander Foundation announces £250,000 donation to ABCUL’s back office project and the development of an Automated Loan Decision (ALD) tool with Experian

February 2012 ABCUL establishes Cornerstone Mutual Services as a commercial subsidiary to deliver business services to credit unions; ABCUL provides a £300,000 subordinated loan to Cornerstone

May 2012 Feasibility study published concluding that Credit Union Expansion Project is feasible and should be backed by a fund of £51 million;

September 2012 Tender process is launched to identify a delivery consortium

October 2012 Tender process closes; ABCUL bids leading a consortium of 82 credit unions; Cornerstone Mutual Services to be the delivery

April 2013 DWP announces the award of a £38 million contract to ABCUL to deliver the Credit Union Expansion Project over 2 years to April 2015; contract commits to adding 800,000 new members and saving consumers £1bn in interest payments on loans.

April & May 2013 77 credit unions sign contracts underpinning participation in Credit Union Expansion Project, entitling them to Payments By Results incentives for growth in members, savings and loans. Credit unions agreed to ABCUL / Cornerstone retaining 25% of growth payments to fund the Expansion Project programme costs. The contract committed credit unions to adopting and using ALD.

August 2013 Simon Blissett appointed Project Director; early Project delivery commences with core team recruitment completed including a number of credit union secondments; contract renegotiation shortly commences due to flaws in original funding design.

September 2013 Roll out of ALD service commences with phase one roll out to initial ALD subscribers completed by November. The roll out of ALD continued throughout the first half of 2014.

December 2013 Simon Blissett resigns as Project Director. This is a major blow for the Project and given the pressure to deliver, Grant Thornton is appointed to lead the Project under Ges Richmond. Grant Thornton had been involved in the Project on an advisory basis.

January & Consultancy AT Kearney is enlisted to support a competitive tender process for February 2014 suppliers of banking platform technology to support the Model Credit Union. HP, Kesho, Progress, Wellington, TCS, Mambu, FIS, MVT and Fiserv all bid.

July 2014 Fiserv selected as preferred supplier and initial Statement of Works signed to scope and design the Fiserv Agiliti platform for CUEP. Design and scoping work continues on this basis throughout remainder of 2014 and 2015.

August 2014 Louise Galbraith joins Cornerstone Mutual Services as Managing Director

September 2014 Lord Hunt of Wirral joins the Cornerstone board as Chair.

October 2014 First major contract variation following long-running negotiations lasting over a year. The contract varied the structure of the investment to break the link between investment and pre-achieved growth. It also extended the contract by a year to 30 April 2016.

January – March 32 credit unions sign up to the Framework Agreement with Cornerstone Mutual 2015 Services creating the “transformation” cohort. These are credit unions that commit to adopting the Model Credit Union (core banking service) proposition.

October 2015 Common Sense with Money business-to-business marketing toolkit launched to support credit union marketing to business partners for payroll deduction services. Included animations with celebrity voiceovers, and adaptable poster and leaflet collateral. Funded local marketing campaigns for individual credit unions using these resources operated throughout 2016.

January 2016 Cornerstone signs Master Services Agreement with Fiserv UK for delivery of Agiilti Software as a Service platform under the Model Credit Union basis.

February 2016 retailCURe – a new start credit union for retail employees – becomes the first credit union to go live on the Model Credit Union platform. As a new start credit union, there are no migration challenges and the credit union heavily assists Cornerstone in working through ongoing build and design issues.

July 2016 Revamped Find Your Credit Union website launched. All credit unions benefit from an enhanced user experience and search functionality.

August 2016 Louise Galbraith resigns as Managing Director of Cornerstone Mutual Services. Chris Thompson appointed interim Chief Operating Officer to December 2016 while restructure of Project resource takes place.

September 2016 East London Credit Union becomes the first credit union to migrate to the Model Credit Union platform. The migration suffers significant challenges and requires significant additional resource to stabilise the credit union. This causes a major rethink of migration planning and assumptions.

December 2016 Credit Union Expansion Project engagement event is held with credit unions signed up to the Transformation cohort. This is with a view to resetting plans in light of the East London Credit Union migration experience and its setbacks. Ministerial sponsor, Lord Freud, retires from Government.

Major contract renegotiation completed with Fiserv following significant delays in platform delivery contrary to original MSA timelines.

January 2017 Major restructuring of Project resourcing completed. Grant Thornton resourcing of project management ends and bulk of contractor staffing terminated. Permanent staff team recruited including Sally O’Hara as Head of Delivery who leads Voyager Alliance migration process.

March 2017 Voyager Alliance Credit Union migrates to the Model Credit Union platform. Significant challenges faced upon migration in terms of functional gaps and the readiness of the credit union’s staff team. This initiated a halt to further migrations while a major review took place.

June 2017 Final major contract renegotiation following 7 month DWP project review covered by piecemeal contract extensions – a number of key Project milestones

on migration had been missed at this stage. Revised contract extended to 30 November 2018 and predicated any further payments in relation to migration of credit unions upon the successful migration of credit unions on to the platform – i.e. making payment contingent on success. Also required 6 credit unions to be live by 30 December 2017.

February 2018 Department for Work & Pensions terminates Credit Union Expansion Project contract for failure to meet migration targets.by the end of 2017. Cornerstone Mutual Services in turn terminates contracts Framework Agreements with transformational credit unions.

March 2018 Motion passed by ABCUL Annual General Meeting requiring the ABCUL board to conduct a lessons learned review into the Project outcome.

Appendix iii. Summary of Interviews for CUEP Review

Introduction

Interviews were held with fourteen people from who were involved with the Credit Union Expansion Project in one or more ways; through paid or governance involvement in ABCUL or Cornerstone and/ or through employee or governance involvement in a credit union that was part of the Project. Written comments were also received from Lord David Hunt of Wirral and a workshop session was held with the current Cornerstone board held for the purpose of informing the review. The interviews took place between November 2018 and January 2019 and were carried out by ABCUL Associate Abbie Shelton as a standalone piece of work. The committee selected the interviewees to enable people with a wide range of perspectives to contribute to the process. They aimed to discover how different aspects of the project were perceived from those who saw it from different viewpoints. Nevertheless, this summary only represents the independent views of the interviewees themselves and those views are not representative of either the ABCUL or Cornerstone Boards, or other people with a similar perspective on the project.

Interview summaries were approved by each individual ahead of inclusion in the summary that follows. All those who took part were also given the opportunity to ask for certain comments to remain anonymous, to ensure that all views could be freely given. Efforts have been made to include as many points from each interviewee as possible, although, as the combined interview summaries ran to over 30,000 words, space constraints have limited the comments from each individual interview that could be published. They have all, nevertheless, been taken account in the production of this review.

One interviewee expressed concern that an ex-employee of ABCUL had been employed to carry out the interviews and an interviewee voiced a concern that their views may not have been taken on board and that the results of the review had already been decided. The committee would like to reassure all interviewees that their views have been recorded objectively, fed back to the committee and taken into full account in the production of the report. Once again, all interview summaries were approved by individual interviewees.

The Committee would like to thank the following people who gave up their time to provide their views as part of this valuable exercise.

Mark Lyonette was invited to take part in the interview process but instead chose to direct the committee towards the information he provided for the plenary session at the ABCUL AGM.

David Batten – Chief Executive of Hoot Credit Union

David Dickman – Chair of Cornerstone 2012-2014

Barry Duggan – Chief Operating Officer of Voyager Alliance Credit Union and Maria Hughes, Operations Manager, Voyager Alliance Credit Union

Louise Galbraith – Managing Director of Cornerstone 2016 – 2017

Jonathan Glennon – Head of Delivery for retailCUre Credit Union (now working within Voyager Alliance Credit Union following merger)

Joe Hegarty – Chief Executive of Voyager Alliance Credit Union, CU Representative on the CUEP Project Board

Don Kehoe – ABCUL Director and Director of CUEP (but non-transforming) credit union (London Capital Credit Union).

Matthew Redgrave – Chair of East London Credit Union.

Clive Rix – ABCUL Director until 2018 and Cornerstone Non-Executive Director until 2018, Director of ABCUL member and CUEP participant (but non-transforming) credit union (Nottingham Credit Union)

Stephen Walsh – Chief Executive of Pioneer Mutual Credit Union and Beth Welsh, Business Development Manager, Pioneer Mutual Credit Union, CU Representative on the CUEP Project Board

Each interviewee was asked the same set of open questions. Prompts were included to ensure each interviewee had an opportunity to comment on all aspects of the project:

1) What do you think were the key successes of the project?

2) What do you think were the key failings of the project?

Interviewees were asked if they had anything to add regarding the following aspects:

 Vision and ambition  Design  Communications  Delivery  Governance  Training and readiness  Staffing and leadership 3) In your opinion what are the key things that you would change about how the Project was envisaged and executed to achieve a more favourable outcome?

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4) In your opinion what were the key things that you would do the same about how the Project was envisaged and executed?

5) (For Live Credit Unions Only) Is there anything that you believe you as a credit union could have done differently to secure a more favourable outcome from the Project?

6) If you were forced to choose one factor that you believe was most responsible for the disappointing outcome of the Project, what would it be?

The summary that follows takes its starting points as the questions asked and the aspects interviewees were asked to consider.

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What do you think were the key successes of the project?

Key successes of the project identified by interviewees fell broadly into three categories. People cited changing credit unions’ attitudes and behaviour as well suppliers innovating and offering new products to the sector. Some products that came out of the Project were also provided as examples of successes.

Credit Union Attitudes

For Clive Rix, the Project helped persuade credit unions to look more seriously at the scope and security of their systems and consider what they wanted their IT to look like. For Don, the Project meant that credit unions now better understand topics such as straight-through- processing and general automation. Robert Kelly said that the Project, “brought forward the need for transformational change and mindset, a change in culture and a change in how we service our members.” In Vincent Thomas’s view, the Project, “led credit unions to have the right kinds of conversations and be looking at modernising and trying to do that as a collective rather than as individuals.” Lord Hunt said that credit unions, “also began a much- needed and belated process of modernisation”.

David Batten said that the project made credit unions work together, “in a way that I don’t think we had necessarily before; the collaboration between credit unions and a common cause that came out of that.” He also said that is broadened credit unions’ horizons. “It made credit unions realise that there’s more to do than what we’ve got.”

Suppliers’ Innovation

Vincent said the project, “raised the bar in the sector, whereas there was nothing available and very little development going among suppliers to the sector I think the pressure from the CUEP programme led to other people responding.” This, for Vincent has included established software suppliers to the sector which have started offering online services along with new entrants such as Incuto which, he said, is, “offering pretty similar things to the CUEP programme but in a different, more modular, lower cost way.” Clive pointed out that a number of credit unions are now either developing their own apps or working with other, newer suppliers to develop them. In addition, he said, more established credit union software firms, “are pulling their fingers out and trying to do things a bit better”. David Batten made a similar point, “It kind of kick started a whole load of other work which other providers have been doing. They had probably ignored credit unions before but when they saw that there was an appetite for growth and change, they kicked off from that.”

Project Products

Robert said that he thought that ALD as a toolkit in the early days was a huge success, “in terms of promoting responsible lending and giving credit unions a toolkit for understanding risk about loan applications.” Don thought that ALD could have been a much bigger product; he identified it as a product which inspired people to look at credit scoring and automation and pointed them in that direction. Clive said his credit union was initially very enthusiastic about ALD, “but over time, not really very much happened to it and it was very expensive ...We’re still using automatic loan decisioning, we’re just not using the one that

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was developed by Cornerstone.” Vincent identified ALD, and also the Employers Engagement toolkit as successes.

David Batten also said that ALD made a big difference to his credit union. “ALD was, in the beginning at least, a really positive aspect.” He added, “the marketing and social media support and training, and the CUEP Leadership Programme that was provided at the beginning of the project, were very useful – directly to Hoot, and indirectly from the personal development opportunities they created for our senior managers.”

Louise Galbraith said she thought the ALD product was an early success but it did not get commercialised and rolled out as she had hoped would happen, although she said the need to focus on the main delivery was understandable. “There was a point at which we said we could commercialise and make more use out of the ALD Experian set up and we did go down that route and I was hoping that would work out because that was moving ahead when I left.” Louise also identified the work that was done on standard wireframes for websites for credit unions as something that could have been a success had it been rolled out further. It was, she said, “really well designed, really well thought about… but to the best of my knowledge it never got translated into a relevant product for the credit unions.” She said the product was technically good, a nice user experience, with good concept and good delivery and she thought that it could have been a really good deal for members.

Jonathan Glennon said that the key success of the project was the platform that was picked. “I think Fiserv were the only real viable option. They’d given a proper banking app that could do faster payments, I think you can’t say you’ve got a banking app unless you’ve got that. The general platform, the customer journey and the customer focus are just brilliant really.” Joe Hegarty said that the key success of the project was the delivery of online banking. “We’ve got over 3,000 members using and they absolutely love it.” Barry Duggan and Maria Hughes identified the main success as the faster payments. Maria said, “the digital element of it is absolutely fantastic for the members. That was the whole reason why we went on the platform.” On the Agiliti system, Clive said, “the external member facing bits worked really well, [Voyager Alliance Credit Union] had their record lending month as the app worked so well; members could log on, take out loans, nobody in Voyager saw it, it all went through automatically, I mean that was great.”

Don highlighted that his credit union grew quite strongly during the project and so benefitted greatly from the incentive growth Payments by Results (PBR) element of the Project: “It got us through to a sustainable position so that our income covers our expenses and eased that transition.” Don also said that his credit union benefitted from working with Paul Jones about governance issues as part of the CUEP and that making people think more internally, and about the future, were beneficial.

Lord Hunt pointed out that, “credit unions came to enjoy a much higher profile and uptake levels, as a direct consequence.”

A number of interviewees struggled to name any successes that had arisen from the Project in response to this question, or highlighted the overall negative outcome. Matthew Redgrave said: “I don’t think anyone could identify a success, this project was supposed to be rolling out to dozens of credit unions within a year, we never signed off warranty because it never

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worked properly. And now the project has been canned and pulled so there are no successes.” Stephen Walsh said that he thought that the key success of the project was, “probably to show that ABCUL could not be trusted and had no ability to handle a project of this scale.” Stephen said that ABCUL should probably have passed the project on to another organisation, “not just masking themselves under Cornerstone”. He said: “The skill set just wasn’t there, in either the senior staff or the board of directors to run such a project.” It was, said Jonathan, in the implementation of the platform and the delays behind it that things started to go wrong. Louise said that any successes from the project were very limited: “I think the project was on the brink of things that could have been huge successes and we kind of snatched defeat from the jaws of success.”

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What do you think were the key failings of the project?

General points made about failings of the project are set out below. Specific views relating to different aspects of the Project, including thoughts on both successes and failures, are set out in the theme sections that follow.

Don Kehoe said that not getting all those credit unions who wanted to be on the Model CU platform on there, and the exit from the project were key failures, along with the “length of time it took to where it didn’t get to” and the way that it ended. He said that this led to a lot of bitterness from the credit unions that went through the implementation with Fiserv and those that were in queue to get there.

Louise Galbraith said that the failure of the project was “particularly heart rending” because it was “nearly, nearly there, almost, almost right and just fell short.” That, she said it was also partly why it was so hard to call: “When do you pull the plug when you’ve still got a heartbeat? So that situation persisted for such a long time.”

Lord Hunt said that it was for reasons beyond its control that Cornerstone, “was unable to meet its obligations under the terms of the CUEP Project contract with the DWP.

Stephen Walsh said that a key failing was “Leading us up a hill.”

Matthew Redgrave, speaking about East London Credit Union said: “The CUEP project has almost completely destroyed the credit union, we are being forced to either close or merge with another credit union and I would say that about 80% of the reason for that is this.” Matthew went on to say that the system still does not work and that the credit union had had to close twice in the previous week because of problems with the system. “At one point last year, we had a woman banging on the door saying she didn’t have the money to buy her children’s nappies because we’d closed because of Fiserv and CUEP and all the rest of it. So that is the level of damage it’s done.” Matthew said: “The effects are not just technical, the effects are that when an organisation is being prevented from running properly, you end up spending all your time firefighting.”

Referring to the end of the Project, Joe said that the DWP lost confidence, and that it was not the money that was an issue when the project ended as this was a small amount to them: “Even £38 million is a speck of dust to them, they spend £120-150 million every day, but the money wasn’t the issue, they’d just lost confidence.”

Beth Welsh said, “When everything went wrong in East London, that is when there should have been a pause and a step back. I think if what had happened in Voyager had happened in East London we would all be live now and the project wouldn’t have failed. I think the East London thing was swept under the carpet under mismanagement and staffing when I actually think it was the fault of the system.”

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Different Aspects of the Project

After expressing their initial views on successes and failings of the CUEP Project, interviewees were asked for their thoughts on this regarding a range of aspects. These are set out below.

Vision and Ambition

Many interviewees agreed with the vision that the Project set out, but a number expressed a view that it was too ambitious.

The vision of the Project was seen by many as a good thing. Vincent Thomas said: “The vision was a bold vision and very well worth supporting… I think the vision was good and bold and we should have modern ways of working, we should have digital services, straight through processing etc and it ideally should be done within the co-operative movement as a collective endeavour.”

Robert Kelly said he still believed strongly in the vision of the project: “The vision, the objective of a shared services organisation that was tasked with promoting collaboration and transformation in the sector was absolutely the right vision and objective.”

Jonathan Glennon said that the vision for the project was, “absolutely spot on”. “It did exactly what it said, and it was perfect for the credit union movement.”

Matthew Galbraith said: “The vision as written down on a piece of paper and put on endless PowerPoints was great, but it was never delivered. It was ambitious, well we’ve seen it was too ambitious, I suppose since it didn’t work I suppose we had to say that it was too ambitious, or maybe it wasn’t the ambition that was wrong, it was the execution.”

Others also thought that the project may have been overambitious. Robert, for instance said he saw the level of ambition as too high: “I think minimum volumes has almost strangled the sector in the last number of years and I think those just weren’t realistic. So the vision was spot on in terms of what we need for the sector, the ambition was too high.”

David Batten said that the idea behind the project was really, really good. But, he said, “I think that looking back you question ABCUL’s ability to deliver that as a product.” He said that he felt that the amount of work that needed to go into it was completely underestimated and the that the scope of the project was probably where it fell down. He said that he thought that this started a step before the project when the DWP identified the types of members that credit unions needed to attract. That, he said “is a business model for credit unions, but it’s not the only business model for credit unions”

Clive Rix said: “I think we’d have to go back and ask whether the whole project was misconceived from the start.” He said it seemed to him in hindsight that neither ABCUL nor Fiserv had had any real understanding of the resources and expertise the credit unions had. “And,” he said, “I think what they designed was very much too ambitious for most credit unions.” “I think we were just being too ambitious in the first place in trying to decide something all singing, all dancing, that the movement wasn’t really ready for.” Joe said that he thought that the project was overambitious from day one. “It resulted in a frustration with

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the DWP because the project wasn’t achieving its objective, so straight away, right at the top of the project, things are wrong. They overpromised and that was clearly frustrating the minister and the senior department team.” He added that there had been a need for a large number of contract variations.

Design

When asked about design, a variety of different issues were raised, about the structure of the whole CUEP project and the contract which governed it, about the concept of a Model Credit Union, and about the design of the Agiliti platform and its supplier. These will be considered separately.

Design of Project and Contract

The contract which ABCUL signed with the Department for Work and Pensions (DWP) was seen as an issue for a number of interviewees. Project requirements coming down from the DWP, Vincent Thomas said, “made the project top heavy and increased the complexity. They also gave very prescriptive requirements about what had to be delivered at what cost, so there was no flexibility, we just had to buy into what was on offer.” For Robert Kelly, the DWP contract was, “was almost the noose round the project’s neck because the very fact that some of the targets were so out there in terms of plausibility meant that we were always running against the tide in terms of contract variations and the need to try and restate it. I think we signed up something that was almost doomed to failure right from the start.” Another interviewee said they thought that everything that went wrong could be traced back to the difficulties managing the relationship with the DWP and fulfilling the obligations that came with their money. The complexity built in to the project because of the need to deliver internal government procurement contracting rules made the project so top heavy that it almost guaranteed failure, they said: “I think if it had succeeded, it would have been quite miraculous, given the constraints that being dealt with right throughout the project.”

Lord Hunt said that the DWP, “set an unreasonably high level of expectation”. He said that he thought that this, “was perhaps understandable, but still regrettable.”

An interviewee said that they thought that the exit agreement that was made with the DWP was poor and suggested that there was money left which would probably be enough to allow credit unions to be moved onto another system, or upgraded, rather than be, “left floundering.”

Vincent said he would not be against saying no to a similar funder in the future. “I would have said [yes] to DWP if they’re willing to work like Lloyds bank and give money to enable credit unions to do what they already want to do.” But he said he thought he would walk away from a scheme which would mean the outsider coming in and designing a whole new service in a prescriptive funding bids process.

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Overall Project Design

Robert said that the design of the Project meant that there was too much to do in too little time. “There were almost too many component parts trying to achieve what we actually set out to achieve, which was to give credit unions a platform to transform their business models and their cultures.” He said that he thought the design of building confidence through deliverables such as central services was the right objective. “But we failed to deliver quick wins which eroded confidence, and that filtered through the rest of the structure and the project overall.” Clive Rix also pointed out that a number of the central services it was thought would work soon fell by the wayside.

Other, earlier elements of the Project were raised by interviewees. Joe Hegarty said he believed that far too much money was spent on the marketing elements, “which frankly went nowhere.” Joe said, “there were three or four heads of the process, they paid really expensive people.” Jonathan Glennon was also critical of the amount spent on marketing. “Some of the things that I went to, when really you were trying to deliver a banking platform that wasn’t running particularly well and a lot of the budget had probably gone on silly marketing meetings telling people how to design a poster, which is stuff that ABCUL does anyway.” Robert said that he thought that the marketing brief, produced in the early days of the Project was, “very useful in crystallising the problem that we had, and we continue to have, in the sector but it didn’t necessarily help deliver anything significant within the project other than the collaterals that continue to be used to promote savings and loans.”

Robert added, “we failed to deliver on a number of central services as we described them…we failed to deliver on things like treasury management, credit control. The procurement hub wasn’t taken up as well as it could have been. So that almost typifies the diversity in our sector in terms of one size doesn’t even come close in terms of trying to service our members and the range of members.”

David Dickman said, “I still think that the debt recovery was fragmented whereas perhaps a regional approach would have brought economies of scale to 50 or 60 credit unions working together. You know there’s nothing wrong with the ideas, it’s what was prioritised and what was left to whither on the vine.”

Matthew Redgrave was critical of financial inducements offered to credit unions to transform and said that was strategic mistake. “I think there should be a general presumption that you don’t do that.”

Money given to credit unions at different stages, and for mergers led, Joe said, to the project, “haemorrhaging money that was just crazy, it was giving money away and if this had been thought out clearly, credit unions that are smaller than us could not cope with the complexities of this platform.”

Another interviewee stated that some credit unions took the opportunity, to ‘milk’ the project, whereas others viewed it as a transformation journey.

Don Kehoe said that from the setup of the Credit Union Expansion Project, he was concerned that there was not enough intellectual property within Cornerstone. He suggested Cornerstone, “should have been owning some of the things it was doing, rather

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than being a conduit for it. Because at the end of the day I think Cornerstone could have been a really valuable company that could have been rescued but because it owns nothing, it has very little attraction to somebody who would want to fund it and save it as it were.”

Model Credit Union

The idea of the Model Credit Union was raised by a number of interviewees. Jonathan said that too many very small credit unions with very specific needs which were being co-opted into the project were told that their specific requirements could be accommodated, and they could do things their own way. They should have been told, he said, that “‘this is the way to revolutionise your business model and your business model must change to fit into this amazing thing’”.

Stephen Walsh added that he thought a fundamental issue was that the Model Credit Union concept had been forgotten by the time the project was running into crisis mode. He said that he thought that credit unions were being allowed to say, “ ‘we do this’ ‘we do that’ and the whole thing became delayed because Fiserv were running around trying to design things for individual credit unions rather than being ‘here you are, here’s a Model Credit Union, here’s what you get, here’s what you can do, this is aligning your products, aligning everything that you offer with this Model Credit Union and you go forward with this technology to help you grow.” Stephen also said that he thought that this had been completely forgotten including by some of the key members of the ABCUL Board whose credit unions were on this journey as well. “They were the ones that were shouting the loudest as far as I was concerned, in terms of diluting this Model Credit Union which ran the whole thing into the ground.”

Joe described how over 300 letters had been designed by a group of credit unions which were involved in work to help with design of the platform. Most of these, he said, were irrelevant to the credit union. “Because this group is made up of community credit unions, they put together all these hundreds of letters. To be fair to the project, we spent about a week going through them all and getting rid of them.”

Robert said, “I think the model CU journey started well, in that we needed to understand that individual businesses need to give away some territory and make some concessions around what a model CU look like does”. But, he said, that the longer the project went on and failed to complete some key deliverables, this began to change. He identified one point in the Project when a number of credit unions met in Stockport to discuss what became Model CU and there was over 90% buy in for a more collective vision and a consensus position was agreed. “And you almost wanted to bottle that moment in terms of the credit unions…as time went on that diminished and I think we tried to placate credit unions because of the delays which eroded the drive for a standardised approach.”

Platform Design

The key element of the Project, the Agiliti platform, attracted a number of both general and technical comments.

Louise Galbraith said that the actual design of the software was ‘okay’ and that a poor product design would have raised a different set of alarms much sooner. She said that she

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thought that the problem was related not to the product but was due to the fact that this was Fiserv’s first attempt at Software as a Service and they underestimated the technical challenges they would face. She thought that it was correct to focus on digital access and that, although the product was a little basic, “it wouldn’t have needed a huge change of strategy to deploy other products like credit cards, like contactless, like mortgages, like secured loans.”

Beth Welsh said that she thought that there were a lot of positive things about the platform and said that having now looked at all the other things on the market, the credit union was finding it very hard to look at another system, ‘because even with the major issues with Fiserv and the platform, it is the best on the market, and gave us everything we needed.”

After the work at Voyager, she said she thought the platform was now fit for purpose apart from issues regarding regulatory reporting, “which is obviously an important thing, but I think with a bit more investment that could have been sorted and I think there was only a small way to go.

Beth said that she thought that the plug was pulled far too soon. “I think it’s disappointing that with a little bit more work, all the credit unions could have gone live.”

The early project team, said David Batten, was people from the credit union movement who understood how credit unions worked and were able to support that process. But as the project moved on, he said, there was a disconnect between the pathfinders and the developers. “It felt like there was a misunderstanding between what the pathfinders, who were working every day and knew what a loan application looked like and what it needed to look like, and three or four lines of ‘there needs to be a loan application process’” This, he said, then turned into a “hideous process that the developers developed.” He said he didn’t think that the project, “checked back with the pathfinders often enough to check that the developers were doing the right thing.” As the process went on, David Batten said, the more credit unions were told that there was only one way of doing things, ‘you have to send these letters, you have to send these texts there are no other ways of doing it’. He said, “the platform turned into such a juggernaut that it wasn’t about training to run the platform it was about changing everything that you do.” With a lack of credit union people involved in the design, he said, “it was almost as though this truck had been set on its course and there was nothing anybody could do to change direction of it, least of all the people was supposed to be designed for.”

Lord Hunt said the Agiliti platform certainly had its virtues, but said that he thought that Fiserv were, “unduly optimistic about their ability to overcome its teething problems”. He also said that there was a, “significant gap between the demands of the DWP and the ability of Fiserv to deliver”.

On the suppliers of the platform, Clive said that, although he wasn’t terribly involved early on that it did seem that Fiserv completely changed their approach from providing a product to providing software as a service. He said that he was surprised given their level of experience about how long it took them to get things off the ground. “Maybe,” he said, “they weren’t the right people in the end, I know the credit unions chose them but I think they were designing something as they went and it didn’t really work very well.” This, he suggested,

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pushed ABCUL and Fiserv into doing things the wrong way around, prioritising the wrong things and not fully testing everything. He added, “If we’d known at the start that it was going to take five years rather than two, I think the whole thing could have been designed better, could have been carried out better, and in a way that would have been easier to manage."

Vincent Thomas also said he saw the very expensive design as an issue for the platform. Designing the “absolute perfect banking system for credit unions” that “had to do absolutely everything” meant, he said, that it had to have a lot of things in it that credit unions didn’t currently do and all of those carried costs, including transactional costs that increased the expense. “In terms of design it’s this issue of starting simple and building complexity and in modern ways of working they talk about agile as a project methodology. Modern ways of doing things in an IT environment”, Vincent said, “would be to get something delivered and used as early as possible.” He said some of the software in the depths of the system seemed out of date and suggested that because the system was being built from scratch, constraints faced by established banks, which have to build on existing systems, did not exist and there was the opportunity to do something brand new, as challenger banks can. Other new suppliers, he said are willing to integrate into existing systems and, he says, the platform could have been designed with a, “much more light and flexible way of working, which would have worked much better for small to medium sized business compared to large scale banks.”

Maria Hughes said that overall a big failing was “the whole lack of understanding of what a credit union is, how it operates.” She said that after previous problems in the other credit unions, the platform should not have been rolled out to them. She added, “when we signed to say yes, we’d go live, the only thing we were told was missing was the credit referencing. That was the only bit we were told was going to be about a week, so we said okay we’ll run with it.”

With hindsight, Louise said, and if they had known about the length of time Model Credit Union would take to develop, they would also have cut down the project numbers, focussed on ALD 2, on getting the website deployed and on training programmes. “So that’s why I’m so angry with Fiserv because their dishonesty … they basically poisoned our decision- making process with disinformation. Don stressed that software projects often go over on cost and time, but that it is important that a project gets its own momentum up to prevent inertia. He also stressed that banks also face immense disruption when they change systems, only do it when they’re replacing systems with something many times better and have the manpower to cope with the change.

Don also referred to what he identified as common issues with buying software and working with consultants. “When you go to a software demo, it is always going to look fantastic, because if it doesn’t no-one will buy it and people will always promise you ‘we really understand your business and this is in our interests to get you in a great place’, it’s not, they’re interested to get you to sign up.” He stressed that he was not particularly attacking Grant Thornton as the main consultants on the project but did say: “They were just a bit gung ho, they were going to make money of the project whether it was a big success or not, so it was in their interest to really hype it up and get people enthused on it, which is not a

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bad thing but when you’re trying to keep the risks down it does blind you to some of the dangers and some of the considerations that would be more appropriate to consider.”

Clive said that he would have had concerns about the longevity of a platform: “I would have worried that it would turn out the same as the CUCA and ALD and ABCUL prepaid; we’d have the great idea, we’d put the developing equity into developing it, and show it would work, then other people would come in and do it better and cheaper. And I think in many ways that is probably happening, probably not in an ideal way, but I know of several organisations who are developing replacements for Curtains, for example, in a way that is progressive, that they can manage.”

A number of technical issues and specific issues with the implementation of the platform were identified by credit unions and are summarised below, in no particular order. These are subject to ongoing discussion with Cornerstone and Fiserv:

 Interface between some different parts of the platform was not configured correctly  Incorrect information supplied for members to sign on for digital services  Membership accounts flawed so savings can be withdrawn when they should not be  Revolving account credit did not work  Problems paying dividends and interest  Difficulties extracting MI  24 hour wait to check any changes made to system  Too much time taken to swap between different screens  Credit unions still in expensive contracts with no assistance given to get out of them  Issues with rejections of payments to certain bank accounts.  Problems with Direct Debits  Need to have every interaction with member recorded as telephone call  Need to go through multiple screens to complete simple task, such as accepting a share deposit Communication

Communication was an important issue for interviewees. Comments below have been divided into general communications and more individual communications with credit unions.

General Communications

Communications, for Don Kehoe, were the worst part of the whole project. He described them as ‘abysmal’. He stressed the importance in projects of keeping people appraised and advised so that they know what is happening and are aware of any bigger delays. “I always say that if you inform people of the difficulties, they understand you are doing your best and are on the journey with you. They get no last-minute shocks or delays.”

Vincent Thomas made a similar point, saying that efforts were made to improve the communication. He said he thinks it did improve: “But we still had times when ‘we don’t know what to say so we won’t say anything’, and that’s the time when you most need to say something.”

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Robert Kelly reflected this point from the other side, “We always felt that we were always on the back foot, we were always being responsive rather than proactive, we were always pushing an answer out on the basis that someone was asking a question rather than actually doing it and being on the front foot.”

Louise Galbraith stressed that efforts were made to be honest and ethical in communications as they could. The structure of the project, however, made this difficult, she said. “We all realised quite early that we were in a poisonous triangle where we were forced to get commitments and make commitments which were supposed to be back-to-back but we weren’t able to deliver the back-to-back part, so from day one, we had very few levers that we could pull once Fiserv started slipping because we were more pre-inclined to meet our obligations to our customers in terms of penalties and in terms of compensation and stuff like that, and that was all meant to be back-to-backed by Fiserv and of course they failed us. And then the pain that Fiserv inflicted on us, we inflicted on our customers which was awful.” The project was, Louise said, “being fed nonsense” but credit unions were not being intentionally misinformed.

David Batten that it had to get to the point where credit unions had to get together and start writing letters to the project board to get any form of response or any form of guarantees. He also said that he had had strong concerns about information given to credit unions at times. “There were I think, to be honest, there were lies told, and I use that word really openly, at the beginning of the process especially when it came to around costs.”

Don said that he appreciated that constraints imposed by contracting with Government bodies mean that it can be difficult to be totally open. He appreciated that having a Government department as a partner brought its own risks and sensitivities but thinks that ABCUL and Cornerstone probably weren’t fully prepared for those.

“I think communication’s a difficult one”, said Clive Rix, “Credit unions always wanted to know what was going on and maintaining the right level of information is quite difficult, I think.”

On communication, Joe Hegarty said, “I think it’s difficult because in a project like this you are trying to present the positives. So it’s really difficult to say we’re having all sorts of problems; I think there’s difficult factors in that. And I think Cornerstone tried… I don’t think there’s much more they could have done.”

Sometimes, he said, there seemed to be a bit of a “blame game” with communications, with credit unions being held to account for something they hadn’t done. “It was a bit odd and a bit unnecessary really.” Jonathan Glennon put this down to too many people being allowed to communicate. “Really that should have just been down to a couple of individuals. Especially with contractors, contractors are always dangerous people because they can always get people’s backs up because you know they’re getting paid particularly well.”

“Maybe,” Jonathan said, “some of the core staff should have controlled that a little bit more and maybe just had monthly meetings.”

Beth Welsh said that she that that there were some positive aspects to communications including the Town Hall meetings and phone calls when Sally O’Hara came on board and six

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or seven credit unions would hold regular phone discussions. “They were the ones closest, we were in the best position to comment because we were actually seeing it working the system, I think that was really good”.

She said that there were problems when these calls started to be cancelled, often at the last minute and with no explanation. “It felt that the credit unions’ opinion wasn’t important.”

She said that she also thought that there was a lot of miscommunication. “There was a lot of things that we weren’t told, there was things that we found out at a latter date. We’d be asking about something and it would be ‘oh that’s no longer in scope’ but like at no point were we told that.” Beth said that she didn’t know whether this was due to, “just bad management by the project manager or if it was purposeful”.

David Batten said that when the platform was implemented in the three credit unions the project team were, as they were told to do, “bigging up the success of this implementation into the three credit unions, ignoring the fact that we all knew that it was going really, really badly, but up until the end there was no acknowledgment of how badly affected these credit unions were. We weren’t treated as intelligent adults able to make decisions, we were fed stuff. We were kept in the dark and fed all the positive stuff, while we knew, because we all talk to each other, how bad it really was.”

Matthew Redgrave recalled at a meeting of credit unions in Manchester in 2017 seeing a presentation he thought of as a sales pitch, which was at the time when his credit union was struggling with the system. “We were open mouthed that Cornerstone was standing in front of credit unions selling a project which wasn’t working, I mean it was totally inappropriate to do that, everyone was astonished.”

Jonathan said that he thought that Cornerstone tried to communicate as best as they could. But, he said, “the way that was done with these groups and different special interests, it wasn’t well controlled, it wasn’t well managed.”

“But,” he said, “I think there was a genuine attempt to communicate and keep people interested” However, he said, “with the delays and how the bad news was managed, sometimes meetings were cancelled, and it all sounded a bit panicky.”

Matthew said that presentations he looked at that were sent to the credit union before he joined the board were part of the reason that he thought the project was oversold.

Individual and Technical Communications

Other comments were made about more specific communications between individual credit unions, suppliers and Cornerstone.

Clive said, “I think there is a tendency to assume that everyone else knows what they’re talking about, so when people are talking about a new platform, and I think certainly on the ABCUL board we did this, that they’re all quite clear what they were needing to design and therefore what the final use would be. So you assume that ABCUL knows about credit unions and what they’re capable of, and has conveyed this information accurately to Fiserv.

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And I’m not sure either of those things could have been true, otherwise we wouldn’t have ended up where we did.”

At Pioneer Mutual, Stephen Walsh said, “I can’t explain the number of people who during this project was running that I had to explain what a credit union lottery was to. And that was to the project manager, to people in Fiserv, to people in Cornerstone and it wasn’t in scope and it turns out it was in scope because the Fiserv platform could operate quite successfully a credit union lottery, but I was having to explain time and time and time again.” Stephen said that the thought that aspect of communication could have been improved if the people who were the project managers had more of a credit union background.

David Batten said that the thought there was a failing in communication because many in the project team did not really understand credit unions. “It almost became a running joke when invariably there would be a new person who would roll up with bright ideas, looking all very fresh and bushy tailed and say, ‘I know nothing about credit unions, but I’m really looking forward to finding out’. And it became a bad joke with the number of times I had conversations with people like that.”

David Batten also identified problems he saw with communications about the development of central services. He said that when an option for a credit control service was presented, it was for a service which would attract a monthly fee for each loan passed to the proposed company. “And when we asked, ‘what are they going to do’, and ‘what incentive is there for them to actually do anything’, there was no response. So then nobody signed up for it…And then it really quickly became a thing of credit unions didn’t have the appetite for that. And that wasn’t the case, it was that the thing that was presented to us was rubbish, essentially, and we had no idea what we were buying into or what incentive there was for the credit control companies to do anything. You know if you’re going to give me 3.95 every month to look after a credit control case for you its not in my interest to do anything about it, because the longer that I don’t do anything about it, the longer you’re going to give me 3.95 a month. And that really basic question was never answered.”

Matthew said that it was sometimes difficult to get information because of the structure of the project. “It’s been very hard to know where your go-to people are, where your touchpoints are, because we were told we weren’t allowed to speak to Fiserv. The people who came in, Grant Thornton, were just contractors so they didn’t really have any stake in it, DWP didn’t really want to get involved. And not long ago when we started looking at ways of pulling out, it was very difficult to get information from anyone about how we would do it and how much it would cost.”

Matthew and Joe also made serious allegations of being misled and provided with misinformation by senior members of staff which are disputed and therefore not reproduced here.

Joe said that the credit union had had very little communication from ABCUL or Cornerstone since the closure of the Project and that they felt that they had been left to sort out the problems. This, he said, had seriously damaged the relationship.

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Beth said, “we were told even as late as June that there was no issue, that we would definitely go live, not to unfreeze our products after being on a business freeze for two years. And we are still reaping the negative effects of that.” She also said that she thought that communication about the end of the project was badly handled. “We were also promised press releases and things like that, that would explain to a lot of our stakeholders” but these never materialised. “We never received any kind of correspondence about the closure of the project or the update even though that was constantly promised.”

Another interviewee complained about a lack of post-project support and the lack of communication and assistance after the project closed. They said they had been passed, “from pillar to post” with emails ignored. And an interviewee said that they had been shocked when dealing with senior level executives at Cornerstone who hung up the phone on them.

Delivery

Speaking about her experience of delivery of the platform at Voyager Alliance Credit Union, Maria Hughes said: “We had to go live as one of the biggest credit unions probably to go on the platform, for it to have a future we had to go live, personally I think it was ‘put us on it and deal with it’. We had a whole team, and everybody was behind us but unfortunately it wasn’t fit for purpose.” Matthew Redgrave was critical of the timing of the withdrawal of hypercare support from Cornerstone and Fiserv at East London Credit Union, in the early days of implementation when, he said, “nothing had been resolved and things had got even worse, so really it shouldn’t have been withdrawn.” He said, “and on a practical level it just made it harder to get anything done, so I think on a timing, delivery aspect there are lessons to be learnt there.”

Beth Welsh recounted how both her and Stephen Walsh at Pioneer Mutual Credit Union had cancelled at least three holidays when dates were given for going live which were then changed. “Dates would change, our last date was arranged without any consultation with the credit union, at a time when all three of us were on holiday. We happily changed all that and then obviously it never happened.”

She also said that no thought was given to the fact that the credit union was still running a business. “I think for at least a year, 95% of my time was spent preparing things for the project that would then sit on someone’s desk. I had to have our communication plan and our dormancy letter ready, and it had to be done by the next day. And then nothing would happen with it.”

Beth also said that she also thought that one of the key failings was that the project lost sight of what credit unions wanted and instead ran with the view of what the consultants wanted, consultants who did not have a background of credit unions. “Once the system went live,” she said, “these failings became very apparent.”

David Batten said that his credit union’s experience of the project wasn’t entirely negative because ALD was delivered. “That made a big change to the way we looked at loan applications and the way that we ran our business.” But, he said, that was all that he could personally say about delivery as nothing else was delivered for his credit union. “But the

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communication around the way that the delivery and the processes were going on with everybody else was really bad.”

One interviewee said that they would usually ensure that they had a paper trail but they did not because they were working with the DWP and their trade body and they trusted them. They said that things they were promised did not happen, and they are limited in how much they can challenge because everything was done verbally, “and I don’t know whether that was a conscious choice by them or not.”

One interviewee said that information was passed around by a project manager on a pen drive, meaning that there was no paper trail. They blamed their own naivety at the time, but suggested this may have been done to prevent the challenging of decisions or promises.

Joe Hegarty said that presentations given in the early days of the project which assured credit unions that the platform would mean credit unions could function with fewer staff did not turn out to be true. “This platform needs more staff than you’ve got now because it’s a very complex platform, so the fundamental basis on which credit unions were recruited to go on the platform was wrong.”

Joe added, “it should only have been done for credit unions our size and bigger”. He said that larger credit unions should have been recruited by telling them that the needed online banking and digital access for their members. Money was wasted on the smaller credit unions, Joe said. “And then Fiserv say to me that they’ve earnt nothing from the project… I don’t know how true that is.”

One interviewee said that they thought that credit unions which were close to transforming were left in a worse position than those which had transformed as they had invested heavily in a project that did not happen for them.

Jonathan Glennon said that he thought the review should be looking at the staff resources in place during the project. “I think it would be interesting to find out what staff were on board at what time and how much they were costing and what they actually delivered and whether their job description could even be met at that time.” He summed up the issues as “just basic controls and justification” and said, “it just seemed to just get away from Cornerstone really.”

Vincent Thomas suggested that a better way to approach developing a new platform for the credit union sector would have been to focus on building it for just one, two or three large credit unions at the start. Choosing one or two or three credit unions with the resource to support that design and testing needed he suggested, might have worked.

Vincent said “I think it would have been much better if we’d have got their commitment of maybe Voyager and a couple of other large credit unions, build something that works for them, test it in the wild, fix any bugs and when it’s been in use for a year with one or two or three credit unions then think about selling it to other credit unions.” This, he said would have been more efficient and much less likely to end up with problems due to complexity.

He also said that, in hindsight, he thought that Fiserv may have not been a good choice: “I think they may have been too big and too much focussed around delivering for large

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organisations. And with the credit union sector in the UK, even the largest credit union in the country is a small business.” This, he said, contributed to what became a “bloated” system.

From Robert Kelly’s experience of the project as a credit union Chief Executive, he said that he thought that the ‘as is, to be’ exercise was carried out far too late on in the project. “To do an exercise around ‘as is’ business processes, ‘to be’ business processes, if you don’t do that in the very early days, as opposed to doing it what I would describe as potentially 60- 70% of the journey in, for us to start that task at that stage, it was almost impossible to change the direction of the oil tanker.”

As well as feeling way too late, Robert said it almost felt like that was the beginning of the end, “Because they’d realised at that point ‘why didn’t we do that exercise 18 months ago because that would have given us a much more prominent position with Fiserv in terms of the negotiations on what does the system do, what can’t it do.” Robert put this in the context of work arounds in existence at the time, “Accepting that the system was going to be 75% correct or functional and the other 25 you can work around. Well let’s be honest, that didn’t work for East London, it didn’t work for retailCUre and it certainly didn’t work for Voyager.”

“My experience”, Don Kehoe said, “is that many projects do not go exactly to plan and costs often significantly overrun, but there seemed to be a naivety in the CUEP leadership that the consultants employed were as committed as credit union activists are, and similarly that the software vendor’s salesmen actually had everything they were offering and their interests aligned as closely with those of the UK credit unions as they claimed. Their assurances are only ever worth the paper they are written on. It was known at the time that the software the Model Credit Union was to be based on had had a two-year hiatus during its implementation to full service banking for Tesco.”

Governance

David Dickman explained his views on the governance of Cornerstone when he left the board in 2016. “I think in hindsight it should have been more independent and have more authority in its own right. In Cornerstone, and obviously that was one of my reservations in staying on as chair, a lot was driven by the consultants, or ABCUL to a certain extent.” He said that a fait accompli was often the scenario presented to him as Cornerstone chair, especially from Grant Thornton in their consultancy role. He said that in the early stages he did query their understanding of the sector.

During the early stages of the project David Dickman said that he began to recognise that the focus was on technology and the banking platform issues and he said that this was an area where he felt that his skills were not of the required level. “I’d seen the failings that had happened in the Co-operative Bank with regard to them trying to get a new banking platform and how that ran away with their capital and the amount of money they spent on it with rather an abortive end really.”

Don Kehoe said that he was never very happy with the relationship between Cornerstone and ABCUL. “For me”, he said, “it was in a no mans land. I felt it should either be much more tightly under ABCUL control, but my preference would be that it was much more

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independent of ABCUL control. But having thought about it, it got to where it was because of the route we took to get there.” Don suggested that the relationship between ABCUL and Cornerstone was more like ‘brothers’ and meant that the ABCUL Board did not deal with Cornerstone in the same way as they may have done with any other sub-contractor. He thinks that made things difficult; “I think the board did everything ‘right’ according to the law but didn’t step back and say, “how does this look from the outside?”. People, Don said, “weren’t seeing the distinction between the two companies that we saw and when you see the things that come, the criticism, quite often it is not seeing that Cornerstone was a separate company.” Don also identified some confusion arising from the fact that the ABCUL Chief Executive was the figurehead for Cornerstone. Don said, “It was his energy that was the dream behind it and people saw him as ‘Mr ABCUL’ and put their faith in the ABCUL brand as it were, so I think that is probably where a lot of the confusion lay.”

When it became clear that what was happening was not just splitting ABCUL in two with the trade body part remaining as ABCUL and the transactional commercial business being hived off into Cornerstone and CUEP was going to be something massive in comparison to ABCUL, Don suggested that the ABCUL board should have said that the game had changed. Sustained efforts should have been made to recruit a qualified and experienced CE for Cornerstone at that time, which should have been made more remote from ABCUL and more entrepreneurial.

Clive Rix said: “It might seem odd to claim that governance was good when the project didn’t really deliver, but I thought on the whole that it was good; I thought the Cornerstone board was a quite impressive organisation to be in. I think the external directors we had were very good…they were challenging.” He said that he was not sure what could have been done better and pointed out that time limits mean that it is always difficult for non-executives to really know what goes on inside a project. He did say that there was plenty of challenge and stated: “I never thought that Mark and before him Louise and other heads were allowed to get away with anything, but when they tell you something’s happening it’s very difficult to do otherwise. Could we have done more? I don’t know. Could we have had more external auditing of what was going on? I mean that would not be normal, you wouldn’t normally consider that to be necessary.” He also pointed out that there were also credit union representatives on the project board.

David Batten said that he thought that governance was the least of the project’s problems. “It feels as though the governance things were all set up with the best of intentions but probably weren’t able to cope with the failure of the project. It didn’t seem to be able to respond to that.” David said that it felt as though a lot of the responsibility for maintaining the outcome of the project was delegated to the people delivering the project and he said it felt as though that was a mistake. That, he said, probably led to the failure of the project. He said that the board should have asked at an early stage if what was being delivered was what customers wanted.

David Batten said, “I think that’s what was forgotten in the whole thing, that the credit union were the project’s customers. And towards the end it didn’t feel like that at all. It felt like the DWP was the project’s customer and we were just an annoyance. But we were the end

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users of it and our views were not taken on board, or if they were taken on board, they were taken on board at such a late stage that there wasn’t time to do it.”

For one interviewee, the inclusion of credit union representatives on the CUEP Project Board was a ‘tick box exercise’. They said that they thought that comments from the credit union representatives were ‘brushed under the carpet’ and not taken seriously even though they had an in-depth understanding because of their involvement in the project. Towards the end of the project, it was said, the impression was given that the involvement of the credit union representatives was not wanted, and meeting times were changed at such short notice that it was not possible for them to attend. One interviewee said that the Project Board was closed at the most important juncture.

Vincent Thomas said that he thought having Cornerstone as a separate organisation with a separate board was a sensible structure, because of the need to protect ABCUL. He thought, however that the absence of the DWP as the funder on the project board was a big mistake in governance. “They’re effectively the sponsor in the project and they’re saying that they won’t engage in the delivery… given that they specified in so much detail what was to be done and every change had to go through a convoluted government change and approval process they were an integral part of the project.”

The closeness of ABCUL to Cornerstone and the Project was identified as a problem. Many credit unions, Don said, were ‘born’ through being supported by ABCUL and when they have a problem they reach out to ABCUL. “It’s their mum,” he said, “It’s that trusted relationship, it’s a maternal relationship really, so a lot of them feel let down on that relationship basis, not on a business to business basis. For my mind I always put down to it, people say business is about business but actually most of it is about people, so I think that’s very true.”

Don remembered being surprised by the fact that he was told only one credit union took legal advice on the Model Credit Union contract. He said he thought that put ABCUL in a very difficult position; because people were trusting everything to be ok because it was ABCUL. That, he said put an onus on the Association to make sure that it was. He said he thought that ABCUL, for its part, tried to be as clear as it could, but he wasn’t sure that people had thought about what would happen if the project didn’t work.

Others were more critical of the governance system that the project sat within.

Matthew Redgrave said that he thought that the structure of organisations within the project caused problems. He described it as a triangle between DWP, Cornerstone and Fiserv: “There was the DWP then there was ABCUL which didn’t want to be under any kind of financial duty and therefore created Cornerstone as a separate legal entity, but in reality, it was the same people and then Fiserv.”

Joe Hegarty was critical of governance because of what he said he saw as a “web of deceit”. “Why does it need to be so secret in the movement? This is a trade body and people know it, what was the reason for all the secrecy, I don’t understand it at all. The finances surrounding the project, were very, very secretive in the later days.” “You don’t win by being secretive,” he added, “it just creates suspicion”.

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Stephen Walsh said that he thought that governance was supremely mishandled. “Maybe”, he said, “that was the naivety of ABCUL in terms of how they structured the Cornerstone board.”

A lack of consensus about the Cornerstone’s true financial picture and projections for the company was identified by one interviewee. It was stressed that fraud was not alleged, and accounting was legitimate, but it was suggested that a desire to protect the organisation meant that all the numbers necessary to do a proper projection for Cornerstone and make a proper, reasoned decision were not provided by the ABCUL Group to Cornerstone management. A doubt was expressed that Cornerstone would ever be given genuine independence within the ABCUL Group because of a lack of confidence that others could be trusted to put the company first and that the heart of it would always be concealed and protected.

There was a view from one interviewee that, within the project, there appeared to be an unwillingness to take difficult decisions, “other than to offend and mess up individual credit unions - unless you happen to be involved in the ABCUL Board.” Another interviewee said, “the Chief Executive of ABCUL should have left under a cloud rather than under his own steam and the Chair of ABCUL should never in a 100 billion years gone on to become Chief Executive Officer. This was on their watch and they should be liable for it.”

One interviewee said that although the project was closed because the funding was withdrawn, this was because of governance. “And because of the huge excessive delays which I think were due to the mistakes made with East London and how that played out. All those decisions and all that money spent and wasted was down to project management and bad governance.”

One interviewee said that they had heard some senior staff of ABCUL Board members’ credit unions being extremely negative about the project. They said that suggested that there should have been a buy in from board members to promote the project and the need for transformation to their credit union but, “they clearly didn’t”.

An interviewee questioned why, when the credit union of an ABCUL and Cornerstone director pulled out of the project, they were not, “stripped from their position and a new person appointed.”

Matthew said that he wondered whether the ABCUL board has questions to ask of itself but said that the review process suggested that they realised that they have. He said that he was uncertain about what the relationship between them and the Chief Executive was regarding CUEP.

David Batten said, “At the end of the day, as shareholders in Cornerstone we received very little communication about how things were going… there was a failure in governance in the communication.”

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Training and Readiness

Robert Kelly said that he thought that a lot of money was spent with Prospect Consulting at an early stage and that he thought that the plan and rationale for that was absolutely correct. “I think it was designed to ensure you bring the credit unions along on the journey. The cultural impact of the change was as prominent if not more prominent than the technical.”

But, he said, despite the best intention and motivation from the start, “It just didn’t pan out that way.” And Robert said that the stand out reason for that was that Prospect Consulting did a lot of activity with the wrong people in the room. “We didn’t attract the right credit unions with the right representatives and the right voices…what we should have probably done is tried to involve more of the Cornerstone and project staff in the work that Prospect did with the credit unions.”

Vincent Thomas suggested that work should not have been considered for the majority of credit unions during the life of the project: “Whilst there wasn’t a system ready, it was perverse to try to get the credit union ready for a transformation.”

This, he said, added to frustration in credit unions: “They had to do all this work and be ready for transformation, but the delivery timescales kept getting pushed out and out and out and in the end were withdrawn and that proves why that was the wrong approach.” Fundamentally, he said, training was focussed too widely throughout the project instead of just doing it for people that were actually in the process of going live.

David Batten said that his credit union ended up being lower down the queue to transform and that it was the credit union’s choice to be in that position. His credit union did do some preparation and training and, he said, in the early stages when the Agiliti platform first became available, it felt to him as though the training was going to be really good.

But then, he said, “it kind of tailed off, as the people who had been in at the beginning left and then new people and that whole ‘I know nothing about credit unions but I’m really looking forward to finding out’ cycle started and all of the energy of the project moved into just building the bloody thing and getting it launched regardless of whether it was ready to be launched.” David also said that there were “interesting expectations” about how he was going to spare all his staff for three days training when he was trying to operate a business.” He said that was a concern at an early stage, but he had raised it and thought that he would find a way to do it.

Matthew Redgrave reiterated that he had been told that the credit union wasn’t seen as ready to go live and said that was one of the top five single things that went wrong. He said that while he doesn’t know the ins and outs as he is not in the credit union every day, that the staff team felt that they had not been sufficiently trained. He said that he had got the impression that people in Cornerstone thought that some of the staff weren’t ‘up to it’. “There’s probably a bit of truth on both sides, so I can’t tell you exactly what’s fair but I would accept that there’s some fault on both sides, there wasn’t quite enough training, or it wasn’t good enough, but also some individuals maybe didn’t pick things up and so on.” He stressed however that, “With training, either way the trainer still has a responsibility to train

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people, even if they’re a bit slow or something, it is a kind of responsibility.” If the training team thought that the team didn’t understand, he said, then that should have been raised.

Joe Hegarty said that the training team at the credit union worked really hard, but because there was no test environment, they had had to teach themselves from manuals. “They were operating the system with us, but it turned out later that some of the things that they’d shown us, because they were self-taught, because the platform didn’t exist, it was just a manual, there was actually an easier way to do things.”

Maria Hughes said, “they weren’t trained by Fiserv, they trained themselves and then trained us, which wasn’t really practical was it?”

For Pioneer Mutual Credit Union, there were problems with the broadband service. Stephen Walsh explained, “So we were sitting being told it was too slow by trainers who should have known that really this was put in at the request of Cornerstone and Fiserv.” He also identified the lack of play data as an issue. “You couldn’t just sit and take someone and stick them in front of a computer and say, ‘just play with that, see what you can do, see if you can make it work’”. Beth Welsh said that the training was quite often cancelled and not rescheduled. “We were left going live with quite a lot of outstanding training. Also, we were given a lot of training and then three months elapsed before we were due to go live again.” They also had problems with training being delivered remotely. Beth also said there were problems with the project trying to deliver training remotely. She said that she did not know whether that was to save costs or because people did not want to come up to Glasgow. Sharing training also caused issues for them, as Beth said, “because there were things that we needed or wanted to ask that were very specific to our organisation and about the running of our organisation that had business confidentiality.”

Stephen said that there were ‘fantastic, world class trainers’, including Peter Rowe Blackman, “he was great, he was a fantastic individual that got this credit union through some very low times with his enthusiasm and his ability to deliver training.”

Louise Galbraith said: “I think we had a lovely team of very competent trainers who were good at developing the material and conveying the material, and the problem isn’t that, the problem was that people just didn’t understand banking.”

Louise identified the fact that she and others in the project underestimated the learning curve of credit unions. “The enthusiasm and willingness was not going to make up for the massive shortcomings in experience and management capability that was actually happening in the credit unions. With hindsight, she said, they would have known that a longer runway was available before transformations, and they could have done some more work with them, such as putting people on secondments into banks. “If someone had said at the beginning you’ve got 3 years to do this, I hope we would have approached a whole lot of differently than we did.” They were, she said, “constantly pushing against this theoretical going live date and then Fiserv constantly pulling the rug out.”

Don Kehoe said that his impressions were that the idea of implementation in a three-week cycle was incredibly ambitious, perhaps foolhardy. He suggested that credit unions may not have taken on board how big the changes to operating with a fully functioning system would

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be. Training, he said, is the most important part of the system, and with banking systems: “You need people to know the full gambit of what can be done because otherwise you’ve got a Ferrari and you’re just using it as a bicycle.

Don also stressed the importance of the old system being really clean before the move to a new platform. He said that further ahead in the project, when gates came in and credit unions had to meet certain hygiene standards, it was far too late, “After the horse had bolted really”.

Staffing and Leadership

Comments on those paid to lead and carry out the detail of the project have been divided into three sections below, covering leadership, staff turnover and contractors and consultants.

Leadership

Robert Kelly said, “We should have had a separate chief executive for Cornerstone right from the get-go.” He said that while he agreed with the vision that was presented and the risk mitigation, and understand the reasons why this didn’t happen, and signed off on that at the time so takes his share of the responsibility. But he said that, with hindsight, there should have been one accountable person reporting into the ABCUL Group structure and not having a dedicated person responsible for Cornerstone was a mistake. He suggested that the lack of this let the project consume Cornerstone, when Cornerstone had been built for a wider impact.

Clive Rix had a similar comment, saying, “I think perhaps having the Chief Executive of ABCUL running Cornerstone at the same time was not a thing we should have allowed to happen, as he was stretched too thin.”

David Batten said that he thought there was a lack of leadership from ABCUL and the Cornerstone board in leading the programme, “other than at times only on paper”.

Stephen Walsh said that the Project, “should have been much more disciplined in terms of the project management. It needed leadership and leadership simply wasn’t there.”

Joe Hegarty recalled a conversation he had had with the ABCUL-Cornerstone Chief Executive when he was told that it is normal practice in America to have the trade body head also be the chief executive of the CUSO. Joe said: “I think he probably could have been the chief exec of the CUSO, but not the project lead on the project. They’re two completely different things.”

One of the biggest mistakes for Cornerstone, said Joe, was to, “not have a proper lead person in charge. That isn’t a criticism of the individual, but it’s simply that, in a project like this, you needed a project lead and that wouldn’t necessarily be the person who’s a very good trade body lead.

The lack of a responsible person for the Project was identified by David Dickman at an early stage in the Project. He said: “Cornerstone didn’t really have any staff during my tenure, possibly a difficulty, it was all ABCUL support rather than someone who was responsible and

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accountable. When we appointed the guy from Nationwide who came and left [Simon Blisset], he seemed to leave a vacuum.”

Consultants and Contractors

One interviewee identified some confusion about the perceived role of Grant Thornton in the project; whether they were providing resources to the project, or ‘owning’ and delivering the project, which, it is said, would have involved much more risk and a much higher cost for their services. It is not known if this was a tactic to keep the consultants ‘on the hook’’. Issues were also identified with accountability and the fact that advice was asked for but often not taken. “The programme structure was torn between being given accountability but not actually being able to approve or authorise any decisions. And that’s never a good thing.”

Joe said “We were paying the most expensive financial consultants in the country to run the project, in Grant Thornton, and all of a sudden the money’s gone.” He continued, “they were very nice people and knew quite a lot about the financial services industry - you could almost write on the back of a cigarette packet what they knew about credit unions”. Joe added: “The only time things turned around is when you brought Sally O’Hara in and she really understood projects like this…If someone like Sally O’Hara had been in position from day one, I think the project might have been a success.”

Vincent Thomas said there were, “lots and lots of contractors who had lots of experience in the technical infrastructure they were dealing with but didn’t understand credit unions.” In some cases, he said, they also thought they knew better and thought credit unions should change to be more like banks.

But Vincent did say that, “it did seem to me that - especially the senior management - there were a lot of people that committed a huge amount of effort and worked really hard on delivering the project.” But because it took so long, he said, they’d do it for a while and then they’d be gone. He suggested that there should have been a core team seeing the project through from start to finish.

Clive Rix said: “I think we’d have done better if we’d have had our own people in charge from the start rather than consultants. I wouldn’t dispute the use of consultants to do the work, but I think we should have our own people in charge.”

Don Kehoe said that he understood the Grant Thornton model and how it was designed to mitigate the risk of having one person that you’ve then got a key dependency on, but in reality, the lack of accountability hampered the project.

David Batten said, “I think the reliance on external consultants at a senior level meant that the reason why we were all here got lost. And it turned into a delivery of the project regardless of whether it was the right thing for credit unions or not.”

Matthew Redgrave also expressed concerns about the financial aspect of using consultants. He said that it was mentioned at a Cornerstone event that some consultants were being paid £1000 a day. “So these Grant Thornton people are paid phenomenal sums of money and the result of it is total failure as we’ve seen. The amount of money that Cornerstone threw at

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this is astonishing, and in the end this is actually taxpayers money so it is a scandal really that paying these people £1000 a day and then them getting fed up after a month because its too difficult and then disappearing and we get someone else paid £1000 a day.”

Staff Turnover

A number of interviewees expressed concern about what they saw as high staff turnover within the project and the number of contractors employed. Matthew said that things for his credit union were made worse by high staff turnover and the use of a lot of different contractors: “In the autumn of 2016 we had had a total nightmare of trying to deal with this whole project on the technical, IT side of things, we had, there were people that we were dealing with, Fiserv people, Cornerstone people, Grant Thornton people and they were coming and going at an alarming wait.”

Lord Hunt said that the project was, “dogged by frequent changes of personnel, both at our contractors, Grant Thornton, and also within the ministerial team at the DWP.”

Joe also expressed concerns about the high turnover of Cornerstone staff. “The turnover of staff at Cornerstone on the project was just horrendous, people just didn’t stay, they were there for two or three months and then they were gone. And that was right from the top of the project right down to the everyday staff, they were here one week and gone the next.”

Robert also said that the constant change and churn in the staffing of the project was a challenge for credit unions. With his credit union hat on, he said: “It felt like a revolving door, every time you had a conversation you went back to the start. It was a huge effort from the credit union to just tell the story rather than get anything done.”

David said that it felt as though there was an ‘unbelievably high’ turnover of staff. He recalled responding to an email one afternoon that he had received that morning, only to be told that the staff member had left in the meantime. When credit unions asked about this turnover, he said, “the communication we got back was ‘well that’s what you’d expect from a project of this complexity and maybe it’s a bit more complicated than you think it’s going to be. There was a kind of condescension around that that was really displeasing and made everybody angry.”

Clive said that he thought a rapid turnover of staff below the project leadership, could be seen as a sign that things weren’t going well within the organisation. He also said that he heard from people involved in the project who, “didn’t send back good reports about the morale and the way things were handled.”

On a related issue, some issues of conflict between the ABCUL Group and the project team were identified in the interviews. It was felt that unnecessary barriers were put in the project’s way on occasion and decision making was delayed which affected the roll out of products. Some conflict and the manner of communication were also identified as affecting morale and behaviour within the team.

Matthew said that a ‘huge turnover’ was extremely harmful to the project and said he did not know what the causes were: “Whether the individuals weren’t good enough, whether they were too stressed, whether there was too much pressure on them, not enough money, too

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much money flying around, I mean who knows. But the end result was a lot of churn and that was very harmful to the project.

One interviewee said that staffing should have been moved to a permanent model much earlier, “and maybe it shouldn’t have been paying people £8-900 a day for training that was clearly people taking money and quite happy to burn public money because they’d got a whole injection of cash and were thinking hey, how can we spend this.”

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Lessons Learnt - In your opinion what are the key things that you would change about how the Project was envisaged and executed to achieve a more favourable outcome?

The answers to this question are summarised below and have been grouped in the themes discussed above.

Vision and Ambition

Clive Rix said he questioned whether it is always necessary for ABCUL to be the prime leaders said he wondered if there was a way to get the private sector to take on the development of new technology. “Is it always necessary for ABCUL to be the first mover, demonstrate the demand for these things, demonstrate the potential for these things and then let them sort of fail, fall by the wayside and other people come in?” Clive recounted a recent conversation when someone had said that ABCUL had been a great champion for credit unions and did a great job on the lobbying side, but most of its commercial ventures: “Have turned out to be pretty much of a disaster”.

One interviewee suggested that a big lesson was that the UK needed to move to some sort of service organisation structure; “we deal with trade organisations for one thing, we have these independent service organisations that do other things for us. This has thrown up flaws in the British sector and it needs to be sorted.”

Vincent Thomas said that the only thing he thought he would do the same about the project was the two areas of vision and ambition. “We still want to get the same output and we should still want to do it a sector. But I think everything else I would change even to the extent of saying no if we were offered money from the DWP to do it again.” He suggested that a much better way of achieving the vision would be to find ways to do it on a smaller scale by delivering a roadmap from which credit unions can buy into different bits without replacing their whole system.

David Batten said that a key lesson to learn would be “Don’t bite off more than you can chew.” He said that he could see why ABCUL made the bid to the DWP for the money, “and to a certain extent they were probably the only person from the credit union movement who could have made that bid to the DWP for the money.” But, he said, referring to his previous work in the voluntary sector, “there’s this whole thing of chasing the funding and then losing the sight of what it is you’re trying to achieve.” He said that he thought that by chasing the funding for the project, the idea of the change that everybody wanted to happen got lost.

David Batten said, “I think the whole kind of banking platform thing was a mistake and I don’t think really any credit union was asking for that, it was just the DWP said you’ve got to have it. And I realise with any funding its about serving the demands of the funders as well but maybe at that point we should have said, we should have been stronger and said if you want credit unions to deliver some of this you’ve got to listen to us and not dictate what it is we need.”

Design

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If, Clive Rix said, ABCUL did decide to start again and be the prime mover, it would probably need to spend more time in credit unions, looking at what they are capable of and engage IT organisations at that stage to ask them what would need to be done to improve it. He said: “I think it would need to be much more of an incremental development of new systems and I think it would need to be much more focussed on what credit unions are capable of.”

Beth Welsh said that she thought there should have been more credit union input into the design process. “I understand in the early stages credit unions really helped shape the system. That was then taken back and handed to Fiserv.”

David Batten said that he would have kept the pathfinders who had developed the spec, I’d have kept them involved for much longer especially at the early stages. He said that somebody should have just said ‘this isn’t going to work is it and we just need to dial down what we’re doing or redefine what we’re doing’ at a much early stage in the process.

“But then there was nobody there to say it’s not going to work, because all of those people had stopped being involved.”

Don Kehoe also said “we could have had a much simpler system dedicated to what would have been the core business for every credit union.” Don said he thought that good relationships were built with Fiserv but stressed the importance of attention to detail and suggested that many more end users should have been involved in delivery.

“If we did it again,” Don said, “We now have much more understanding and I see there are some big systems going in at the moment… benefitting from people knowing a bit more. Every credit union is different.” Don stressed that both trying to accommodate all different ways of working or getting credit unions to adopt common working are very difficult.

Robert Kelly suggested that introducing a single product rather than eight or ten at the same time, allows staff and members to get used to that particular change: “It builds confidence and it builds resilience within the business, people understand the journey you’re on and then you add the next building block.”

Robert said that a viable minimum entry point needed to be set. “I think the challenge that we had was we didn’t have enough minimum volume commitments to make it sustainable, so it almost paralysed us right from the get-go.”

Robert said he thought that this was a common theme in how commercial services have been delivered by ABCUL and Cornerstone: “We’ve jumped into commercial deals that have been linked to minimum volumes that we’ve never hedged the risk… rather than having firm commitments from customers who’ve said okay, you’re ‘the conduit, the bit in the middle, so they understand the risk you’re taking.” He said that he thought too much risk had been taken around minimum volumes for the project to be ‘anywhere remotely achievable”.

David Dickman said I think you could have revisited what were going to be the short-term wins in terms of more centralisation, more economies of scale. “ I think we went down the route of the banking platform being the be all and end all, whereas I think we could have focussed more attention on branding the sector, on common brand, centralisation of postal dispatch, purchasing power; the credit scoring we got there in the end through ALD.”

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Louise Galbraith said: “The biggest single factor that crippled us was being forced to sign up customers and put in the back-to-back commitments before we had a product ready to sell… I know the DWP thought they were doing the right thing, but it was crushingly, absolutely the wrong thing.” She went on to say that this was raised as a problem with the DWP, but it was not possible to unravel that aspect of the project. She said, “If you were running this with your personal money, would you have cut your losses at this point and I think that you would. If you were a private company, maybe you’d just have cut your losses at that point. But no one could bear to, you know everyone wanted to do it so they kept trying to find ways to make it work and actually the right decision at that point was to say this isn’t going to work, it can’t work.”

Vincent Thomas said that there should have been a different approach to targeting who should have been the customers of the project. “Because frankly, the 2-3k member credit unions that only opens 3 days a week and have got 3 staff shouldn’t be the target.” He also reiterated that credit unions had taken money from the project with no intention of joining the platform.

Joe Hegarty also said that the project should have been more proactive with approaching the bigger credit unions. He said that the top ten or twelve credit unions should have been involved in the project. “We needed some critical mass of the larger credit unions, one, to satisfy Fiserv but two to prove it and to make it work and it never did.” Joe also said, “Whenever I go to meetings of larger credit unions, one of them stands up and says we really need to focus on trying to get digital, we can’t get it. They can’t afford it.”

Joe said that he thought it was very sad that the project could have achieved this for them but did not because of the mistakes that were made.

Stephen Walsh said that the project should have gone to someone else, or ABCUL should have picked a different IT supplier, something that was more realistic for the UK sector, “rather than being dazzled by bright lights.”

Communication

Don Kehoe said, “we took on too much of the trust and the faith of the credit unions in ABCUL. It may not have made a huge difference to the outcome, but it would have made a huge difference to the way people think about ABCUL now, I am aware that our name is mud.”

Don said he thought that risk should have been explained in a more upfront way and problems along the way should have been communicated more openly. He also suggested that there should have been a user-centric focus and that more empathy should have been demonstrated to the problems of credit unions having to take on such a huge system with all its components.

Don said that the lessons learnt that were presented at the ABCUL 2018 AGM are the lessons learnt and should be the key takeaways from the project, and should be included in the report but that more humility should have been expressed at the event.

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The lack of an apology and of responsibility being taken was raised by one interviewee. “Cornerstone led the project, the project failed. Take responsibility and actually thank people for their time… and there’s been no acknowledgement, not even to the public, not even to ABCUL members.”

Delivery

Beth Welsh said that she thought that Fiserv was maybe the wrong choice as a supplier. “Not because they’re not capable, they’re a billion-dollar computer banking platform supplier, but because they didn’t know the sector. They didn’t know the British sector and the American sector is very different.”

Beth continued: “I think if we had had an IT provider that understood the credit union landscape in Britain, we might have been in a very different situation. They promised a lot of things that they didn’t deliver, and couldn’t deliver.”

The purchase of vapourware was an issue which Don Kehoe identified as something not to repeat. “I think one of the problems with software people,” he said, “Is that when you ask them ‘can it do this’ they always say ‘yes it could do that’ and people never take into account that they haven’t said yes it does.”

Don was also critical of the idea of changing to a complete new system straight away: “I think the idea that you would use a Kesho curtains system up until a Friday afternoon and then on the Monday morning following that you would have a full banking platform at your fingertips was overly aspirational.” He said that the technical change alone was hard enough, but that the biggest lesson learned is, “the failure to work out and support and design the cultural people change that was necessary within the sector.”

Vincent Thomas said, “I don’t see why we should be saying to people in order to get online services you have to give up everything else that you’ve got and give up all your systems so I say it should have been delivered as a way of integrating the existing systems into a central online based system.”

This, he said would have made more sense for the credit unions and they would have got the benefit of it a lot faster.

If the project were to happen again, Clive Rix said: “I’d spend a lot longer to identify what credit unions actually needed, what was absolutely essential to them, what was nice to have, what they could afford, what they would have the resources to do and maybe identify a much smaller number of credit unions than 40, or 35 we ended up with, who would be able to take it on. I think I’d look for the top half dozen of credit unions that were on the list to sign up.”

Having noted the small staff size of many employee credit unions, Clive said: “I think some of the bigger community-based credit unions might have been in a better position. He also suggested that more time should perhaps have been taken to find out what credit unions’ ambition was and why credit unions were really taking part. He said that he was not sure that all credit unions on the project signed up for the right reasons, that some were seeing additional funding as a type of grant funding, and this was compounded, he said by the need to sign up high numbers to meet the requirements of the contract.

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“I think once the project was underway…if Fiserv had made a better fist of developing it earlier and making it fit for purpose, rather than just sticking it into credit unions when they were not really quite ready, would have made a big difference.”

Clive went on to say: “I know Voyager made mistakes as well… they told everyone they were open for business and of course that caused the whole thing to crash and overwhelm them with telephone calls and things they couldn’t handle. But if they were readier and trialled it more incrementally then it still, it might just at the end have worked, at least for some credit unions.”

Louise Galbraith commented on the size of the project in relation to ABCUL, and Cornerstone as it existed then. “Maybe, she said, “a company can’t run a project that is bigger than itself, maybe that never works, maybe the incumbents always feel swamped and overwhelmed and overcome by the juggernaut that a big project can be. She suggested that the DWP should perhaps have brought in a bank or a software company to run the project, which would have prevented problems caused by barriers of forming a team and coming to a common understanding when people came from very different backgrounds. It was, she said, “almost like a reverse takeover and that’s how people behaved as though they felt like they were being reverse taken over and there was the emotional response of the company like that.”

If, she said, Fiserv had met their commitments, “Everything would have been hunky dory… we would have then learnt that the credit unions couldn’t take it on as fast as they thought they could, we would have hit another problem, but it would have been a very different problem.”

Regarding the platform, Matthew Redgrave said, “on a purely technical level it has never worked properly. And if anybody at Cornerstone or Fiserv say to you, it works fine, they’re just not telling the truth. And I’m sure on the margins where people have done something wrong or been badly trained or have performance issues or whatever, all of that could be true but it doesn’t work properly.”

He added, “Fiserv will tell you that thousands of credit unions in America work on this platform with no problem and I think that is true but also is not the point, because the way this was delivered and the market that we have is different and in this country with the way that CUEP delivered it, it hasn’t worked.”

Governance

Regarding the Governance, David Dickman said, “If I’d stayed on, I’d have wanted to have a specific measure and more control of how the money was spent and where it was going, and I don’t ever think that was clear. You know these IT things just gobble up money. Possibly if I’d have had the authority, I would have sought to have better representation on the board from other specific credit unions, in other words expanding the non-exec directors to people actively involved in the sector, which might have got better buy in on a much broader scale.”

On the structure David Dickman said: “In hindsight it would have been better to have a flow chart and a structure chart of the group position, so ABCUL, Cornerstone, and the

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Foundation, how they were interlinked, how they all had separate authority and autonomy, I don’t think it was ever fully clarified.”

David Dickman also stressed the importance of control, he said that key milestones and value for money assessment should have been brought in very early so the board could see “where’s the payback, what’s been achieved, what have we got for what we’ve spent, I’m not sure if any of those measure were brought in. But it could have been, I don’t know.”

Regarding the structure of the governance and the Project, Louise said, “Another main lesson, is that there needed to be more clarity about who was able to make decisions within the project and Cornerstone itself.”

Don Kehoe stressed his view that things don’t fail because of one problem but said that he thought that the DWP had a really stifling effect because of their control of the money and how that fed through. He suggests that it would have made life easier if the money had gone through Cornerstone, rather than ABCUL. At the point that Cornerstone started delivering CUEP and moved away from just delivering its existing products, he said, somebody should have been appointed to lead the company and own it going forward.

Training and Readiness

Jonathan Glennon said that he would have put a lot more resource into BAU, that it should have been asking how the credit union could get ready for BAU. On skills gaps in finance in credit unions he said, “ABCUL knew that, Cornerstone knew that, so what are we doing to negate those issues, to mitigate them. It just didn’t seem to have any thought on that really. It’ll be alright on the night seemed to be the main mode.”

Jonathan suggested that with all the contractors and skilled individuals employed – Financial expertise was missing an account/finance manager should have been in place as it was clear getting control of the books and being prepared for auditors, board reporting and regulatory requirements were key.

Robert Kelly said: “I think we should have invested more in ensuring that the credit unions understood the scale of the change, what they were signing up for and the cultural change that was necessary. I think credit unions thought they were swapping one system to another and fundamentally it wasn’t.”

Barry Duggan identified the lack of a training before the implementation as something not to repeat. “You could have had that a lot more before going live and there was none of that.”

Staffing and Leadership

Joe Hegarty stressed the importance of having the right person at the top in charge of the project, He said, “I do believe it’s because they didn’t have a project manager from the beginning.”

Stephen Walsh said, “It should have been much more disciplined in terms of the project management. It needed leadership and leadership simply wasn’t there.”

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Others commented on the importance of leadership throughout the project. Robert Kelly and Don Kehoe both said that there should have been a separate Chief Executive appointed for Cornerstone.

Key things to change, Beth Welsh said, would be “staffing and the move to a permanent model. I think if that had happened and they’d looked at the system more closely with East London I think we’d be in a very different situation.”

Jonathan Glennon said, “You don’t train a contractor because that person is too highly paid and has got an individual skill which is why they’re sat there to be trained by someone else is just not the way they should be used.”

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Lessons Learned - In your opinion what are the key things that you would do the same about how the Project was envisaged and executed to achieve a more favourable outcome?

Remaining on lessons learnt, interviewees were also asked if there was anything they would do the same.

The selection process for the IT supplier was picked out by Don Kehoe as something which he thought was done well. Jonathan Glennon thought the choice of platform was the right one. “From what I’ve seen of the other companies and what they could offer and what Fiserv, albeit delayed, did deliver, I think those decisions, from an outsider’s perspective, it seems like it was the only viable option.” Joe Hegarty, Barry Duggan and Maria Hughes reiterated that they would want to retain the customer facing digital aspects of the platform.

Robert Kelly said that he would want to retain the, “aspiration and the objective that was set at the start, which was to drive aspiration within the sector to deliver more modern services and accessibility for members and the need for credit unions to challenge themselves around transformation and sustainability.”

David Batten said that the early stages felt like they were, “really good”, with the pathfinders who had a high level of operational credit union experience and expertise taking the lead. “That’s what I think worked really well, was having the end-user credit union experience in the beginning, I’d have kept that all the way through and then maybe by doing that there’d have come a point much earlier in the process where fundamental changes to the platform or to whatever was being delivered would have happened.”

Louise Galbraith said that she was still firmly committed to the particular kind of documentation she used within the project and would use the same methodology again, as she knows how much long term value the resources have. She reiterated that she thought that the website product was well done and that ALD was a very smart product. She suggested, however, that Cornerstone was very weak on pricing because of what she saw as a ‘charity mindset. She said there were good relationships built at a team level but summed up: “It’s hard for me to argue for a positive outcome when from the investors, the buyers’ point of view it’s a complete unmitigated disaster.”

Matthew Redgrave said: “I can’t think of anything good that’s happened, really. We’ve learnt a lot a lot. In a funny way you do learn from failure, so I’ve learnt things and other members of the board have. But I would have been quite happy to not learn them, frankly. That’s not a compliment to the project because that wasn’t the point of the project.”

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Lessons Learned - Is there anything that you believe you as a credit union could have done differently to secure a more favourable outcome from the Project?

Live credit unions were asked if they thought they could have done anything differently that would have secured a more favourable outcome. Their responses are summarised below, by credit union.

East London Credit Union – Matthew Redgrave

Matthew said: “Firstly, if we had our time again, we would not have gone first, because it’s a general rule that you shouldn’t do it and there should not have been financial inducements to make someone make a mistake, so that’s a kind of governance error from Cornerstone in my opinion.”

Matthew mentioned that the credit union had had some personnel problems but, he said, “without CUEP, we would have been able to solve them and had time to solve them. When you throw CUEP on top of it you just end up doing that and nothing else. As a volunteer director, I don’t know how many hours, days I’ve spent over the last two years dealing with this, taking time off work, doing conference calls in the middle of the day, like this, endless meetings. It has created a phenomenal amount of work which has prevented us doing our duties and that’s why to some extent our problems are a direct result of CUEP and to some extent they’re indirect, because they’ve taken our focus off what it should have been.”

Voyager Alliance Credit Union – Joe Hegarty, Barry Duggan, Maria Hughes and Jonathan Glennon

Joe said that they could have taken a sideways step when the two credit unions due for transformation ahead of them stepped aside and said they weren’t ready. “But because we’re a well organised, professional credit union, we thought we were as ready as we can ever be, we’re not going to be more ready in six months, we’re ready now, so we took the decision not to take a sideward step and maybe that was the wrong decision. He added, “but the project wouldn’t have gone anywhere if everybody had done that. So going live was a big mistake, probably. But in the long term we’ll probably still have a digital platform, so all the pain, all the costs we’ll come out of it a stronger credit union.”

Maria said, “we should have trusted our own instincts a little bit more, that was taken away from us early on, we lost control of our own credit union, if we did have to migrate to another platform, we’re better equipped now, we know how communicate with the members a little bit better, we wouldn’t hand over responsibility.”

Joe said that he thought that the credit union’s communications with their members went awry initially. He explained that they lost control of their Facebook page so members could post comments, but the credit union could not respond. When they were locked out of Facebook, they found that they could not contact the organisation and it took some time to rectify the situation.

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Joe said that they were initially swamped with phone calls from members. “We were getting thousands and thousands and thousands of phone calls every day.”

Jonathan said that he thought that there’s individual blame with the credit unions but that they were, “playing with one arm tied behind their backs”.

He said, “they could have had more control and knowledge over their own membership and pushed back.”

He said, “I know Voyager dropped 12,000 text messages as a group to all their members and that caused absolute panic but the project management around that wasn’t good.”

He said that they should have been helped more with this by the project team. “So even basic things around that like, do you want to go and employ a load of temps to answer the phone, we’ll do some training with them, or you’ve only got like 30% of your members online at the moment, shall we do that 30% first or do A-C that D to whatever.”

“So”, he said, “there are a lot of things the credit union shouldn’t have done, but if you’ve not got a good project management team and their delivery is poor it’s almost as if you’re fighting fires aren’t you?”

“It does still come back to if the project isn’t managed well and it’s all over the place and its different special interest groups coming in from different contractors and no-one’s looking at where the skills gaps were, and the trainers aren’t ready, it’s almost impossible to say what the credit union should have done differently.”

Pioneer Mutual Credit Union – Stephen Walsh and Beth Welsh

Beth said that while she thought there were things that the credit union would have done differently, she didn’t think that they had a lot of choice on the decisions that they made, and they felt forced into a lot of decisions.

Beth said, “With hindsight we would have got ABCUL to take the contracts on our behalf and cover ourselves risk wise…but that was at the advice of our trade body and DWP so there’s obviously that level of trust and I think we wouldn’t go in so trustingly in future to something like this.”

“With the closure of this project, there’s a lot of ‘this’ll never work, you can’t do it’ and the failure has played into that and now people have a fear to do anything new and I think that will remain for a good few years.”

Hoot Credit Union – David Batten

Hoot Credit Union did not actually go live with the Agiliti platform but were fully engaged in the process that led up to the transformations. David said, “I think from our point of view we believed far too much far too early in what was said was going to be delivered and we hitched our wagon to this engine without knowing what it was that was going to come out at the end. And I think that was a mistake that we made.”

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He said that his credit union tried to mitigate that by participating as much as they could in developmental sessions that happened once the platform begun to materialise, “but I think it’s hard to say that we could have done any more of those sessions because we did a load of them.”

“I don’t think there is any more that we could have done to alter the outcome of it.”

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If you were forced to choose one factor that you believe was most responsible for the disappointing outcome of the Project, what would it be?

The wide range of issues raised in these interviews reflects how important its success was to those involved in it. It was difficult for most people to provide one factor that they believed was most responsible for the failure of the Project, but a number did, and these are summarised below.

 Difficulties built into the DWP Contract including back-to-back arrangements  Structure of the Project  Lack of understanding of needs of credit unions from supplier and much of Cornerstone.  Too little input from credit unions in design after the early stages  Wrong credit unions chosen for transformation and timing of go live.  Poor delivery from supplier and poor monitoring of project against delivery  Failure to make platform fit for purpose ahead of implementation  Lack of training before implementation  Failure to ensure that credit unions understood the cultural scale of change  Leadership – lack of consistency and bad management.  Turnover of staff and failure to move to a permanent staff model sooner

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Appendix iv. List of participating credit unions

All credit unions were given the opportunity to opt out of being included in the following list of participant credit unions. The lists exclude a small number of credit unions that wished not to be included.

Live credit unions (those that migrated to the Model Credit Union)

East London Credit Union Ltd Retail Credit Union Ltd T/A retailCURe (later merged with Voyager Alliance Credit Union Ltd) Voyager Alliance Credit Union Ltd

Transforming credit unions (those that signed up to Model Credit Union)

1st Alliance (Ayrshire) Credit Union Ltd 1st Class Credit Union Ltd Ayrshire Credit Union Ltd Bacup (Lancashire) Credit Union Ltd BOOM! Credit Union Ltd City of Plymouth Credit Union Ltd Clevr Money Credit Union Ltd Darlington Credit Union Ltd Dumbarton Credit Union Ltd East Sussex Credit Union Ltd Eastern Savings & Loans Credit Union Ltd Erewash Credit Union Ltd TA Derbyshire Community Bank Hoot Credit Union Ltd Hull and East Yorkshire Credit Union Ltd Just Credit Union Ltd Kent Savers Credit Union Ltd Lincolnshire Credit Union Ltd London Plus Credit Union Ltd Money Box Credit Union Ltd New Central Credit Union Ltd NHS (Scotland And North England) Credit Union Ltd North London Credit Union Ltd Northamptonshire Credit Union Ltd TA Harvest Money Pentecostal Credit Union Ltd Pioneer Mutual Credit Union Plough & Share Credit Union Ltd South Manchester Credit Union Ltd SurreySave Credit Union Ltd Westcountry Savings and Loans

Growth credit unions (those that signed up to initial CUEP contract and received Payments for Growth)

2 Shires Credit Union Ltd Bradford District Credit Union Ltd Bridgend Lifesavers Credit Union Ltd Bristol Credit Union Ltd Cambrian Credit Union Limited (formerly North Wales Credit Union Ltd) Cardiff & Vale Credit Union Ltd.

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Cash Box Credit Union Ltd Central Liverpool Credit Union Ltd Chesterfield & North East Derbyshire Credit Union Ltd Clockwise Credit Union Ltd Croydon, Merton & Sutton Credit Union Ltd Enterprise Credit Union Ltd Gateway Credit Union Ltd Grampian Credit Union Ltd Hartlepool, East Durham, Tees Valley & North Yorkshire Credit Union Ltd Hillingdon Credit Union Ltd Knowsley Mutual Credit Union Ltd LASER Credit Union Ltd Leeds City Credit Union Ltd Lewisham Plus Credit Union Ltd Loans and Savings Abertawe Credit Union Ltd London Capital Credit Union Ltd Manchester Credit Union Ltd Moneywise Newcastle Credit Union Ltd NE First Credit Union Ltd Norris Green Credit Union Ltd Nottingham Credit Union Ltd PCS Credit Union Ltd Pennine Community Credit Union Ltd Police Credit Union Ltd Pollok Credit Union Ltd Prince Bishops Credit Union Ltd Rainbow Saver Anglia Credit Union Ltd Sale Credit Union Ltd Sefton Credit Union Ltd Sheffield Credit Union Ltd Smart Money Cymru Credit Union Ltd Solent Credit Union Ltd South Tyneside Credit Union Ltd Staffordshire Credit Union Ltd The Co-operative Credit Union Ltd TransaveUK Credit Union Ltd White Rose Credit Union Ltd

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