Core processing is never a settled matter. A relentless stream of tweaks, improvements, and leaps in technology makes it a two-edged sword: While it increases credit unions’ efficiency, it also can expose deficiencies in their current practices.
“We’re seeing a general trend in core processing technology where distinct modules deal with specific elements, such as online banking, mobile services, general ledger, and so on,” says Ryon Packer, senior vice president, enterprise product strategy, at Fiserv. “We call it ‘ecosystem evolution,’ where the core becomes more of what it’s supposed to be.”
An analogy might be the orchestra conductor who doesn’t play an instrument but makes the notes of all instruments mesh into a coherent whole. “Using an integrated system gives financial institutions easier access to various data and allows for better adherence to regulatory requirements,” Packer says. “We characterize it as ‘1 + 1 = 3’, meaning the module coupled with the core processor creates a synergy that is a third element.”
Ten or 15 years ago the core was supposed to be all-knowing and all-serving, says Barb Lowman, Fiserv’s senior vice president, account processing solutions. “But now modularization makes it so there’s no one-size-fits-all attitude. Credit unions can now see a menu and bundle which core services they want.
“Credit unions look to functionality and numerous touch points in their relationships with members,” she continues. “Otherwise, if a credit union is struggling to reconcile different core system modules, it can detract from service levels.”
“Credit unions that struggle to integrate multiple vendors’ systems eventually reach a point where the money they’re investing in integration can’t be applied elsewhere in the organization, such as offering members lower interest rates,” Packer adds.
Tim Maron, director of business development services at Corelation, expands on the modular concept. “Our XML middleware, KeyBridge—KeyStone is our core software—gives credit unions the ability to open their system to third-party providers without jumping through hoops. Because we use our own middleware, the entire transaction set is available to third parties. Therefore, clients get to control what their members see.”
Lowman is on the same page. “If we own the core processor a client is using and that client wants to integrate another company’s module, we can do that. We also will ask clients what they like or don’t like about their current core processing system. What do they want to provide for members that they now can’t? Much of the answer depends on their select employee groups or current platform. But much of what they request is simply, ‘I need better tech.’ ”
What oft en happens, she adds, is that frustrations mount as credit unions attempt to integrate data from different vendors’ products. “Their information technology people might be able to do manual workarounds for a while, but as credit unions add components, it becomes more burdensome to do this.”
Packer says credit unions have gotten smarter about integration. “In the past, they might have bought a module and found that hooking it up to the rest of their core processing system was a problem from the start. As they peel the onion, looking for ways to integrate systems, they run into the problem that many vendors’ offerings are not open-source.”
Spencer Jones, product management executive, integrated core solutions, at D+H, says his company’s strength is its “willingness to partner with other vendors’ solutions. Some vendors can be heavy-handed, telling credit unions they must buy their products exclusively.
D+H offers two core systems: UltraData Enterprise and Phoenix-EFE, the latter of which many credit unions use as they get deeper into commercial business, says Jones, who’s a proponent of the omnichannel approach to service.
“Why have six different ways of dealing with the branch, call center, online, smartphone, tablet, and desktop PC?” he asks. “Why give members different experiences as they shift from one channel to the other? While bankers tend to look at channels as separate letters of the alphabet, we say the best way to look at them is to join those letters together to create a sentence.”
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