Cloud computing and business process outsourcing will help credit unions maximize efficiencies and reduce costs, says Joerg Engelhardt, vice president, financial industry marketing, for Diebold.
Credit Union Magazine recently asked Engelhardt how virtualization, cloud computing, and other technology innovations will affect the financial services industry—and how credit unions can use technology to pursue younger members.
Credit Union Magazine: How will virtualization and cloud computing change the financial services industry?
Engelhardt: First, it’s important to note that virtualization isn’t as new as some may think. Virtualization has been in use for more than five years in the financial services industry, with the major impact being felt from an operational efficiency standpoint through the consolidation of servers in information technology [IT] infrastructure.
Cloud computing is the latest trend to use virtualization. It brings the utility of computing software applications to the financial services industry through a combination of public, private, or hybrid cloud vendors.
The result of cloud computing will be reduced capital expenditures and a shift to an operational expense model that grows with the business and puts more risk in the hands of vendors rather than credit unions.
An application of virtualization specific to the financial services industry is with virtualized ATMs. These will allow credit unions to address their most critical business priorities of improving operational efficiency while delivering an optimal consumer experience.
By removing the onboard computer from an ATM terminal, a virtualized ATM network ties each “ghost terminal” in an ATM fleet back to a centralized computing resource.
A single data center provides a lower total cost of ownership by enabling faster failure recovery and more rapid software upgrades and services deployment.
Credit Union Magazine: How important is cloud integration—so all technologies operate on common platforms? Do you see this happening soon?
Engelhardt: One of the current challenges in the technology space is the difference in software platforms and languages. Often, providers and credit unions aren’t using the same systems, and a customized solution is required to integrate a provider’s solution with the credit union’s platform.
The extra step of customization to ensure the two systems can communicate can be cumbersome and costly.
Before credit unions realize the benefits of fully integrated SaaS [software as a service] or cloud-based services without the extra cost of customized implementation, common platforms and common languages need to be established.
Work has been done over the last five to seven years in achieving consistency in the enterprise software space, which will play an important role in establishing integration for cloud-based services. But there’s still work to be done.
Consistency in software platforms isn’t an overnight change, but heightened awareness of the issue and lessons learned from the enterprise software world should help.
Based on what we see today, there will be significant progress made in the next 12 to 18 months in establishing common platforms for credit unions and their partner systems in the cloud.
As services-based models become the cost-effective choice among financial technology providers, credit union IT executives will see a decrease in customized implementation costs as consistency is achieved.
Credit Union Magazine: CUs need to attract and retain younger members to grow. How will technology aid CUs in this pursuit?
Engelhardt: While attracting and retaining younger members is important, credit unions must not lose sight of other valuable demographic sets. Baby Boomers and Gen Xers are the bread and butter of a credit union’s member base, and their needs should be considered, too.
The purchase of iPads among middle-aged business men and women, and their eagerness to conduct financial transactions on those iPads is stunning. A 50-year-old customer and a 24-year-old customer may look very similar to a credit union when it comes to channel use, so development, implementation, and member education of these solutions should take both demographics into account.
As time goes on and older generations become more confident with technology, their use of electronic channels—including mobile—will mimic that of their younger counterparts.
Credit Union Magazine: What other technology trends do you see coming?
Engelhardt: It may not be the first thing one thinks of when asked about “technology,” but business process outsourcing has begun to make an impact in financial services over the past 12 to 18 months. It carries a high value proposition that’s enabled by technology and allows financial institutions to maximize efficiencies and reduce costs.
Outsourcing applies to many areas of financial services and it can have a significant impact on all of them. For example, deposit automation is a technology that’s fairly mature, and it continues to be adopted quickly. But implementing deposit automation requires a financial institution to make a significant investment in areas beyond just the technology.
Other areas of financial services that business process outsourcing can positively impact include cash management, network processing, and security monitoring, just to name a few.