Conventional wisdom once held that credit unions with more than $1 billion in assets should keep core processing in-house, while an outsourced solution or service bureau was better suited to all other credit unions.
And, so the thinking went, any credit union opting to outsource would have to relinquish control of how and when it conducted its processing operations.
But core processing experts say it’s time to toss out those old assumptions. “The technology has come a long way,” says Naseer Nasim, senior vice president at Fiserv. “The differences between in-house and service bureau delivery models are narrowing.”
In the traditional service bureau model, which is still the preferred outsourcing choice for many credit unions, vendors take over all core processing functions.
Today, however, credit unions can choose from a variety of outsourcing options that let them retain more control.
At Fiserv, for instance, one option offering a high level of control for clients is dedicated hosting, in which the service bureau assigns one of its servers to the credit union. “It’s similar to them having their own system in their own computer room,” Nasim says.
But the server is at Fiserv, and maintenance, upgrades, and security are Fiserv’s responsibilities, not the credit union’s.
Over the past five years, Nasim has seen more credit unions—including some of the largest—opt for some type of outsourced core processing.
“Asset size no longer determines the best delivery option,” he says. “It’s more a matter of what the credit union’s business strategy calls for.”
Symitar also is witnessing a movement toward outsourcing, says President Ted Bilke. Current in-house clients are migrating over, and more than half of Symitar’s new core processing customers are selecting some form of outsourcing.
“We’re also starting to see a few billion-dollar credit unions make that choice,” Bilke says, “and I think we’re going to see more.”
Part of what’s driving the shift is cost, Bilke explains. Credit union delivery channels have multiplied, making constant, uninterrupted connectivity at multiple points critical. With that, the cost of in-house core processing has climbed.
He says Symitar now sees more instances where the service bureau option doesn’t increase costs as it has in the past. “It’s actually becoming a savings opportunity.”
Still, the in-house model remains the top choice for many. In such cases, the key issue is maintaining total control of core processing, Bilke says.
Because outsourcing means giving up some measure of control, “you have to go into this with your eyes wide open,” he advises. “It’s difficult for a service bureau to be as nimble as you can be when you need to go into your system and change anything at any time.”
Failure to recognize that difference can lead to frustration with the outsourced model, Bilke says.
Stay tuned: The second of this five-part series examines how a hybrid of in-house and service bureau core processing systems can free up valuable technology and staffing resources.