Credit unions must make difficult decisions when investing in technology, as their wish lists tend to be much more substantial than their budgets.
To help prioritize projects and expenditures, develop a strategy that spells out your credit union’s overall technology direction and goals, says Chris Saneda, senior vice president and chief information officer at $2.4 billion asset Virginia Credit Union in Richmond.
Saneda says credit unions should base their technology strategies on members’ needs with the ultimate goal of providing an exceptional member experience.
“Opportunity isn’t found in deploying splashy products,” Saneda says. “Opportunity is found in managing the member experience in an integrated fashion.”
Coping with tech costs
Most major technology initiatives come with a major price tag. That’s one reason why nearly 60% of credit unions say this year’s budgeted information technology (IT) expenditures will outpace last year’s, with 17% of credit unions budgeting increases of 10% or more and 42% budgeting increases between 1% and 9%, according to CUNA research.
Software and maintenance costs have increased 7% each of the past four years at Virginia Credit Union, Saneda says. Fortunately, the credit union bulked up its IT budget five years ago and has been able to absorb the rising costs up to this point.
Saneda says “pay by the drink” services can be particularly problematic. He suggests trying to come up with solutions internally first, as a way to control costs. Virginia Credit Union built its own online membership- application tool last year. Online membership applications now are outpacing its busiest branches for new membership growth. The credit union will save more than $200,000 over three years compared with off-the-shelf packages that are priced per membership application, he says.
“For the most part, I’m not a fan of managed services and cloud services,” Saneda says. “But we must watch, assess, and consider these capabilities to ensure we’re getting the most from our technology dollar.”
A tech crossroads
A few years ago, the board and management team at Nassau Financial Federal Credit Union sensed it had arrived at a technology crossroads. Members’ technology expectations were rising, but the credit union’s infrastructure presented some challenges for meeting those expectations.
As a result, the credit union started to look for a new core processor in 2011—an undertaking that Everett Boccafola, board chairman, called “crucial” to its long-term viability.
This year, Nassau Financial Federal rolled out Symitar’s Episys system, telling members it would be the launching pad for cutting-edge services. The $392 million asset credit union in Westbury, N.Y., which serves more than 30,000 members through its four Long Island branches, quickly delivered on that pledge.
Nassau Financial Federal improved its online delivery, added mobile services, enhanced online security and functionality, and improved its customer relationship management (CRM) system.
But that didn’t come cheap. The credit union had to increase its IT budget by 35% in 2013 to account for the conversion expenses—new hardware and soft ware, overtime and travel for training staff, and equipment installation and testing.
From Robert Reh’s perspective, that money’s not just well-spent, it’ll offer a positive return on investment over time. “We need to have the foresight to invest in our future success, and not be shortsighted in trying to focus only on today’s financials,” says Reh, chief information officer at Nassau Financial Federal and a CUNA Technology Council executive committee member.
Many credit unions, like Nassau Financial Federal, are aggressively adopting new technologies to meet members’ demands for remote access to their accounts. But many credit unions say a large portion of their IT spending is nondiscretionary.
Research from Abound Resources—a CUNA Strategic Services alliance provider—shows that much of the industry’s increased IT spending will go toward increases in vendor contracts or inflation adjustments. And the slew of regulations in recent years is another nondiscretionary expense, requiring credit unions to introduce or upgrade systems to remain in compliance.
It’s not terribly surprising, then, that planned expenditures for new or replacement technologies is down in almost every category, according to Abound Resources, even though overall technology budgets are up. The exception is mobile remote deposit capture, which Abound calls the one “must-have” technology.
“I have to allocate a lot of my resources just to make sure what I have is functioning well and that we’re getting everything out of it,” says Brandon Smith, vice president of finance and operations for $98 million asset Reliant Federal Credit Union in Casper, Wyo.
“You’d think you should be able to implement IT solutions and save money, and they’re supposed to be more efficient,” Smith says. “But every time you do it, it seems like there’s more work for you to do, and maybe additional cost.”
So how do credit unions, especially those with limited resources, offer cutting-edge services to members and balance their budgets?
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