Core Processors Survey Mobile Landscape

New, vendor-agnostic standards should greatly improve product integration.

January 13, 2014
Tom Berdan sees credit unions’ relationships with their core processing providers taking on increased importance as the burdens on credit unions turn from a steady rain into a downpour.

“They’re facing pressures on many fronts—margins, personnel expenses, competitors, compliance, and consumer expectations,” says Berdan, vice president of product management for Harland Financial Solutions. “Consumers now wield great power thanks to the explosion in the use of mobile devices.

“The move to tablets and smartphones is a seismic change,” he continues. “Last year, smartphone unit sales eclipsed feature phone sales.”

Teri Van Frank, president/CEO of Share One, says the slowly recovering economy makes it harder for credit unions to fulfill traditional tasks.

“They’re not hiring marketing or collections people at the same rate as before, so our purpose is to help their employees who wear several hats be more effective,” she says. “Our core processing system is designed to make things easier and more efficient.”

And as older members become net savers rather than net borrowers, Van Frank notes, credit unions need to recruit younger members—as well as consumers with less-than-perfect credit histories.

“Most credit unions have not been aggressive at recruiting these consumers,” she says. “Part of appealing to younger members is keeping in mind they want instant gratification. If they apply for a loan, they don’t want to have to go to a brick-and-mortar branch to start or complete the process, and they don’t want to have to wait a long time for a decision.

“The faster you can make the process for them, the more likely they are to come back to you for other loans, checking and savings accounts, and other services,” Van Frank continues.

CUFX standards improve Integration

Symitar President Ted Bilke says other external factors are changing the face of core processing and the demands placed on it, including the increased volume of core conversions and consolidation among core processing providers.

One significant development is the adoption of new integration standards driven by the CUNA Technology Council through the Credit Union Financial Exchange (CUFX). This is a standards initiative designed to:

* Simplify integration and reduce initial and ongoing costs of independent vendor-provided and credit union-created offerings;

* Increase speed of delivery of new business functions across the credit union industry;

* Improve the member experience and employee efficiency; and

* Free vendors from repetitive, time-consuming, low-impact customization so they can focus their efforts on application innovation.

Credit unions must continually improve their technical infrastructures to best serve members and remain competitive. Integration standards such as CUFX promise to reduce inefficiency in connecting applications.


Experts from both credit unions and vendors are collaborating on CUFX to develop vendor-agnostic standards that make product and service integration across the credit union industry faster, easier, and less expensive.

Bilke says the credit union movement needs these standards to reduce the costs and complications involved with integrating with third-party providers. This will help credit unions provide offerings such as mobile financial services.

“Mobile apps are the hottest thing now,” he says. “Credit unions did an extensive early adoption of first-round apps. Now they want to differentiate themselves by segmenting the market according to device and experience—from simple and straightforward to elaborate financial management capabilities.

“But it’s sometimes frustrating for them to find the right solution,” Bilke continues. “There’s an element of doubt. Integrity and standardized interfaces are important.”

NEXT: Single suite or best of breed?

Single suite or best of breed?

The great divide in core processing, Berdan says, is single suite versus best-of- breed solutions.

“Can a core processing provider put together a range of capabilities— marketing customer information file system, lending, channel management, payments, content management—in one suite versus blending, interfacing, and managing several different systems? When I was in the banking industry, we had 28 separate systems for addressing all those different functions,” he says.

“Credit unions traditionally have been best-of-breed buyers and users,” Berdan adds. “However, now with consumers doing so much via mobile and voice, all self-service channels have to look, respond, and update the same. Consumers expect the same experience throughout the enterprise.”

Providing this consistent, seamless experience through multiple vendors can present great maintenance and upgrading difficulties, Berdan says.

“There’s simply a lack of bench talent among most credit unions to be able to efficiently and effectively manage multiple systems,” he says.

Bilke agrees there can be benefits to having a single supplier. “It’s what we sometimes call ‘one throat to choke,’ ” he says. “A single supplier has to take ownership for things that go wrong.”

But, he adds, credit unions want things the way they want them, “and that oft en means getting something from us and something from somebody else.”

Bilke says Symitar addresses that demand through its Vendor Integration Program (VIP) which relieves credit unions from having to reconcile different systems.

“Through VIP,” he says, “we deal with more than 60 other vendors, testing their systems and ours in different configurations and levels of development—from first stage to beta to finished—to make sure they work together efficiently.”

The quest for continuity

Continuity solutions have become a hot trend as well, Bilke notes.

“The quest is on for genuine 24/7/365 capabilities so call centers are always staff ed or members can start a car loan application at 2 a.m. and get it processed right away,” he says.

The pursuit of enterprise-wide encrypted security solutions also will become more prominent in coming months, Bilke adds. “This involves the encryption of everything— reports, images, loan applications— into a common storage system. It makes perfect sense to secure all systems at the same time.”

Auditors have encouraged credit unions to secure all their channels, fueling this push.

“More channels means more risks,” says Bilke. “The bad guys are shifting from attacks on Tier 1 financial institutions to smaller financial institutions in the hope of finding more easily compromised security.”

In the meantime, core processors have responded quickly to consumer pressure for maximum convenience, which increasingly excludes brick-and-mortar branches.

Among the features Share One offers to improve service and broaden credit unions’ appeal to current and potential members, Van Frank says, are:

* Member service via text messaging;

* Instant loan decisioning; and

* Online document transfers that eliminate the need to send physical documents back and forth, or for a member to have to appear in person.

“Next year we’ll introduce ‘tablet branches,’ where our clients will have the capability of going out and recruiting members on the spot via tablet presentations and sign-ups,” Van Frank says.

In the pipeline for Harland Financial Solutions, Berdan says, is an increased focus on:

* Channel integration;

* Compliance. “Five years ago, we were devoting one-third of what we are now to compliance in terms of time and resources,” Berdan says; and

* Payments. Financial institutions are determining how they’ll stay engaged in the payments game: person-to person payments, bill presentment and payment via devices, and mobile acceptance capabilities for merchants.

“We’re focused on keeping credit unions relevant in that arena,” Berdan says.

He warns that as core processing continues to grow in sophistication, credit unions run the risk of falling behind. “If you don’t keep up on new features and functionality, there’s a danger you might not even know what’s in your system.”

There have been cases where clients asked Berdan for a feature that’s already part of the system. “They didn’t learn it well enough to know that,” he says. “In our contract with new clients, we include a ‘contract checkpoint,’ where at six or 12 months we come back to a client to assess how well they’re using our product, whether it’s one part of the suite or the entire system.”

For Van Frank, the whole point of core processing is to make transactions and requests easier for members by responding to them quickly.

“They’ll see you are making life less expensive and more convenient for them. You’re helping members conduct their financial affairs without having to spend a lot of time or be in a particular place to do so.”