There’s plenty of disruption talk in the financial technology space, and there’s good reason for it. From the GAFA giants down to the smallest upstarts, traditional financial institutions are facing threats from non-FIs like never before.
However, providers of legacy technology to financial institutions are facing even bigger threats.
Progressive credit unions can always find the technology they need. The question is where they’re going to find it. Which brings me to the topic of disruption in the core processing space.
A few years ago, I was convinced that the sudden appearance of new, allegedly modern cores in the marketplace was little more than a sideshow. As I figured it, they were destined to go the way of the pet rock. After all, I worked for one of the big guys, so I knew firsthand how complex and resource-intensive it was to put out a good core product.
I have no problem admitting when I’m wrong (probably because it’s so rare that I am), but this time I was dead wrong. New core platforms are indeed seeing success in the credit union space. Here’s why:
- New cores are designed to be open.
There’s a big difference between creating some middleware to allow a 30-year-old core to interface to new products and designing an API-driven core that practically begs to have new products integrated. There’s also a big difference between saying you’re open and actually wanting credit unions to integrate third-party products to your core. The new guys have the legacy behemoths beat hands down in this department.
Why aren’t the old-timers more open to the idea of being open? Glad you asked.
- New cores don’t force their own ancillary products down your throat.
Most new cores sell add-on software packages that enhance the basic functionality of the system. Some even build all their new features directly into the core and don’t charge for those new features at all. Either way, that’s a far cry from attempting to create a one-stop shop for every possible technology need. Remember that saying, jack of all trades, master of none?
That’s why legacy providers flinch when they hear open systems. A truly open system would make it as easy to integrate somebody else’s ancillary product as their own. And that would either hurt sales or force the legacy provider to build a better product.
- New cores are smaller and therefore nimbler.
Technology is moving faster and faster and faster. You can’t wait for your core provider to form a committee to read the TPS reports produced by the reporting committee. The profitability committee would probably shoot the whole thing down anyway.
New cores can make things happen now.
- New cores are hungry.
Success leads to complacency. Everybody knows that. It’s just as true in credit union data processing as anywhere else. And complacency inevitably leads to poorer service.
I can’t say what any of the new cores will be like 10 years from now, but I can tell you that today, they generally provide better customer service than the big guys. Credit unions buy technology based on features and functionality, but it’s the customer service experience that really makes the difference over time.
Think you’re limited to King Kong, Godzilla or Gamera when it comes to core processing? Think again. It’s a new world with plenty of new players.