Your credit union needs to be relevant to the core if it is going to continue to exist in (or more likely reclaim) its privileged position as an epicenter of your community.
Correction, your credit union needs to be relevant from the core.
Your core technology, and a business strategy built around that technology, should be the primary engine and energy driving your institution deeper into your community. By that, I mean it should be empowering you to increase and strengthen your credit union’s position as a gravitational force on consumers, businesses, merchants, and other organizations in whatever community you serve.
Despite the various, manifold, and predictable outcries I’ll inevitably receive from (irrelevant) core vendors as a result of writing this piece, I assure you of the following: this idea of core driven relevance is not a theory, it’s an easily verifiable fact.
To understand the immediacy of this fact, all you have to is turn on your smart TV, your phone, your laptop, or whatever digital device you prefer and use your favorite non-financial services/non-banking technology. Better yet, turn on your favorite non-financial services app on all of the above devices at the same time.
Their formula for success and consumer satisfaction is not complex:
- Amass and control data about you as a customer in a centralized, person-centric, extensible/accessible database.
- Use that data profitably, and protect it as if it were gold (because it is).
- Extend that data out to the consumer via consistent, unified, adaptable digital experiences.
The third prong of this common sense strategy is where things tend to get tricky for credit unions. Put simply and succinctly, this is because most credit unions control very little when it comes to their ‘best of breed’ digital channels and modern member services. We are now living in what DaLand CUSO is calling the Platform Predisposed or Platform Saturated era. This era is largely the result of the ways in which the same tired, traditional, and aged core vendors (struggling to support steps 1 and 2 above) also (temporarily) solved your online, mobile, and digital channel demand problems (in the 90s and 00s) by buying and/or reselling bolt-on solutions (which then came to be known as ‘best of breed’ options) around their core.
Rather than looking ahead and supporting/anticipating a need to modernize your operations from the core, most core vendors created complex and cluttered universes of platforms around your core. The result for your institution is expensive, inefficient, high-friction operations and fragmented/siloed (less profitable) data. The result for your member is the functional equivalent of needing two different remote controls and an AOL dial up modem to access/view their favorite shows on-demand, on a limited few of the devices they desire (only after receiving a one-time pass code from a free Wi-Fi enabled toaster they received for opening a free checking account!).
The bottom line for your bottom line is this: if your core isn’t empowering you to follow a common sense roadmap for relevance in the digital era, then it’s not a relevant core.
More accurately put, if you find yourself (especially as an executive of a financial institution) constantly confronting reasons why your business objectives and strategic initiatives can’t be accomplished, then you’re allowing your outdated, overcomplicated core to drive your financial institution into irrelevance.
And yes, there are relevant core technologies and vendors serving the credit union marketplace which can position your financial institution to develop and execute a strategy around the three-step formula above. There are at least three of them. No, they’re not (necessarily) the three you ran into at your favorite annual or regional vendor or governmental affairs conference. If you would like a map to get to one of them, we can help. And no, we won’t charge you a portion of your core contract or savings to get there. That’s also an antiquated mode of business.
I recently read an article by an industry peer which mentioned the usual suspects and players, and profiled the challenges they’re facing modernizing their cores and keeping their client bases relevant (the other author’s opinion, btw, not only mine).
There were two things which struck me as core issues (pun intended) in the above mentioned article:
- The article spent an excessive amount of time predictably pontificating on how these vendors might solve their problems of relevance (and thereby the financial institutions’ crises of survival!) by simply adding some new features, new screens, and some desired new buttons and screens (or, what we affectionately refer to as obsession with button clicking and screen surfing).
- The author (astutely) remarks on the current trend of evaporation and consolidation happening in the community and small bank market. Further, he connects this to the struggles and limitations these local financial institutions are facing as a result of their core platforms and core vendors.
Regarding point one, above: your future as a credit union will not solidify or strengthen by talking to your core vendor about button clicking or teller screen surfing. Sure, this stuff is important; but, it doesn’t amount to a strategy or IT road map to keep you relevant. Further, can we as an industry finally agree to dispense with the dogma, stigma, and excuses around the intricacies of commercial services and business loans and why that’s an alleged reason to remain on outdated solutions!? These alleged complexities of the commercial business universe don’t seem to be preventing outside players (like fin-techs) from foraying into commercial accounts, investments, financial services, and lending. I would suggest that if you find a relevant core processor who has modern architecture and can amass and use data in an efficient and adaptable way (see non-financial/non-banking IT strategy steps 1-3 above), then that core can also support your aspirations and ambitions to dip your toes into commercial banking in your community. We know this, b/c we’ve seen it (and helped our clients actualize this reality!).
Concerning point two: your credit union is no different. Sticking by your antiquated legacy core is going to drive you into irrelevance. This will impact the lives of your members and the vibrancy and financial future/opportunities of the community around you. That said, the fact community banks are evaporating (in part because of irrelevant core vendors) is good news for your credit union. Perhaps the best news our industry has heard in 100 years. Savvy, sustainable, technologically sound credit unions can cement their position as an epicenter in their community using modern digital tools and strategies driven from their core. The evaporation of local banks is creating a vacuum into which your credit union should be attempting to expand its gravitational influence and mass. As consolidation occurs in community banking, and as more consumers are forced into relationships with mega/big banks and national players, there’s a pool of potential members likely looking for a relevant, digitally savvy, competitively priced, local steward for their data and financial future!
Don’t drop the ball! Or, rather, don’t lose the opportunity to strategically pick up the local data, keep it stored locally, and put it to use (profitably) in and for your local community!!
In an era of rapid technological innovation, modernization, and democratization (increasingly affordable, accessible, and usable to the general public) of powerful technology, there are only a few valid reasons to continue to tolerate technical limitations from your core processor: (1) an expensive termination clause in your existing contract; (2) broader benefits or strategic relationships with the parent vendor of the core processor; (3) a personal preference for awesome games of golf and great steak dinners the core showers upon you when they make their annual or quarterly visits!
The first two are easily overcome, especially if you have a strategy and map to move past them and offset their impacts to your institution. The third one … well, enjoy the steaks and tee times while they last! Hopefully your favorite steakhouse isn’t a local one in need of a capable local financial institution partner to keep them thriving.