Last year has been a challenge for credit unions across the United States, forcing unprepared businesses to adapt to new working practices. The impact of Covid-19 was universally felt across the industry with many having to deploy untested business continuity plans. Based on recent survey results, it is becoming clear that existing operational processes and technology architectures were not optimized to be redeployed from an in-office to a work-from-home strategy. The increase in the number of financial transactions that credit unions have experienced this year has added to the pressures of largely disparate operational frameworks.
Heading towards the budgetary period of the year, credit unions need to take stock of their IT estate and determine if this is the right time to invest in new technologies. Revisiting core banking processes should be a top priority. Are the right systems in place to cope with increasing transactional volumes?
One of the key focuses will be on reconciliations. Often spread across multiple departments or business units using a blend of legacy systems, in-house built platforms and spreadsheets, reconciliations form the bedrock of any financial services company. Credit unions face challenges in managing data for the key services they provide their members with such as savings and checking accounts, credit cards, payments and ATMs to mention a few. This approach often results in inaccuracies, delays to management or regulatory reporting and is fraught with risk.
Looking ahead, there are a number of things to consider:
Is the current operational process fit for purpose?
If the blend of manual, home-built databases and legacy software mentioned above sounds familiar to you then the answer is, no. The reality is that the saying “if it isn’t broken, then don’t fix it” is no longer true. Technology has advanced too much for anyone to ignore its impact. Our cell phones have a million times more power than a NASA supercomputer did when we went to the moon. Yet many of us have not realized that this technology is also available to operations and finance teams. This becomes more evident when we look at each of these individually:
A mainstay in any finance team, spreadsheets have been with us since the late 1970s and let’s be honest, they will continue to feature for years to come. However, for reconciliations this is not the case. Prone to error in formulas and macros they form operational risk as there is no ability to audit at a transactional level. The loss of control becomes more evident as transactional data volume increases.
There was a time when systems were built in-house using Microsoft Access or other databases to overcome high volume challenges or complicated processes. The reality is that these systems are often outdated and reliant on intricate knowledge of how they were built, which presents problems when the person who built the system leaves the company. The key problem with spreadsheets is the lack of access control which results in limited audit-ability.
It has been almost 30 years since the first wave of reconciliation software came to market. Many of the legacy tools in place across credit unions today still run on the underlying code of the 1990s with limited functionality added in the intervening years. A stark contrast to the evolution of computing power and innovation taking place elsewhere. Commonly single-issue tools, legacy reconciliations tools are not usable across the multiple services.
On-premise versus cloud
It comes as no surprise that the topic of cloud has risen to the top of the agenda in most boardrooms this year. An abstract concept for most in the credit union space for the past few years, cloud-based solutions found new life for anyone still harbouring misgivings around security concerns.
The challenges presented by a year of change have demonstrated the limitations of local IT infrastructures. Business teams with domestic computing setups at home were disadvantaged by limited bandwidth, remote working tools and well known latency issues with VPN and Citrix connectivity.
The benefits of moving to a cloud-based solution massively outweigh continuing with the current infrastructure. The cloud is more cost effective, operationally resilient, easier to access and delivers unprecedented computing power. As we consider budgeting for the coming financial year, CEOs will be considering the advantages of cloud solutions compared to the space and resources dedicated to internal servers.
Making sense of it all
The result is that many credit unions are emerging from 2020 with a bold new vision of the future. Implementing cloud-based systems should not just focus on modern technology but provide holistic tools that benefit the whole business, not just one department. End-to-end enterprise solutions are increasingly popular for a reason.
So, when searching for a new reconciliation system, bear in mind three key considerations:
- Is it flexible enough to be used across all business services?
- Is it cloud-based?
- Does it provide operational resilience?