How Banks, CUs Differ In Their Technology Strategies
Despite bank claims to the contrary, apparently there are some areas where the "walks like a duck and talks like a duck" analogy don't quite hold water, as one person who regularly swims with both banks and CUs says that one such area is technology.
"The difference we are seeing with banks compared to credit unions is that banks look at a longer ROI curve on technology investments," said John O'Malley, president of Lake Mary, Fla.-based Harland Financial Solutions, which, in addition to the many solutions it offers under its own name is also parent company to ULTRADATA. "Aside from their core systems, credit unions want to see ROI in six to 18 months. Credit unions want to see ROI on everything. They're looking for the quick-hitters."
O'Malley, who took time to talk about technology-related issues while in Washington for CUNA's GAC, said there are reasons credit unions are looking for the faster payback, not the least of which is asset size. But he noted that credit unions also have decisions on their tables that banks do not, most eespecially field of membership.
"Because credit unions have more of a focus on field of membership, their technology products have to support that," he said. "Banks look for longer-term efficiencies and rationalization of the infrastructure. Banks invest a lot more. The community banks and regional banks have technology infrastructures and a lot more focus on web deployment and XML. Credit unions are still looking at expanding products and services."
The hottest dish on the table for credit unions has been member business lending, a fact not lost on Harland. Its sales staff also often encounters some familiar faces around that table; ex-bankers who used to use the company's technology at their previous post. "A lot of credit unions have brought in lenders from a bank," he noted. "Our application is rule-based, so you need to have two things. You need to bring in some talent, and you need technology that is rule -or expert-based."
When it comes to member business lending, even the experts find their expertise being challenged, as there are a host of rules to follow. And even when following the rules to the letter, some miss the alphabet, observed O'Malley. "People don't think through the pieces of compliance, one of which is, 'Have you gone through the process in the right way?,' in addition to the documentation," he suggested.
As an aside, O'Malley pointed out that members who have business accounts shouldn't be viewed as somehow separate from members in general. "There is a general awareness that as credit unions expand into MBLs that people don't see the two-the business and the retail account-separately," he said. "As an example, if you fly an airline somewhere on business and have a bad experience, you're not going to think differently about that airline if you're going to fly it personally."
In the case of Customer Relationship Management (CRM), for which the company is also known, O'Malley observed, "You can have all the technology about relationships, but it's also about the analytics, the household's propensity to buy. It's about understanding that is what is valuable to you and them. We call it the one-view."
When asked about the job credit unions are doing getting that view and capturing data, O'Malley said there is a much better awareness now among credit unions about the need to do so. "There aren't many that don't recognize the need," he said. "It's a matter of prioritization. Credit unions have focused so much more on the infrastructure because of the dependence on the branch structure. And now there is a renewed focus on the brick and mortar."
When it comes to data, O'Malley readily acknowledges that there isn't just an abundance of member data available to credit unions, but too much information to sort through from vendors. "I think there is an oversupply of technology for the most part," he conceded. "We've had to come back and say, 'What is our foundation?' We do believe a lot of what were non-core technologies will be integrated into the full suite. It will be knowledge-based, and workflow will be the key, i.e., with business intelligence."
Within credit unions, O'Malley said Harland sees two overarching trends. "We see various markets, but the fundamental trend will be the expanding FOM and the other trend will be that ultimately, the credit union will need better information. We will be investing heavily in the infrastructure of how can we influence workflow for efficiency and for the purpose of improving the knowledge of the member. The last thing the industry needs is another core provider. It's who can integrate the best."
Outside of credit unions (for those of you unsure, yes, there is a world outside credit unions), O'Malley offered a unique perspective on what he sees going on in credit unions and banks.
"If you talk to a bank, they are trying to be more like a credit union with friendly service," he said. "If you talk to a credit union, they are trying to be more like a bank in terms of operations and products and services. That's why from a credit union perspective you see more investments in platforms and in branches."
Frank J. Diekmann is Editor of The Credit Union Journal.