Studies Suggest Trends In Credit Union Core Processing Decisions

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BOSTON-Two new studies suggest several trends are at work in credit union core processing.

The studies, "Core Banking Solutions for Large Credit Unions" and "Core Banking Solutions for Small Credit Unions," from Celent, found that during 2010 approximately 10% of credit unions sought to change their core system, up from historical averages of 4% to 5%. "Opportunity exists where smaller credit unions look to upgrade an outdated legacy system and where credit unions look to consolidate processing to a single vendor following a merger or acquisition," the studies found.

Among the other study findings:

1) Multichannel technologies. Credit unions are finding it necessary to develop competitive technological offerings, and therefore prefer core banking solutions with multichannel options like ATM, mobile, Internet, and IVR to attract customers and engender customer loyalty.

2) Increased integration. Credit unions are also looking for vendor solutions that offer integrated functionality like CRM or business / mortgage processing automation. "A single view of the member and increased operational efficiency allow credit unions to better connect with their members across all channels," the study said.

3) Preference for hosted implementations. Usually larger financial institutions opted for in-house solutions. Celent reported it has noticed a trend toward hosted or service bureau implementations for most credit unions, mainly due to the following factors:

• Credit unions want to be relieved of the technical responsibilities of maintaining the infrastructure and to focus their efforts on banking functions like introducing products, improving customer service, etc.

• For small credit unions which cannot achieve economies of scale, hosted implementations are cheaper than in-house implementations.

• Hosted implementations make it easier for credit unions to comply with ever-increasing regulatory demands and provide better risk management.

Celent reported it has also uncovered a trend toward hosted solutions among credit unions. Most credit unions lack the economies of scale to properly operate a robust in-house core processor and therefore find it more cost-effective and efficient to utilize a service bureau solution. Credit unions are also looking to add complexity to their service offerings by updating or retooling legacy core systems that offer limited integration or portability, the company said.

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