Many experts liken a core conversion to getting a divorce, a root canal and moving at the same time — a perfect storm of stress. But it’s even more painful to operate a credit union on a “closed” core that doesn’t allow for interface with third-party vendors offering new technologies.
“We frequently see credit unions who, for competitive reasons, desire to offer an enhanced or more seamless experience to their members. They observe inroads from fintech, which create wonderful experience for their clients and desire to offer the same to members,” said Horsetail Technologies Principal, Mark Berman. “However, when they look to implementation, legacy cores offer either limited choice or expensive options to integrate compelling third-party options.”
The Baltimore-based Horsetail Technologies counts 80 CUs as clients, including the $175 million Riverfront Federal Credit Union and the $151 million The Partnership Federal Credit Union. Both have experienced issues related to legacy cores. “With our legacy core, the products that we could work with were limited or cost-prohibitive to pursue,” said Riverfront FCU’s Information Systems Supervisor Christopher Reed. “We were not impressed with the options we had.”
In an effort to streamline operations and better serve its 22,000 members, Reed explained, Riverfront converted to Corelation’s Keystone platform last May. Among reasons for the conversion, which took nearly one year, was that the old core didn’t offer customization.
Today, the new core provides servicing for share and loan products, new member and account workflows, loan origination, accounts payable, general ledger and ACH origination. “We use third-party vendors for online and mobile banking, phone banking, online account opening/loan applications, bill pay, credit card processing and disaster recovery,” said Reed. “There are also interfaces for many other third parties for the purposes of moving data from or to vendors.”
Know thy core
Bonnie Ortiz, EVP of professional services at The Partnership FCU has not only guided her credit union through a core conversion, but often is hired by other CUs for related consulting services. The key, she said, is to determine the problems they want to solve.
With more than 12,000 members, Partnership utilizes Fiserv’s XP2 core processing system, which Ortiz says is a robust system built with a relational database platform. “This system provides the CU flexibility and functionality that grows with us,” she said. “It is customizable to our procedures and workflows.”
Ortiz said some credit unions find this type of system “too open,” as it requires staff to modify and maintain the features they decide to implement. As a result, they may opt for a more “vanilla” option.
But if a core is closed, Ortiz warned, at some point a CU may require ancillary solutions for such things as online banking, workflow solutions or other funtionalities.
In Berman’s experience, legacy core systems present “significant issues,” with more executives looking to move to open platforms.
“For those that do make a switch, it is frequently to an open core,” said Berman. “The open core to them represents opportunity to tune service regularly as innovation and opportunity presents itself without changing everything at once.”
He conceded that changing core systems is no small task. On average, a CU may only undergo a conversion once a decade or even less frequently. Executives usually start the daunting core search process three years before the existing core contract is set to expire or renew.
“Other efforts have to stop or be put on pause while the entire organization focuses on a singular project,” said Berman. “All of that resistance creates organizational inertia that keeps many more credit unions from making a move that they see as being in the best interests of their membership.”
A year out from conversion, Reed said the project required a lot of team work and resulted in added stress. The benefits, however, are far-reaching. With an open core, for example, he said the abilityto implement a new product is readily available.
And while not all post-launch statistics have been aggregated, he noted the credit union continues to see increased usage of its online banking platform. Additionally, he said there has been a “big push” for moving members to e-statements — to date, enrollment is up by 300 percent..
“If you are going to spend the time, money and resources on a core conversion to realize the many benefits modern cores offer, an open core is the way to go. With legacy cores you are paying maintenance from both a third party as well as to the core processor for keeping the integration running,” said Reed. “When updates need to be made, you are working with both parties to ensure the functions and data you need is available.”
