Talking Credit Unions with Chris Smith

EDITION 4 - Todd Proulx interview on CU core IT systems

March 01, 2020 Chris Season 1 Episode 4
Talking Credit Unions with Chris Smith
EDITION 4 - Todd Proulx interview on CU core IT systems
Chapters
Talking Credit Unions with Chris Smith
EDITION 4 - Todd Proulx interview on CU core IT systems
Mar 01, 2020 Season 1 Episode 4
Chris

This interview took place immediately after Manchester CFCFE Conference in Manchester. At that conference Todd had outlined his extensive experience of IT solutions in the credit union sector in the USA, and his recent engagement with Irish credit unions. Todd noted that core IT system replacement, the focus of his presentation, is a very significant project for credit unions, but because there have been so many of these in the US (over 600 in the last five years) there is now increasing competence at core system conversions. For most core processor businesses, the overwhelming majority of their clients come by successfully converting them from another provider’s system. 
Todd described the drivers that push credit unions to recognise that the replacement of a core system is necessary. 
First, when it is clear that the existing system is now in ‘maintenance mode’, i.e. there is no strategic development, and probably compliance-only upgrades, this can be a signal that it is time to change core system. 
The second driver relates to functionality – when the current system can't do what is required by newer credit union products and services, for example offer lines of revolving credit, or interface effectively with a mobile app.   
Third is the challenge of integration with other required IT solutions. Increasingly today, no single system can be the best at everything. A core system must therefore be able to easily connect with specialist providers who can focus on creating high quality add-ons for specific functions (such as loan origination, financial analytics, mobile/Internet banking, etc.). Finally, Todd drew attention to the risks arising from poor or limited support, which may by itself be sufficient reason to change systems. 
He advised that, notwithstanding these drivers for change, credit unions should think hard about the impact of conversion to a new core on their processes and people. With regard to staff, Todd observed that the credit union should at all times keep the primacy of serving members and maximising their financial benefit as its top priority, even if doing so efficiently with new technology means that some staff are no longer needed. 
Todd described some of the features of modern credit union service delivery in USA. These include fast and personalised lending decisions, as well as branches that are more like the ‘third space’ between home and work that Drew described for the Starbucks recovery strategy in the late 2000's. 
Todd offered some observations on selecting a new core system. He warned attendees to be wary of banking solutions. Bank operations are productcentric not customer-centric, so their systems often do not cope well with a member-oriented business model. He noted that solutions from big companies come with the advantages of stability, but also generally a shareholder value priority that does not always work well for customers. Conversely, smaller companies carry more risk in terms of commercial sustainability, but might be closer and more dedicated to customer need. CUSOs (credit union service organisations – numerous in USA) could be the most focused on their customers, but they sometimes suffer from challenges in getting to agreement on priorities. 
 

Show Notes

This interview took place immediately after Manchester CFCFE Conference in Manchester. At that conference Todd had outlined his extensive experience of IT solutions in the credit union sector in the USA, and his recent engagement with Irish credit unions. Todd noted that core IT system replacement, the focus of his presentation, is a very significant project for credit unions, but because there have been so many of these in the US (over 600 in the last five years) there is now increasing competence at core system conversions. For most core processor businesses, the overwhelming majority of their clients come by successfully converting them from another provider’s system. 
Todd described the drivers that push credit unions to recognise that the replacement of a core system is necessary. 
First, when it is clear that the existing system is now in ‘maintenance mode’, i.e. there is no strategic development, and probably compliance-only upgrades, this can be a signal that it is time to change core system. 
The second driver relates to functionality – when the current system can't do what is required by newer credit union products and services, for example offer lines of revolving credit, or interface effectively with a mobile app.   
Third is the challenge of integration with other required IT solutions. Increasingly today, no single system can be the best at everything. A core system must therefore be able to easily connect with specialist providers who can focus on creating high quality add-ons for specific functions (such as loan origination, financial analytics, mobile/Internet banking, etc.). Finally, Todd drew attention to the risks arising from poor or limited support, which may by itself be sufficient reason to change systems. 
He advised that, notwithstanding these drivers for change, credit unions should think hard about the impact of conversion to a new core on their processes and people. With regard to staff, Todd observed that the credit union should at all times keep the primacy of serving members and maximising their financial benefit as its top priority, even if doing so efficiently with new technology means that some staff are no longer needed. 
Todd described some of the features of modern credit union service delivery in USA. These include fast and personalised lending decisions, as well as branches that are more like the ‘third space’ between home and work that Drew described for the Starbucks recovery strategy in the late 2000's. 
Todd offered some observations on selecting a new core system. He warned attendees to be wary of banking solutions. Bank operations are productcentric not customer-centric, so their systems often do not cope well with a member-oriented business model. He noted that solutions from big companies come with the advantages of stability, but also generally a shareholder value priority that does not always work well for customers. Conversely, smaller companies carry more risk in terms of commercial sustainability, but might be closer and more dedicated to customer need. CUSOs (credit union service organisations – numerous in USA) could be the most focused on their customers, but they sometimes suffer from challenges in getting to agreement on priorities.