The Winds of Change Transform New Financial Services Environment

The winds have shifted, resulting in more rapid adoption of open-based technologies that are enabling financial institutions to leverage information throughout the entire enterprise.




Business trends are like winds – sometimes light and subtle and sometimes strong and palpable and yet when they converge the climate can change dramatically. Right now, the financial services market is undergoing the convergence of several trends, which is altering the environment for credit unions and banks alike. Global technology shifts, increased pressure on product diversification, increased competition, margin/spread compression, market demands and regulatory changes are now converging in an unprecedented manner and credit unions need to adapt or be left behind.

Regulatory changes have made it easier for other providers of financial products and services – insurers, brokerage firms, trust companies, and others to enter the market with traditional banking products and services. This intensifying competitive landscape has created both an imperative to change and an opportunity to prosper if the opportunity is seized quickly.

In response to the increased competition, there is pressure to launch new, targeted products and to diversify revenue streams with new sources of non-interest fee income. Credit Unions need greater flexibility to launch these new products and services more quickly, and to know more about their members immediately, in order to service them better and provide them with more relevant products.

In addition, the number of ways in which individuals are interacting with their financial institutions also continues to change and expand. Members are now accessing credit union account information through multiple channels such as the Internet, ATMs, branches, call centers and voice technology. As members have become more comfortable with the Internet online commerce has continued to grow. And, other emerging technologies and channel opportunities such as wireless which is already widespread internationally will become even more popular in the U.S. once there is a common standard.

Through this channel proliferation, members are accessing their balances more frequently and in more different ways than ever before. Without an increase in assets or fee income, this can be a net negative to a financial institution, which must bear the cost of providing access to all these additional touch points. Superior products, an improved level of service and an increased level of interaction have become essential elements in today’s financial services environment.

To meet these demands, credit unions must be able to manage all their channels efficiently and effectively as well as create opportunities to cross-sell new products and services.

Unfortunately, aging technologies and legacy systems are nearing the end of their useful cycle and are now posing a roadblock to increased profitability and successful implementation of other applications such as CRM. There are limitations on data field sizes, limits on product types, redundant databases and additional layered-on systems that don’t communicate effectively with each other. Legacy systems present a serious handicap, whether the financial institution is running their system in-house or in an outsourced service bureau environment.

Out With the Old – Outdated Legacy Systems

Many of the legacy core platforms that are in use are often surrounded by bolt-on applications that have been added in an attempt to extend the life of these systems. Financial services vendors have tried to fix the inherent problems associated with aging and cumbersome systems with a number of layered-on applications (Front-end systems, Middleware and CRM platforms). However, financial institutions are finding that these additional applications are increasingly ineffective and simply mask the weakest link in their technology infrastructure – the underlying, dated core processing technology and architecture.

Other factors to consider and associated with aging legacy technology are inherent data field limitations, lack of openness, incompatibility among applications, the expense to maintain these systems and the additional burden on resources as a result of layered on technology redundant or disparate data bases and overall coordination.

All of these flaws in outdated systems taken together have put many financial institutions at a distinct competitive disadvantage. As a result, there is a growing global shift away from legacy technology systems to more open, relational and real-time technologies to better meet strategic goals. In fact, the intensifying competitive landscape has created both an imperative to change and an opportunity to prosper when it comes to making the transition from legacy systems to open-based architecture technologies. There are also real risks to not addressing aging technology. Doing nothing is no longer a practical option.

In With the New – Open-based Technologies

While financial institutions have been hesitant about implementing new, relational core platform strategies that are highly functional, affordable and scalable, more and more forward-thinking credit unions are realizing that a strategic decision needs to be made regarding the disposition of their aging technology and have taken the full step to open, next-generation technologies to replace old legacy systems. Rather than try to survive the weakness of legacy platforms, the ineffectiveness and cost of additional layers, these credit unions are recognizing that there are now better options currently available in the marketplace. They are also discovering that the total cost of ownership for newer systems far outweighs the risk involved in maintaining their aging technology, as it limits growth, impairs productivity, minimizes new opportunities and puts the institution at risk.

The winds have shifted, resulting in more rapid adoption of open-based technologies that are enabling financial institutions to leverage information throughout the entire enterprise, and across all member touch points consistently and in real-time.

This proven technology provides greater flexibility and freedom and it allows credit unions to manage all their channels efficiently and effectively creating the opportunity to cross-sell products and integrate other applications such as CRM. It also enhances a credit union’s ability to offer members timely, relevant and filtered information without the need for additional layers of technology.

No matter where you are in your competitive evolution, realizing that the core application layer is the critical foundation of your financial enterprise opens up an array of possibilities. By bringing the powerful advantages of real-time relational technology to bear, you can ultimately exploit the openness of this technology to improve all the areas of your operation, including: member service, back-office, reporting, relationship management, lending, branch operations, and more.

Modern technology at the core level is not only a safer decision, but also puts your financial institution in a position to do more than just survive. It will not only allow your credit union to survive but to thrive in the changing financial landscape.




July 24, 2006



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