Converting a core processor can be a silver bullet for credit union success, but knowing when to pull the trigger can be a moving target.

Tipping points that say now’s the time to switch include concerns about platforms being in maintenance mode or even sunsetted, vendor support and pricing, and the ability to scale with a growing credit union both in terms of basic functionality and new offerings.

Core providers, consultants, and credit union leaders say there are multiple reasons to make that big decision, but it basically comes down to strategy.

In the broadest of terms, we needed a modern architecture to improve daily system availability, reduce exposure to prolonged downtime in the event of outages, and provide an environment for improved interfaces with other systems, both current and those to come in the future as our business strategies evolve, says Rick Long, vice president of technology and information services at Pennsylvania State Employees Credit Union ($5.3B, Harrisburg, PA).

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A complete member view, reduced need for internal IT support and staff training, and integration between core banking and document management functions also were priorities for 450,000-member PSECU, which completed a two-year conversion process when it went live on the Corelation KeyStone system this past September.

For 20,000-member Co-op Credit Union ($331.2M, Black River Falls, WI), the limitations of its legacy system had become stark.

We weren’t able to offer online account opening, says Kris Goetzka, vice president of operations at the Wisconsin credit union, which switched to the Symitar Episys system in June 2017. We had been on the same system for more than 20 years, and more and more processes were requiring manual intervention and workarounds. The system was built for smaller credit unions, and we realized we had outgrown it.

Ryon Packer sees that in his work as senior vice president of marketing and strategy for Fiserv Credit Union Solutions.

Ryon Packer, SVP of Marketing & Strategy, Fiserv Credit Union Solutions

It’s like when the family grows and you have to go from that two-seat sports car to a van, he says. A lot of credit unions are seeing such substantial growth that they can’t execute their operating strategy on their current cores.

Packer says market and technology changes alike are motivating his client credit unions to make changes, especially in the hot spots of commercial offerings, business intelligence, and digital relationships.

Arriving at the decision to convert should come after much self-examination about service strategy and internal capabilities, and one seasoned specialist in serving small credit unions says such thorough selfreflection might reveal the pieces are there to execute a plan after all.

Anna Duff, President/COO, FedComp

A conversion is not as simple as painting your car a new color, it’s an entirely new vehicle, says Anna Duff, president and chief operating officer of FedComp, the longtime provider of core processing to hundreds of credit unions, most with less than $20 million in assets. If you would like to see certain efficiencies and products within your current core ask your core provider. Sometimes your current core is exactly what you need, but you need to see it perform to its maximum capability.

Bryan Di Lilla also advises credit unions to first take a look at their functional and business requirements and complete a workflow analysis that matches operational procedures against the tools in place.

The magic bullet is not always technology, says the senior vice president and partner at ICI Consulting, specialists in core processor selection and contracts. Examine your processes first and then map them to the new and better technology, if you will. Over many years of working with credit unions we’ve found that exercise to be helpful.

Dozens of times a year, credit unions decide a conversion is worth it, once they decide how much they can no longer take.

Candidly, there has to be a pretty fair amount of pain, says Symitar president Ted Bilke. Conversions are tough. They’re tough on the staff. They’re tough on the members. No one really wants to go through it unless they have to, and they don’t until they see there’s just no other path.

Ted Bilke, President, Symitar

Here are some of those tipping points.

No. 1: Sunsetting And Maintenance Mode

If a vendor announces or even hints that a product is being sunsetted, that should scare the daylights out of existing users, Di Lella says. Although that does occur sometimes among ancillaries like lending platforms, we’ve never seen a vendor just walk away from a core platform. They want to keep you in the family.

Whereas sunsetting is rare, what ICI calls maintenance mode is another issue. That happens when a core processing platform is no longer the subject of significant investment and development by the company.

Bryan De Lilla, Senior Vice President, ICI Consulting

That can be a problem for credit unions that want a lot of new products and services, but it might not be for those that are content with the status quo.

If the support is OK and your needs are basic, some of these maintenance-mode core platforms might not be a good idea to convert from if they work for you, Di Lilla says. But if it’s a painful relationship, if you feel like you’re being compromised in account management, support, or capabilities, maybe it is time to convert.

No. 2: Functionality And Integration

Integrating ancillary software into the existing core has been a major pain point since the birth of digital banking. Partner that with the imperative to keep a legacy system up to speed on transactional and other data processing in the face of membership growth and cyber threats, and there can be some real enterprise pain.

Tim Maron, director of business development at Corelation, offers four red flags: Not being able to integrate with today’s new fintech vendors, slow and old technology, layers upon layers of tech patches that slow down the system, and constant, expensive fixes to old cores.

When too much human action is required to complete simple tasks, or a core’s limitations block the ability of the credit union to serve members effectively and within their own institution’s policies, it’s time to go to a new platform, Maron says.

Tim Maron, Director of Business Development, Corelation

That was the case at Illinois Educators Credit Union ($58.2M, Springfield, IL), where president and CEO Jody Dabrowski and her team came to the realization that their outdated core was a disadvantage in their market. The credit union went live on Fiserv Portico in February 2018, and it’s now able to more easily integrate credit and debit card and online banking functions.

It allows us to serve our members a lot better and a lot more, Dabrowski says. We’re all in now.

Bilke at Symitar says he hears that a lot.

Prospects typically tell me that XYZ community bank or credit union down the street can get these new products and features to market very quickly, and that they feel constrained by their vendor.

With 30 to 50 integration points needed to accommodate all that today’s credit unions typically want to offer, the lack of adequate APIs and other connective virtual tissues can indeed be enough to make a credit union look seriously at moving on from its current core.

No. 3: Support Inside And Out

Internal support can be a pain point. It’s growing harder for credit unions running older legacy systems built on code and software languages that are no longer widely taught to find that good help.

It’s just easier to hire kids out college who can run relational databases, says De Lilla at ICI Consulting.

Michael George, SVP/Chief Marketing, Innovation, and Advocacy Officer, Kern Schools FCU

That’s just part of the reason credit unions changing cores tend to pick those kinds of platforms, along with choosing to run them remotely. De Lilla says the past eight years his firm has worked with only one institution converting from outsourcing to in-house core processing, and it was a large bank.

As far as external support, a lack of responsiveness from the provider of the core it had been on for more than a decade was part of the reason Kern Schools Federal Credit Union ($1.6B, Bakersfield, CA) switched platforms, going live on Symitar Episys in April 2018.

We were growing more concerned about how much resources were really going to the platform we were on, which wasn’t the one the company was really pushing, and we weren’t able to get a lot of information, says Michael George, the credit union’s senior vice president and chief marketing, innovation, and advocacy officer.

Bilke at Symitar acknowledges that credit unions are at the mercy of the core vendor when it comes to enabling a third-party service.

It can be very slow, he says. That’s typically when credit unions start talking to us and other major providers out there.

No one really wants to go through [a conversion] unless they have to, and they don’t until they see there’s just no other path.

No. 4: You Better Shop Around

Price is another reason to convert.

Some credit unions feel they’re paying too much for core and ancillary systems and want to perform a very healthy, necessary exercise, De Lilla says. That is to shop around.

The ICI Consulting partner compares it to shopping for a car or for home insurance.

Think about how often you might not take the time to think about what you’re getting, how much you’re paying, what comparable pricing would be from similar services, he says.

Kern Schools didn’t fall into that trap.

Our contract was coming up, the pricing was high, and we knew we had to change things, says SVP George. The timing just seemed right.

The 2020 Core Report

Callahan’s Supplier Market Share Guide: Credit Union Core Processors helps leaders fully understand the performance and strengths of core processors in the credit union space. This guide offers:

• Expert opinion and advice.
• Changes in market share.
• Client performance comparisons.
• Aggregate assets for credit union clients.
• Newly acquired clients and integration information for select platforms.

Learn how you can get access.