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Why Consumer Expectations Are Forcing A Re-Think Of Core Systems

The ubiquity of technology and consumer expectations for highly personalized service is redefining how credit unions serve their members – and what’s needed from today’s core platforms.

Imagine a young credit union member shopping for a new dress. She starts by browsing online, but can’t find what she’s looking for. She then drives to the local Nordstrom to see if they have what she wants.

As she shops, a sales associate holding an iPad approaches the young lady to offer assistance. The sales associate taps her iPad screen a few times and brings up an app allowing the shopper to choose from a range of fabrics, styles, silhouettes, and details to create exactly the look she wants. Next, the associate taps on the screen again and shows the shopper pictures of her previous clothing purchases at the store reminding her that she also needs to buy a new pair of boots.

This isn’t fiction; it’s a fact of today’s changing retail environment demonstrating how ubiquitous technology and consumer demand for more personalized experiences can combine to create innovative solutions. This evolution is as relevant to credit unions as it is to clothing stores.

Today’s consumers have fully embraced smartphones and tablets to make their lives simpler, easier, and better. Each day, millions of people interact with Amazon, YouTube, and Facebook. Three-year-old children watch TV programs from their iPads, and people in cities pay for cab rides and lattes using mobile payment services like Square.

But many in the industry seem to think it’s OK to ask these consumers to step back 30 or 40 years technologically when walking into a credit union branch. That’s because many institutions are still using legacy transaction-based core systems that simply can’t deliver the kind of personalized experiences and channel flexibility that consumers demand.

It is hard to overstate the impact that systems have on consumers culture and processes. The prevalence of outdated systems has caused the credit union industry to become more disconnected from the way people live and work than at any other time in history. Although these institutions exist to facilitate commerce, commerce is going around them because the tools they have don’t match the simplicity and ubiquity that people expect.

The effect of transaction-based systems has been to create a culture where, when a member walks into a branch, the first question is, What’s your account number? instead of, Can I discuss some ideas I have to lower your mortgage rate today?

While the conservative nature of the industry and regulatory disincentives to try new technology are partly at fault, core vendors share much of the blame for being slow to address emerging technologies and consumer needs in a comprehensive way. Most have failed to update long-established systems because rewriting a core system for today’s standards and technologies is a costly, massive, and risky undertaking.

Disruptive change is needed for credit unions to continue fulfilling their traditional and vital role at the center of peoples financial lives supporting the consumers that drive 70% of the U.S. economy and the small businesses that provide 65% of net new jobs. As consumers become more digitally sophisticated, credit unions must rethink their core systems, focusing on how they can know and serve members better, not just manage their transactions.

Processing transactions has very low value and the industry must demand a higher strategic return from its enterprise systems. These systems should enable credit unions to know more about members, to price and package at the point of service, to handle any product type, currency, or language, to allow for collaboration and innovation at a lower cost, and to create environments where institutions can launch new products quickly and easily. These systems should allow credit unions to clearly differentiate themselves from competitors especially digital ones and leverage their unique advantage for delivering personalized service.

Thankfully, the industry is on the cusp of new core options. Several core providers are starting to introduce fledgling products as well as plan new systems or rewrite old ones to take advantage of newer programming languages, database technologies, and design techniques. Open Solutions led the way several years ago with the introduction of DNA, the first relational core platform with a data model centered on the person, rather than the transaction, and designed from the ground up using the latest technologies.

DNA has given credit unions powerful new ways to understand and serve their member. Its single-platform architecture lets financial institutions of all types collaborate and innovate together, delivering new solutions quickly and at low cost. With last year’s introduction of DNAcreator and the ground-breaking DNAappstore, Open Solutions also gave DNA users a free suite of tools to create their own customized core extensions and a global marketplace for sharing their DNAapps. This has allowed community based institutions worldwide to share innovation on a common platform, compete as one against much larger institutions, and remain at the economic center of their communities by meeting the needs of the people they serve.

The ubiquity of technology and the needs of the digitally connected consumer have spurred financial institutions to take a fresh look at the role enterprise systems can play in overcoming the challenges of a business model that&’s been under pressure for years. The good news is that technology is finally available to help credit unions ease these pressures, re-connect with their members in more meaningful ways, and reestablish their relevance and position at the center of peoples financial lives.

Louis Hernandez, Jr. is the Chairman and CEO of Open Solutions, Inc. He can be reached at louis.hernandez@opensoluitions.com.

Open Solutions Inc. provides innovative technologies and insights that help community-based financial institutions around the world enrich their local economies while operating more profitably, efficiently and collaboratively. Open Solutions revolutionized enterprise technology with DNA, the first open, relationship-centered core banking platform built for global collaboration, and DNAappstore, the first-ever collaborative marketplace for user-created core enhancements. The company offers a full range of complementary software and hardware solutions, plus independent industry insight and guidance from Raddon Financial Group.

For more information, visit Open Solutions at www.OpenSolutions.com.

This article is sponsored by a recognized solutions provider in the credit union industry. Callahan & Associates does not endorse vendors or the solutions they offer, and the views and opinions offered here might not reflect those of Callahan. If you are interested in contributing an article on CreditUnions.com, please contact the Callahan team at ads@creditunions.com or 1-800-446-7453.
June 2, 2014

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