COLUMBIA, S.C. - Flexibility and scalability of a credit union's IT system become a couple key concepts when a credit union changes its charter from a SEG base to community-based, now nearly a daily occurrence in credit union land. That's because growth and the challenges that come with it tend to quickly follow that seminal decision to change charters, not just for the people but for the hardware and software used to do business with members, according to some industry veterans. "Expansion naturally encourages more account openings, and more account closings, if you're not careful," says Terry Murphy, senior vice president for client services at USERS Inc., core technology provider for more than 325 credit unions. "We have witnessed significant growth among many of our community (charter) clients, and the system must not only support this growth, but must do so in a very efficient manager and without impacting credit union operations," says Bruce Cormode, president of Symitar, which has about 600 credit union clients on its Episys and Cruise core platforms. Many of those demands could be coming from people with needs perhaps not typically handled by the credit union in the past, at least in great numbers. For instance, business accounts. "In addition to the challenge of having expertise in-house to service this type of account" at the front end, Cormode says, "the credit union must have an integrated software solution that addresses the unique requirements of business accounts, whether that be account analysis, business lending, participation loans or a number of other services." Electronic-delivery channels also may need expanded. "Having flexible e-services plays a major role in meeting the membership needs of a community credit union," Cormode says. "Beyond the brick and mortar of branches, members require the convenience of highly functional, flexible home banking products, kiosk support, full-function ATM services and so on." There's also the impact on call volume to consider, and whether to expand the physical presence of the ATM network, and even how to deal with the financial history and less-familiar faces of their new FOM. "Where before a credit union had a SEG group well known to the institution, now they need to consider whether to use automated underwriting to better evaluate the lending portfolio, and they need to consider whether they're going to get an increase in delinquencies because they're dealing with the community at large," says Murphy. Those were realities Charlotte Metro Credit Union dealt with when the North Carolina institution converted to its community charter a few years back. "The first people who come in when you make that switch sometimes are the fraudulent, criminal types who want to see if they can pull something, thinking that credit unions are sort of nave types," says Deb McClean, the longtime vice president of marketing at $112 million Charlotte Metro. "But we were ready. We had already heard a lot of horror stories from CUs who never pulled credit reports, for instance, until they had to do a loan, and then were hit big-time with problems when they converted," she says. "We avoided that by doing such things as using Chex Systems before opening a checking account, to see if they were qualified, and offering different kinds of ATM and check cards depending on their history," McClean says. "We also gave our collections department a little backup in case they needed it down the road." The CU runs a Symitar core platform with a courtesy-pay program from sister Jack Henry unit Pinnacle Systems. It also runs quarterly credit reports on its entire membership, and uses the information to not only spot red flags, but as a cross-selling marketing tool, for instance to offer loans directly, in conjunction with MCIF database tools. Speaking of marketing, McClean hastens to note that it's also a whole new game when the FOM becomes the whole area, which in McClean's case just happens to also be ground zero for a couple of America's biggest banks. "I used to call on my SEGs personally and market on bulletin boards in the break room," she says. "When you make the switch to community, you're going to need more advertising and more marketing dollars. Now I have to use television, newspapers, e-mail blasts, billboards. This is a competitive market, and you have to get smart fast." That learning curve is coming home to roost at more and more credit unions all the time. "It used to be a fairly low percentage, but my feeling is that the number of charter changes has probably doubled in the past two or three years," says Murphy at USERS. "And I know it sounds sort of hackneyed coming from me, but with all those channels to consider, and all those technology implications, it's really a good idea to turn to your core technology provider for help when you take this on." Indeed, with credit unions now finding themselves in the unfamiliar position of competing with each other, they may also soon find themselves with fewer friends with whom to network. "I was talking with a CEO at a credit union in Oregon recently who told me that the rest of the country will soon be seeing what he's seeing with overlapping community charters," Murphy says. "There's not the camaraderie that you still see in other parts of the county, he said, and they truly are competitors. "If that's the case, and it begins to close down that channel of advice and counsel and peer group information sharing, then it makes it that much more important that a credit union partner with its vendors, so it can still learn about how other credit unions are doing things." -

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