Credit unions are trending toward the cost-effectiveness and efficiency of hosted or service bureau core banking solutions as they lack the resources to run robust in-house systems, Celent said.

Contributing to the hosted solution trend is the desire among CUs to eliminate the technical responsibilities of maintaining in-house solutions. The firm also found that hosted solutions are cheaper than in-house solutions for small CUs and allow CUs of all sizes to better manage risk and more easily meet regulatory requirements.

"Most credit unions lack the economies of scale to properly operate a robust in-house core processor and therefore find it more cost-effective and efficient to utilize a service bureau solution," Narter said.

CUs are also choosing multichannel systems that provide options such as ATM, mobile, Internet and IVR, as well as solutions with integrated functionality such as CRM and business/mortgage processing automation, Celent said.

"Credit unions are also looking to add complexity to their service offerings by updating or retooling legacy core systems that offer limited integration or portability," Narter added.

Celent calls core banking the "nerve center of a credit union" and notes vendors have allowed CUs to utilize online technology and do away with paper transactions in exchange for electronic solutions.

"Automation has introduced a new level of efficiency and productivity," Narter said. "What has existed as a disparate group of branches is now a networked entity operating as a whole."

The reports also reveal the winners of Celent's latest XCelent Awards. Celent evaluated vendors using its ABCD vendor view–"A" stands for advanced technology, which is based on a system's architecture; "B" stands for breadth of functionality, which measures a vendor's functionalities and front-end systems; "C" stands for customer base, which evaluates a vendor's number of credit union clients and a breakdown of its CU clients by assets; and "D" stands for depth of client services, which takes a vendor's post-implementation support and maintenance levels into consideration.

Out of the solutions geared toward large credit unions, Celent's report found that PhoenixEFE from Harland Financial Solutions offers the most advanced technology and DNA from Open Solutions provides the widest breadth of functionality. Jack Henry & Associates' Episys has the largest customer base and Temenos Group AG's T24 took the title for best service.

Of the solutions that target small credit unions, Celent named Jack Henry & Associates' Cruise as offering the most advanced technology and Fiserv's Reliance scored the highest for functionality. FIS Mercury has the largest customer base and Fiserv's Advantage is Celent's winner in the service category.

Through its analysis of core banking solutions for large and small credit unions, Celent found that Fiserv's CubicsPlus, Reliance and XP2; Trinergy LLC; CSC's Celeriti and Harland Financial Solutions' PhoenixEFE are the only systems that entirely service in-house implementations. Of the vendors analyzed in Celent's report for small credit unions, all but two service CUs with less than $500 million in assets. Almost three-quarters, 70%, of the clients for the core banking system vendors in Celent's report for large credit unions, with the exception of four, have less than $500 million in assets, the firm said.

Celent also noted that of all the vendors it evaluated, their hardware and operating systems vary greatly, ranging from Windows server platforms to non-Windows server platforms to the IBM Power Series. And the presences of most vendors are contained entirely within North America, the firm said.

The following core banking solutions also participated in the reports: Fiserv's Charlotte, CUSA, Galaxy, OnCU, Portico, Acumen, CUBE, DataSafe and Spectrum; FIS' MISER and Harland Financial Solutions' UltraData.