Credit Unions & Open Core Strategies

Transforming to a more member-friendly business model, more quickly incorporating third-party vendors, and achieving developmental efficiencies are a few reasons why credit unions migrate to open core systems.

For this second installment in a two-part look at open cores, credit union executives presented their perspectives on the strategy.

The $150 million Tucson Old Pueblo Credit Union, a client of the Farmington Hills, Mich.-based CUSO Member Driven Technologies, converted to an open banking platform in July 2014. MDT offers the Monett, Mo.-based Jack Henry & Associate’s Symitar Episys platform, which allows for easy integration of third-party applications.

“We needed to integrate with more third-party vendors. All our processes were scattered and separate, and the system we were on was not doing any development,” Manny Chavez, senior systems engineer for TOPCU, said.

The Tucson, Ariz.-based credit union considered several options, including bringing Episys in-house, but ultimately went with MDT’s hosted system. “We do not need to manage any of the hardware. They take care of all the updates. That saves us a lot of time and allows us to run with a smaller IT crew,” Chavez explained.

By opening the core, TOPCU integrated easily with other vendors that link directly to the member’s account, such as CU Direct’s Lending 360 System, to streamline loan originations, and State National’s collateral protection insurance system.

Chavez also indicated the credit union’s e-commerce options were limited with the older system. “It was an archaic home banking solution. None of the new home banking systems played well with the system we were on.” By making the change, the credit union incorporated more current online and mobile banking platforms into the core through MDT. In the works for this year is the addition of mobile remote deposit capture.

The credit union has seen other tangible benefits of the newer system; for example, Chavez said the IT department’s processing time decreased at least 75%. “We went from a five-page checklist where we had to run processes on a daily, monthly, weekly and quarterly basis, and that checklist is going away.” Additionally, front-office type handling, such as account and loan origination, decreased about 50% percent. “We’re saving $70,000 to 80,000 annually,” Chavez said.

The $14.8 million, Colorado Springs, Colo.-based Harrison District 2 Federal Credit Union implemented its open core platform Dec. 1, 2018 through the Layton, Utah-based CUSO CUProdigy, which delivers a cloud-based solution embracing third-party integrations.

What was the catalyst to an advanced open core architecture? “A desire to move to a more progressive business model. We want more of a partnership with our core, as opposed to a basic vendor-client relationship,” Nicholas Jensen, president/CEO at HD2FCU, said. He added CUProdigy understands how its users operate on a philosophical level and the constant feedback the CUSO receives leads to a system that is constantly evolving and improving.

Jensen explained the credit union’s new banking system allows HD2FCU to focus less on its core. “An open architecture, particularly one curated by a company like CU Prodigy, is constantly growing with and around us, freeing up mind space for those of us at the credit union level to simply focus either on our daily tasks or projects to grow products, services and efficiency.”

The core integrates with HD2FCU’s online banking platform, including a mobile app; Experian and Equifax credit reporting; its corporate credit union partner and statement vendor. “This has created a massive time savings of roughly 20 to 25 hours per month,” Jensen said, adding that other benefits include “cost savings resulting in the credit union paying roughly 70% for like services compared to the old platform, the aforementioned time savings, and the unquantifiable benefits that result from using a platform that is enjoyable and makes one’s job easier.”

On Sept. 1, 2018, the $5.3 billion, Harrisburg, Penn.-based Pennsylvania State Employees Credit Union implemented the San Diego, Calif.-based Corelation’s KeyStone open banking platform, which enables credit unions to deliver premium services to members.

“One driver of our decision to change to KeyStone was the overall efficiencies we could harness on the development side,” Richard Long, vice president, information technology services for PSECU, said. “The development tools available through the platform work off of a modern relationship database that allows our programmers to use Java and JavaScript.”

Long acknowledged KeyStone’s application programming interface allows PSECU easy access to all fields and tables, and the ability to add customized fields. “For example, our digital banking systems are in-house and for certain features, we had to store additional data tables in a commercial database such as Microsoft SQL,” Long said. “In addition, system failover time occurs in minutes and data is encrypted at rest. Since the conversion, there has been zero system downtime.”

Long listed numerous benefits derived so far from the new core, including:

• Consolidation of three document imaging platforms;
• Replacement of a Bank Secrecy Act/anti-money laundering system and estimated savings of over $2 million in early fraud detection;
• Reduction of statement processing cycle by 5.5 days, with email statements available within digital banking less than 12 hours after the month’s end;
• Direct access to check images and member documents;
• 24×7 availability of all functionality;
• Real-time generation of selected high-volume member alerts;
• Ability for members to set up and pay new payees within digital banking immediately, and for tellers to interface with Firefox and Chrome;
• Reduction of end-of-day processing jobs from over 516 to 56, the number of reports from more than 600 down to 350, and the number of member letters from 700 to 535;
• Person-centric orientation, meaning a holistic view of the member’s account relationships, and the ability to view an account at a specific point in time;
• Integrated CRM, which provides better understanding of member relationships and anticipation of needs; and
• Work queues that allow employees to send work to other areas, and assign individual items and tasks for follow-up.

Long also revealed an independent consultant performed a process efficiency study baselined against PSECU’s former core banking system, and found there was a daily 55-hour gain on KeyStone within the transaction services department.

The $2.7 billion, Chatsworth, Calif.-based Premier America Credit Union is currently preparing to convert to Symitar EASE, Episys’ outsourced delivery, in September 2019. This was an organizational decision based on the credit union’s core system evaluation team recommendations.

Rudy Pereira, president/CEO for Premier America, pointed out, “Open platform to me means being able to quickly and nimbly interface with some of the third-party providers out there. And so for us, it was an easy decision.”

With its outgoing system, Premier America would have to write the code internally to interface with many third-party providers – too arduous a task for the credit union. Pereira recalled the credit union needed a partner with a strong network. “Symitar, particularly, has probably the strongest network of third-party interfaces out there.”

Outsourcing its computer operations releases Premier America from having to run its own operations, which Pereira admitted is not a credit union core competency. “We’ll be able to utilize their expertise to run and do the updates, and do the blocking and tackling and the things that need to be done. It’s a big benefit to redeploy resources and assets to other critical areas.”

When asked what is expected from the new system, Pereira said, “It’s more than one thing. The experience comes from being able to provide an environment that is going to be more error-free, frictionless and faster.”

Pereira also noted it allows the credit union to interface practically with any third-party solution and easily access its data. “So, we can do better data analytics than what we’re able to do today, and decentralize the extraction and analysis across the organization.”

For now, the California credit union’s focus is on the new core’s conversion. Over the next three years post-conversion, it plans to look at online and mobile systems; online account, loan and mortgage origination; card processing and data warehouse mining.

Regardless of its plan, Premier America knows it has a reliable support system. “The beautiful thing about being in the credit union world is that we are a collaborative industry,” Pereira said. “We openly share with each other experiences not only with the core, but also with a potential partner we’re considering.”