Cloud-Based Core Processing Is the Future of Credit Union Banking

Henry C. Meier, author of a recent opinion piece for CU Times, “Is It Time to Get Your Head Out of the Clouds?”, made some good points, particularly about ensuring your credit union has the right information it needs to make a good decision regarding the cloud. Cloud-based core processing is the future of credit union banking because the benefits outweigh the risks. In fact, Deloitte found that financial institutions moving to the cloud tripled between 2016 and 2018. A more recent survey found that cloud computing was a top-five spending priority in 2023 for more than 40% of U.S. bank executives, as reported by BAI. Adopting cloud technology helps credit unions stay competitive with the flexibility they need and the services members deserve. Given its importance, our credit union leaders must ensure they’re well educated on the topic.

As I wrote in my recent piece for CU Times, fewer than five of the core processing systems on the market for credit unions were built on code that’s less than 30 years old. Those legacy systems have been held together with baling wire and bubble gum. With all the updates and maintenance required in this mishmash of patchwork, it can certainly present issues ranging from pure breakages to security problems.

Educating credit union leaders about cloud-based technologies is paramount to best mitigate any related risk. As we all understand, credit unions can outsource services but not the risk!

Cloud usage can be public or private. Basically, anyone can access a public cloud, which makes it very simple to use with unlimited scalability, however, it is not as a secure as a private cloud. With a private cloud, only certain users can access it, boosting your control and security of your credit union’s data. And, of course, there are costs associated with that.

However, the benefits of operating in a private cloud environment are undeniable for credit unions, as it can expand or scale back as needed, saving your credit union both time and money. Credit unions also can reduce their costs by migrating to the cloud and freeing up your IT staff for more important, strategic work rather than the day-to-day blocking and tackling.

Regarding security, cloud-based core infrastructure is built around data protection, as opposed to on-prem, which arguably can be more easily brought down in cyberattacks. Just be sure you know what parties are protecting and backing up your credit union data. Ensure the proper protective measures are in place and their business continuity plans are, first, made readily available to you, as well as testing data; and, second, comprehensive should a disaster strike – natural or manmade. Business continuity is a real plus of the cloud because data backups are in real time, so when there is a problem, you’re back up and running quickly.

Members also benefit from faster, more accurate service because they can access real-time data, so they can feel a greater sense of control over their finances. And, because you’re able to offer them best-of-breed on a wider range of services thanks to the cloud’s simpler integrations, you’ll build trust with them, so they’re likely to bring even more of their financial business your way.

The risk of losing out on the opportunities the cloud affords credit unions cannot be denied. We understand the cloud is not a panacea by any means. It has its disadvantages, too, such as the need for fast, reliable internet service, but the benefits, including security when it’s in the right hands, can outweigh the risks.

Amber Harsin is the CEO of Prodigy, a core processing and cloud services CUSO based in Salt Lake City, Utah.