- Hispanic Resources
A core processing conversion is much like replacing a leaky foundation. You can put it off for years with temporary fixes, but the day of the “big fix” is unavoidable.
But the effort, cost, and pain involved “is short term when considering your long-term strategic objectives,” says Scott Sylvester, chief financial and technology officer at $350 million asset Consumers Credit Union, Kalamazoo, Mich.—a survivor of two core conversions during his 17-year credit union career.
• One-fifth of U.S. financial institutions have reached a “high level of urgency” regarding core system replacement.
• Employee involvement is an essential part of a successful core conversion.
• Board focus: A core conversion is costly, but older systems are more expensive to maintain.
Many credit unions will undergo core conversions in the near future—or at least they should, according to a May 2010 survey by the Aite Group, which estimates that roughly 20% of U.S. financial institutions have reached a “high level of urgency” regarding core system replacement.
“If you don’t have integrated solutions, you’re finding it increasingly difficult to access information, and you can’t quickly launch new products to remain competitive,” explains Christine Barry, Aite Group’s research director.
The report also found that an additional 56% of U.S. banks and credit unions would benefit from a core system replacement or transformation.
A core conversion is costly, to be sure, but credit unions must weigh the costs of staying on an outdated system, Barry advises. “An older solution is more expensive to maintain. You also could be losing members as a result of not being able to meet their needs. So while a core replacement requires you to lay out a lot of money, you’ll see an immediate return.”
Next: Eliminating old obstacles