Increasingly sophisticated and pervasive cyber threats, the entrance of new competitors and complex regulatory and compliance requirements have all significantly impacted the credit union landscape in recent years. Credit unions today are challenged to accomplish more with less resources; they must manage these competing priorities within their budgets while still providing members with the seamless, digitally optimized experience they expect.
To more effectively meet these expectations, more credit unions than ever before are looking to external sources to host their core platforms and critical IT infrastructure – both highly sophisticated data centers and the cloud. While the cloud was initially met with skepticism when it first emerged on the financial services scene, it is now widely accepted and acknowledged as a strong, secure option for storing data and running operations. Plus, members have relied on the cloud for years; they don’t think twice about uploading their photos, videos, and sensitive messages and information to the cloud from the convenience of their smartphones or tablets.
Outsourcing to allow for a more strategic focus
Having a specialized organization host the core and IT infrastructure provides many notable efficiency gains. Outsourcing allows credit unions to reallocate resources that were once spent on manual, cumbersome hardware and software upkeep and maintenance, which ultimately boosts productivity, saves time and reduces the risk of human error. This approach enables credit unions to enhance security and data integrity without adding staff.
Outsourcing can also help credit unions overcome the current talent dilemma. Today’s low unemployment rate coupled with the intense competition for IT talent from other industries has made it extremely difficult for credit unions to attract and retain the necessary IT talent in house. Even if credit unions are able to identify and recruit the IT and security talent with the needed certifications, experience and credentials, their limited budgets often prevent them from retaining these employees long term. By partnering with a trusted outsourcing provider, credit unions eliminate the burden of finding and training talent to manage their software and hardware upkeep; these vendors typically have dozens of talented individuals at credit unions’ disposal, providing cost effective access to top tier service, support and expertise.
One of the most important benefits of outsourcing the core platform and critical IT infrastructure is that it ultimately frees credit union employees to focus their efforts on more strategic areas, such as deposit growth and strengthening member relationships. Employee time can be better spent on meeting member needs, such as providing a sophisticated digital experience and personalized offerings, instead of handling cumbersome manual tasks such as installing updates, conducting tests and reviewing code.
Allocating more time toward member service strategy is increasingly important in the current environment, as the needs of younger generation members are different than those in decades past. For instance, Millennial and Generation Z members are facing mounting student debt, creating an opportunity for their financial institutions to help them budget and navigate this daunting financial situation. Baby Boomers, as another example, are retiring at an earlier age, so credit unions must work with this generation to plan for and better manage finances during this new chapter of their lives. If credit unions want to have successful long-term relationships with their members, they must pay close attention to generational trends and determine how to help them budget and manage their finances through every stage of life.
Having a trusted provider host core processing also creates more time for credit union employees to focus on members’ individual needs and incorporate more personalization into the member experience. Major retailers and tech companies have become very skilled at personalizing offers and anticipating needs, and credit unions must follow suit. Determining how to better leverage the large amount of member data credit unions have available to them can help enhance the member relationship and lead to profitable cross sell opportunities.
Conducting due diligence
While outsourcing can be a great option, credit unions must keep in mind that not all solutions are created equal or even similarly. To reap the maximum benefit, credit unions must conduct proper due diligence, ask specific questions and be highly strategic about how they manage the outsourcing relationship. Vetting and selecting an outsourcing partner is not a decision that can be taken lightly. Credit unions should carefully evaluate each potential partner’s service philosophy, technology roadmaps and infrastructure to ensure it is the right fit for their organization both now and in the future.
The cybersecurity landscape has become increasingly threatening for financial institutions. And, today’s weather patterns are more unpredictable than ever before. These factors make it imperative for credit unions to thoroughly assess potential vendors’ business continuity plans, disaster avoidance and recovery capabilities and overall security strategy during the due diligence process. Savvy credit unions will consider how their data is stored, where the data will be located, if it will have its own space and how much control they’ll maintain over their information.
Credit unions should also consider the impact a potential partner will have on their regulatory and compliance efforts. Investigating the provider’s compliance knowledge and expertise as well as their strategy around remaining ahead of audit and regulatory requirements will be an important piece of the puzzle. If the right partner is selected, outsourcing can help credit unions reduce their regulatory burden.
Outsourcing is most successful when credit unions select a provider who will act as a true business partner, not just a vendor. It’s critical to ensure the pair’s goals closely align and that trust be established. To evaluate a potential provider’s service and partnership, the most effective method is for credit unions to simply ask their peers. Other credit unions can generally be relied upon to provide transparent feedback on how their experience has been with the provider in question. The credit union community is a tight-knit group, so collaborating with others and considering a potential vendor’s reputation is an important aspect of due diligence.
Outsourcing the core platform and critical IT infrastructure can provide efficiency gains, strengthened disaster avoidance and business continuity plans and reduced regulatory burden for credit unions. Such an approach can free credit unions to focus on their main goal: to best serve the member. Credit unions that undergo a comprehensive due diligence process and select a true outsourcing partner will be well positioned to thrive.
Gary Lee, vice president of client relations and sales, MDT