I remember the day back in the mid ‘80s…I was balancing a particularly troublesome GL account, when in burst the bank president carrying a giant box, his face glowing. “Look what I got you!” he beamed.
It was a personal computer – our very first one – with dual floppy disk drives and a certificate for free “lessons” at the new PC school downtown. I took classes in Lotus123, Word Perfect, BASIC and DataEase. Within a year, we had a dozen new PCs that changed how we completed manual tasks forever. A new era of efficiency was upon us.
On that same day, in the background, our core system was buzzing away. (Yes, they actually buzzed, burped and made other strange noises back then.) We entered balances and account information to send to our branches on clicky keyboards and ugly green screen CRTs that required a list of codes so long and arcane that everyone but the president had cheat sheets taped all over their desks.
At the time, our core system was no more than 10 years old and ran on a “minicomputer” that sat in our operations center right next to our item processing proof machines and check sorters. (Remember those?) The software was coded in COBOL, an already dying programming language.
The database was built on a then-popular flat data model that was proprietary to the big-name hardware manufacturer. No one had yet imagined such things as voice response, ATMs, debit cards, ACH, Internet banking, and mobile. Our entire world revolved around deposits, loans and branches that closed at 3 p.m.
A lot has changed in banking in the nearly 30 years since those simpler days. But many of those ancient core systems are still being converted off of and on to today. Every five years or so an organization will say, “We need a modern core system that meets our current and future needs,” and end up choosing another system that is 20 to 40 years old. That’s because our industry has managed to put all kinds of elaborate wrapping – PCs, middleware, Internet access, ATMs and so on – on top of what remains essentially old technology.
That’s also why the majority of credit unions still run the heart of their organizations using outdated COBOL or PL/1 based systems with proprietary hardware and account-centric data models. The foundation of everything we do has become antiquated and fragile, capable of falling apart at any moment. Let me say it: any investment in legacy technology is a dead-end investment.
Next Generation Core Technology
Changes in the basic banking business model demand core architectures that focus on today’s realities. They must support individualized relationships and employ highly flexible database designs that can grow and change to meet rapidly expanding data requirements.
They must be written in efficient programming languages with broad resources to support them. And they must be easily extendable to seamlessly incorporate future innovations from any source (like downloading apps to a smart phone) to help organizations effectively compete.
For credit unions especially, next-generation core architecture should leverage the high degree of collaboration in the industry to accelerate and enable the sharing of technology innovation.
Thankfully, our industry is on the cusp of many new core options. Even the largest and least pliable core providers are now introducing fledgling products, planning new systems or rewriting old ones to take advantage of modern programming languages, database technologies and design techniques.
A few are also starting to provide tools that facilitate collaboration among institutions, from simple code sharing schemes to full-blown appstores that allow clients to effectively market their creations worldwide.
Significantly, it appears the industry has finally recognized that there are limits to how much new technology can be effectively “bolted on” to older foundations. This is similar to the tipping point many homeowners eventually reach when they realize that a complete “teardown and rebuild” makes more economic sense than further incremental renovation.
Positioning for the Future
Credit union members expect sophistication and technology leadership from their financial institution. For credit unions to maintain and grow primary relationships and increase wallet share, they must address these needs better than their traditional large banking competitors. This requires flexibility and efficiency, modern tools and the ability to improve speed to market.
The financial services industry has fallen behind the technology curve. To stay relevant, the technology credit unions trust to power their operations can no longer be left to legacy systems and legacy thinking.
Today’s world demands more flexible, open designs centered on people and their limitless relationships. Through recent advances in technology and selection of products and vendors aligned with your goals, credit unions have the opportunity to maximize revenue, eliminate inefficiencies, reduce operational costs and increase market and wallet share, all by working more collaboratively with each other.
Those that take advantage of new opportunities and today’s technologies will be best positioned to compete in their markets and overcome tomorrow’s challenges. Imagine the “remember when” stories you will tell in 30 years!