Credit union consolidation has been well under way for a while, as has credit union core processing consolidation. While I have to admit that Fiserv’s recent acquisition of OSI didn’t really surprise me, the news was disappointing.
Having worked as a CTO at several credit unions using Fiserv products, as well as at what used to be Summit Information Systems, I do not believe market consolidation of cores is good for credit unions. Sure there are some good things that come from a Fiserv acquisition. Financial stability, a nice orange logo, sales people wearing orange shoes, hats and maybe even smocks are a few of the perks. Ultimately, it means further lack of choice for credit unions.
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When Fiserv first starting acquiring cores, they allowed them to run independently and continue to innovate. Fiserv fit in well by providing financial stability and access to capital. Over the past 10 years, however, Fiserv tried to consolidate the cores while not calling it consolidation. They stopped investing in some platforms, renamed others, but mainly worked to create a closed community.
I think a fully integrated Fiserv product line could be cool, but I also think it is impossible based on seven (now eight) different leadership styles, technology choices, service philosophies and endless other contrasts which contributed to the creation the different cores in the first place. It reminds me of when Ford or GM acquire other car companies and integrate supply chains. Suddenly everyone is surprised when customers driving a Jaguar don’t like their new Ford steering wheel.
I think we have to ask ourselves as an industry, what really drives innovation? What fosters innovation and collaboration? What are the forces that develop a community? What role does competition from our key vendors play in helping us create new business models and a brighter future? What opportunities does our access to abundant capital provide? In my experience, a large conglomerate doesn’t usually support the evolution we are seeking as an industry.
In the past, when the industry was larger and more diverse, the individuality of brands, philosophies and products that existed and thrived as different cores serving different masters brought innovation, improvements and efficiency gains.
Some cores focused on great credit union technology, some on great service, and some on low-cost business models. Any way you looked at it though, credit unions’ cultures and philosophies tended to match the core in some way.
As our industry consolidates into a commoditized set of financial services, are we destined to receive the same commoditized solutions from our key technology providers? Maybe that is the way of the future for credit unions, but given the staggering size differences of our competitors, a "one-size-fits-all" approach seems flawed. As the old adage goes – if all you have is a hammer, everything looks like a nail.
Maybe we have to ask ourselves, what does sustainability look like, not just for our credit unions but for our communities and our technology? On one hand, there seems to be very little innovation in core products, on the other hand we continue to see vital innovation occurring within new payment platforms such as Dwolla, CU Wireless or within our Shared Branching platforms.
New entrants seem to emerge regularly while at the same time more regulation and more consolidation seem to create opposing forces and challenges. As a young company we certainly face both challenges. Some days it seems we must create mountains of documentation to demonstrate regulatory compliance, the next we are asked to bring an emerging technology to our community.
Ultimately, I think it is key for credit unions to recognize the challenges that come with consolidation in our industry, and to embrace collaboration. As an industry we must demand better community partnership, better innovation, better collaboration, and challenge the forces that pit consolidation against innovation and regulation against freedom.
We must also learn how to be better partners, change the equation, or approach the problem differently. Collaboration, innovation, trust, belief in the little guy is what credit unions were built on. If we regulate and consolidate those values out of existence, we may just end up with more of the same.