We've heard it all before – new technology trumps old “legacy”technology. But if credit unions regularly upgrade their softwareand hardware, why do so many credit unions still rely ontechnologies that were developed in the 1970s?

Many credit unions will argue that their technology is brandspanking new. They'll even prove it by calling up a slick loanorigination system on their tablet. But dig a little deeper and youwill discover that the credit union's whiz-bang functionalitydepends on ancient technology staggering around the basement. Toooften, it's got more bang than whiz.

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The Core is Dead, Long Live the Core

So what is the difference between legacy and new technology?Quite simply – the purpose of the system. Credit unions in the1970s were based on member share accounts. Financial technology wasdesigned to cash and deposit checks, and to process withdrawals.The bottom line: keep the teller line moving. It was a strategy todispel the awful truth – banking almost always involved waiting inline.

Fast forward to 2013. One of the rarest things to find in acredit union lobby these days is a member. Fully 80-85% of alltransactions don't involve a teller. Members use more channels thanproducts, and they expect all those channels to work together, toreflect every transaction and update to their profile immediately,and to offer every credit union service.

The last time a MSR told a member of the Millennial generationto visit a branch and complete a particular paper form, peopleheard the poor Millennial screaming from Alabama to Wyoming.

So if the earth has moved under our feet, why haven't morelegacy technologies moved with it? In a word – pain. Many creditunions regard the move to new technology as a huge drain on timeand resources. In the face of big pain, credit unions do whateveryone else does – they avoid it.

The trouble is, credit unions can't avoid pain forever. The onlything that trumps pain is bigger pain, which has landed in mostcredit unions' laps in the form of shrinking deposits, reduced loanvolume, shriveling fee income and rising costs – particularly inregulatory compliance.

Credit unions that haven't traded up to new technology arefeeling all of these pain points. The question is – do legacycredit unions believe that new technology can help them enough toendure the pain of conversion?

Many credit unions have said yes. Today they enjoy a360^o view of the member because they truly have a memberinformation system that includes the member's photo, signature andfingerprint onscreen. Their marketing and risk management effortskey off of that MIS, simplifying new business development,regulatory compliance and service delivery.

When new technologies become available, the new MIS systems canliterally “plug them in.” That's because the new systems actuallywork like platforms – much like apps for smartphones and tablets.When credit unions want new functionality, they can shop for it inan online store, try it on their systems, and implement itimmediately.

This approach to new functionality is a game-changer for creditunions. It gives them choice in selecting payments, businessintelligence and MIS solutions. Because these solutions are fullyintegrated, they share data. They also share capabilities, sodocument management and e-signatures can be used in loanorigination; fraud and anti-money laundering becomes part of memberbusiness deposits.

This is a far cry from legacy systems whichrequire a separate interface for every new capability. With legacysystems, credit unions find the quality of service depends on thequality of the interface. No wonder much of the upgrade work forlegacy systems revolves around interfaces.

In spite of all the benefits of new technology, many creditunions continue to avoid the inevitable core system conversion. Wehear of institutions hunting for processes that can be shifted offof the core to separate systems. While that sounds brilliant intheory, it stumbles in practice.

Each separate system requires its own processes and database.Periodically, the data in these separate systems have to “synch up”to ensure consistency. Unfortunately, the time between synch upsopen opportunities for fraud.

Separate processes present additional issues. For example, inmost systems, Internet banking is a separate system that literallyduplicates core processing transactions in order to present them onthe Web. That may not be difficult for simpler transactions, likefund transfers or bill payments. But more complex activity – likepaying down a loan balance – can take months to develop. Every timeregulations change, the credit union has another system to trackand fix.

New technologies are eliminating the “synch up” issue becausetheir advanced integration enables them to use the core as thesingle source of record for all transactions. There are nodiscrepancies between debit, Internet banking and teller. Memberinformation and account histories are accurate to the second.

New technologies are also eliminating the separate processissue, since the processes used on the teller line can also be usedfor Internet and mobile banking. Imagine how that can reduce thetime spent explaining why some transactions are unavailable online.It also saves time when regulations change – fixes can be doneonce, not in each separate system.

Finally, we need to address the language issue in legacysystems. Since these ancient systems were written in equallyancient programming languages, interfaces to new systems have to bewritten on those languages as well – COBOL, PL1 andassembler. Today's brightest programming minds have nevertouched these dinosaurs, and the programmers who wrote those legacysystems didn't just scream from Alabama to Wyoming – they retiredthere and hope never to be called back for a credit union systememergency.

If a credit union is wondering why it takes so long to get newfunctions installed on a legacy system, or why only a few of thenew features work as advertised, wonder no more. It's a long way toWyoming, and most of the time, nobody's home.

Robert Bessel ispublic relations director for COCC Inc. in Avon, Conn.