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A quick look at recent NASDAQ performance tells any observer the tech sector has taken one of the worst beatings in history. Internet banking among financial institutions, however, tell a different story. Online Banking reported earlier this year that “Looking back at the Internet gold rush, it’s clear that most of the glitter was fool’s gold.” But several rich veins of the real thing were discovered, and none show more promise than Web banking. Consumers have embraced it, with usage nearing 20% of U.S. households today, and heading towards 33% within four years. The high-end forecast for 2010 predicts that there will be 55 million U.S. households using online banking and/or epayments by that time. An important trend is the sharp increase in the Power Users, households that access bank accounts and pay bills. This shows that not only is online banking penetration growing, but also the level of usage is increasing.” All this poses more and more of a dilemma to the small to medium sized credit union who clearly recognizes the need to offer Internet banking, perhaps provisioning for it in the budget but lacking one of the more hidden costs associated with a leap into cyber-banking which is the in-house expertise to manage the system. A possible answer lies in the role of the core processor. Technologies are in place today that allow Internet banking to be hosted by the core processor who can very likely offer the same features and functionality as a standard in-house, online banking solution. All this but without additional burden placed on credit union management. It might be noted that maintaining security and performance integrity should be watchwords of a hosted Internet banking product. A Virtual Private Network (VPN) that is constantly monitored can be scrutinized with the latest tools and expertise available helps assure firewall integrity, intrusion detection and other security measures are in place. In addition, the core processor can justify greater investment into things such as a longer running UPS system due to the increasing volume of credit unions taking part in the hosting opportunity. The cost of hosted Internet banking will likely differ from a typical in-house solution only by an additional monthly cost to share in the T-1 bandwith access, the hosting part of the equation. Compared to hiring in-house expertise, however, this could very well be looked upon as a bargain to many credit unions looking at the compelling need to make the move in order to stay competitive. Getting online with as little effort as possible should also be a consideration. A simple, one page questionnaire might walk a prospective credit union manager through the questions needed for the majority of what’s needed to launch a hosted Internet banking product. Web design, local ISP requirements are probably the two main issues to sort out with the credit union. With proper administration, it should take only a matter of days rather than weeks that the credit union is online with essentially all of the functionality and feature rich performance found on the core processor’s in-house Internet banking product. So while the fundamental components of a hosted Internet solution are not particularly new, the simplicity to manage, core processor main system integration and lower overall costs attached to getting online, is for a very significant group of credit unions a possibility worth considering.

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