COLUMBIA, S.C. - Flexibility and scalability of a credit union'sIT system become a couple key concepts when a credit union changesits charter from a SEG base to community-based, now nearly a dailyoccurrence in credit union land. That's because growth and thechallenges that come with it tend to quickly follow that seminaldecision to change charters, not just for the people but for thehardware and software used to do business with members, accordingto some industry veterans. "Expansion naturally encourages moreaccount openings, and more account closings, if you're notcareful," says Terry Murphy, senior vice president for clientservices at USERS Inc., core technology provider for more than 325credit unions. "We have witnessed significant growth among many ofour community (charter) clients, and the system must not onlysupport this growth, but must do so in a very efficient manager andwithout impacting credit union operations," says Bruce Cormode,president of Symitar, which has about 600 credit union clients onits Episys and Cruise core platforms. Many of those demands couldbe coming from people with needs perhaps not typically handled bythe credit union in the past, at least in great numbers. Forinstance, business accounts. "In addition to the challenge ofhaving expertise in-house to service this type of account" at thefront end, Cormode says, "the credit union must have an integratedsoftware solution that addresses the unique requirements ofbusiness accounts, whether that be account analysis, businesslending, participation loans or a number of other services."Electronic-delivery channels also may need expanded. "Havingflexible e-services plays a major role in meeting the membershipneeds of a community credit union," Cormode says. "Beyond the brickand mortar of branches, members require the convenience of highlyfunctional, flexible home banking products, kiosk support,full-function ATM services and so on." There's also the impact oncall volume to consider, and whether to expand the physicalpresence of the ATM network, and even how to deal with thefinancial history and less-familiar faces of their new FOM. "Wherebefore a credit union had a SEG group well known to theinstitution, now they need to consider whether to use automatedunderwriting to better evaluate the lending portfolio, and theyneed to consider whether they're going to get an increase indelinquencies because they're dealing with the community at large,"says Murphy. Those were realities Charlotte Metro Credit Uniondealt with when the North Carolina institution converted to itscommunity charter a few years back. "The first people who come inwhen you make that switch sometimes are the fraudulent, criminaltypes who want to see if they can pull something, thinking thatcredit unions are sort of nave types," says Deb McClean, thelongtime vice president of marketing at $112 million CharlotteMetro. "But we were ready. We had already heard a lot of horrorstories from CUs who never pulled credit reports, for instance,until they had to do a loan, and then were hit big-time withproblems when they converted," she says. "We avoided that by doingsuch things as using Chex Systems before opening a checkingaccount, to see if they were qualified, and offering differentkinds of ATM and check cards depending on their history," McCleansays. "We also gave our collections department a little backup incase they needed it down the road." The CU runs a Symitar coreplatform with a courtesy-pay program from sister Jack Henry unitPinnacle Systems. It also runs quarterly credit reports on itsentire membership, and uses the information to not only spot redflags, but as a cross-selling marketing tool, for instance to offerloans directly, in conjunction with MCIF database tools. Speakingof marketing, McClean hastens to note that it's also a whole newgame when the FOM becomes the whole area, which in McClean's casejust happens to also be ground zero for a couple of America'sbiggest banks. "I used to call on my SEGs personally and market onbulletin boards in the break room," she says. "When you make theswitch to community, you're going to need more advertising and moremarketing dollars. Now I have to use television, newspapers, e-mailblasts, billboards. This is a competitive market, and you have toget smart fast." That learning curve is coming home to roost atmore and more credit unions all the time. "It used to be a fairlylow percentage, but my feeling is that the number of charterchanges has probably doubled in the past two or three years," saysMurphy at USERS. "And I know it sounds sort of hackneyed comingfrom me, but with all those channels to consider, and all thosetechnology implications, it's really a good idea to turn to yourcore technology provider for help when you take this on." Indeed,with credit unions now finding themselves in the unfamiliarposition of competing with each other, they may also soon findthemselves with fewer friends with whom to network. "I was talkingwith a CEO at a credit union in Oregon recently who told me thatthe rest of the country will soon be seeing what he's seeing withoverlapping community charters," Murphy says. "There's not thecamaraderie that you still see in other parts of the county, hesaid, and they truly are competitors. "If that's the case, and itbegins to close down that channel of advice and counsel and peergroup information sharing, then it makes it that much moreimportant that a credit union partner with its vendors, so it canstill learn about how other credit unions are doing things." -

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