I remember the day back in the mid '80s…I was balancing aparticularly troublesome GL account, when in burst the bankpresident carrying a giant box, his face glowing. “Look what I gotyou!” he beamed.

It was a personal computer – our very first one – with dualfloppy disk drives and a certificate for free “lessons” at the newPC school downtown. I took classes in Lotus123, Word Perfect, BASICand DataEase. Within a year, we had a dozen new PCs that changedhow we completed manual tasks forever. A new era of efficiency wasupon us.

On that same day, in the background, our core system was buzzingaway. (Yes, they actually buzzed, burped and made other strangenoises back then.) We entered balances and account information tosend to our branches on clicky keyboards and ugly green screen CRTsthat required a list of codes so long and arcane that everyone butthe president had cheat sheets taped all over their desks.

At the time, our core system was no more than 10 years old andran on a “minicomputer” that sat in our operations center rightnext to our item processing proof machines and check sorters.(Remember those?) The software was coded in COBOL, an alreadydying programming language.

The database was built on a then-popular flat data model thatwas proprietary to the big-name hardware manufacturer. No one hadyet imagined such things as voice response, ATMs, debit cards, ACH,Internet banking, and mobile. Our entire world revolved arounddeposits, loans and branches that closed at 3 p.m.

A lot has changed in banking in the nearly 30 years since thosesimpler days. But many of those ancient core systems are stillbeing converted off of and on to today. Every five years or so anorganization will say, “We need a modern core system that meets ourcurrent and future needs,” and end up choosing another system thatis 20 to 40 years old. That's because our industry has managed toput all kinds of elaborate wrapping – PCs, middleware, Internetaccess, ATMs and so on – on top of what remains essentially oldtechnology.

That's also why the majority of credit unions still run theheart of their organizations using outdated COBOL or PL/1 basedsystems with proprietary hardware and account-centric data models.The foundation of everything we do has become antiquated andfragile, capable of falling apart at any moment. Let me say it: anyinvestment in legacy technology is a dead-end investment.

Next Generation Core Technology

Changes in the basic banking business model demand corearchitectures that focus on today's realities. They must supportindividualized relationships and employ highly flexible databasedesigns that can grow and change to meet rapidly expanding datarequirements.

They must be written in efficient programming languages withbroad resources to support them. And they must be easily extendableto seamlessly incorporate future innovations from any source (likedownloading apps to a smart phone) to help organizationseffectively compete.

For credit unions especially, next-generation core architectureshould leverage the high degree of collaboration in the industry toaccelerate and enable the sharing of technology innovation.

Thankfully, our industry is on the cusp of many new coreoptions. Even the largest and least pliable core providers are nowintroducing fledgling products, planning new systems or rewritingold ones to take advantage of modern programming languages,database technologies and design techniques.

A few are also starting to provide tools that facilitatecollaboration among institutions, from simple code sharing schemesto full-blown appstores that allow clients to effectively markettheir creations worldwide.

Significantly, it appears the industry has finally recognizedthat there are limits to how much new technology can be effectively“bolted on” to older foundations. This is similar to the tippingpoint many homeowners eventually reach when they realize that acomplete “teardown and rebuild” makes more economic sense thanfurther incremental renovation.

Positioning for the Future

Credit union members expect sophistication and technologyleadership from their financial institution. For credit unions tomaintain and grow primary relationships and increase wallet share,they must address these needs better than their traditional largebanking competitors. This requires flexibility and efficiency,modern tools and the ability to improve speed to market.

The financial services industry has fallen behind the technologycurve. To stay relevant, the technology credit unions trust topower their operations can no longer be left to legacy systems andlegacy thinking.

Today's world demands more flexible, open designs centered onpeople and their limitless relationships. Through recent advancesin technology and selection of products and vendors aligned withyour goals, credit unions have the opportunity to maximize revenue,eliminate inefficiencies, reduce operational costs and increasemarket and wallet share, all by working more collaboratively witheach other.

Those that take advantage of new opportunities and today'stechnologies will be best positioned to compete in their marketsand overcome tomorrow's challenges. Imagine the “remember when”stories you will tell in 30 years!

LizetteNigro is vice president, core business leader of Open Solutions Inc.inGlastonbury, Conn.