Software for managing the loan portfolio can range fromspreading and credit analysis through impairment analysis or saleof the loan. In most cases, the adoption of such software requiresa change in process as well as an investment from the credit union.In addition to total cost of ownership, what other considerationsshould credit unions have for evaluating potential software and itsvendor?

Software Functionality

Functionality requirements will vary widely depending on theneeds of the credit union. However, these questions can be astarting point for functionality review.

• Does the vendor provide a live software demonstration or allowthe credit union to use the solution hands-on prior topurchasing?
• Does the vendor have a solution to manage each stage of thelife of the loan, including:
  |
  • Tracking interactions with existing and prospectivemembers;
  • Credit decisions, end to end;
  • Loan portfolio management;
  • Portfolio risk management; and
  • Allowance for loan and lease losses?
• Does the solution interact with external data sources to addmore value to users, including Credit bureaus, FRED economic data,peer group data or private company benchmarking for member businessloans?
• Does the solution provide a single point of data entry thatflows throughout the solution to save the credit union time? Can itimport data to remove data entry completely?
• Is the solution installed (server-based), web-based oraccessible via VPN? How will that impact the hardware the creditunion has to maintain?
• Will all credit union employees have access to the solution asneeded? Will that access be tracked and/or managed as neededthrough the use of separate logins?
• Are there limitations to the number of reports that can begenerated or number of users who can login?
• Is the solution:|
  • Easy to use?
  • Flexible in its analysis and reporting to meet theinstitution's current procedural needs?
  • Customizable in terms of institutional defaults andsettings?

Integration, Implementation and Support

For most credit unions, personnel and resources dedicated toinformation technology are limited, making the support offered by athird-party vendor nearly as important as the software itself. Thefollowing questions will highlight the service component ofpotential software, particularly how the third party accommodatesintegration with the institution's core processing system.

Integration

• Does the vendor rely on static data reports as provided to thegovernment or customized data reports to account for the creditunion's segmentations?
• Is the vendor able to import tickler information from theprogram the credit union previously used or from the core?
• Does the vendor integrate with the institution's coreprocessing system and have a history of successfulintegrations?
• Can the vendor integrate data from multiple core systems,hosted cores or other data sources, as needed?
• Can the vendor backfill historical loan-level information,including charge-off/recovery data?
• Can loan-level data be archived monthly for historical trendsand reporting purposes?
• Can the vendor integrate user-defined or custom fields set upby the credit union?
• Can the software integrate a relationship or group identifierto build member relationships in the software?
• What is the average duration of a core system integration forthis vendor?

Implementation

• Does the vendor provide a dedicated representative to managethe integration and implementation of the credit union'saccount?
• Does the vendor offer an appropriate level of training (e.g.,individual web-based training, onsite training, consultant-led casestudies, new user trainings) as required by the institution?
• Will product training be led by individuals who are productexperts but also know the industry and regulations?
• Does the vendor offer user groups for the credit union to learnfrom other institutions using the software?

Support

• Does the vendor bill for support (i.e., email enquiries orphone support)?
• Does the vendor offer multiple points of contact for the creditunion to reach product experts located in the U.S.?
• Does the vendor offer after hours support?
• What is the average response time for support inquiries?
• Does the software come with support materials, including userguides, case studies, instructional videos, webinars, etc.?

Information Security

Even with the promise of efficiency and automation, software fora credit union can only add value if its information securityprotocols keep the institution's data safe. The following list ofquestions, along with a more in-depth review from the institution'sIT department, are some fundamental considerations for evaluatingsoftware:

• Does the vendor provide:|
  • Site encryption;
  • Data redundancy and backup servers; and
  • Disaster recovery and business continuity plans?
• Has the vendor provided its service level agreement? Does itexplain up time, supported browsers and operating systems, andsupport expectations?
• Does the vendor maintain SSAE-16 (SOC 1 & 2compliance)?
• Does the vendor offer a due diligence guide to help the creditunion with compliance requirements?
• Does the vendor use additional third-party vendors assubcontractors to fulfill its commitments to clients?

As credit unions consider potential vendors, softwarefunctionality, implementation and support, and information securityare all major areas to review.

Libby Bierman is an analyst at Sageworks. She can be reachedat 866-603-7029 or [email protected].