How 4 Credit Unions Seed Their Future With Cloud Core Processing

Cloud processing converts say the benefits of the cloud include cost savings and increased operational efficiencies.

 
 

Operating a credit union’s core processing through a service bureau is nothing new, but doing it through the cloud is. Although “cloud” can mean different things to different people, the idea that a credit union and a data center can securely and reliably deploy such a critical infrastructure via the internet is gaining traction.

Four converts to cloud-based core processing had different experiences making the shift, some based on the fact they were converting from the same in-house system to the new environment, others because they were coming in whole cloth new to the platform.

Callahan data pinpoints which core processors are spurring gains in efficiency and decreasing operating expenses at credit unions like yours. Contact us to learn more.

Each credit union cited many of the same benefits, including improved ability to comply with regulations regarding vendors, security, bolstered uptime and disaster recovery, better speed-to-market, found time for IT, and lower costs.

They also each cited the improved ability to customize their platforms to meet their individual needs and priorities. But a cloud-based core system comes with its own challenges.

With Great Freedom Comes Great Responsibility

Although open customization has its upside, it also means looking ahead to make sure the changes are good ones.

“I wish we would have kept the account types the same, for staff and member recognition, and possibly kept the GL structure the same instead of reinventing our wheel,” says Greg Leber, CIO at Minnequa Works Credit Union ($176.3M, Pueblo, CO).

CU QUICK FACTS

Minnequa Works Credit Union
Data as of 09.30.16

HQ: Pueble, CO
ASSETS: $176.3M
MEMBERS: 16,258
BRANCHES: 5
12-MO SHARE GROWTH: 1.7%
12-MO LOAN GROWTH: -5.5%
ROA: 0.86%

Leber has been the head technologist at his Colorado credit union for 18 years and oversaw the conversion from another company’s platform to its current cloud system in 2015. Because Minnequa Works was a longtime service bureau client, converting to cloud services was merely semantics, Leber says.

The conversion itself involved more than mere words, of course, but after approximately seven months of preparation, it went quickly.

“After the usual translation tables, loan product configurations, etc., we shifted into live testing about 45 days prior to our go-live date,” Leber says. “We had a relatively painless conversion with the usual speed bumps coming from third-party vendors - flat file configurations and the like, and dialing in printers and report outputs.”

CU QUICK FACTS

American United FCU
Data as of 09.30.16

HQ: West Jordan, UT
ASSETS: $190.5M
MEMBERS: 9,812
BRANCHES: 10
12-MO SHARE GROWTH: 10.7%
12-MO LOAN GROWTH: 11.6%
ROA: 2.24%

Once go-live happened, it happened fast.

The transition from a data center in Denver to one in Salt Lake City took a couple of hours to complete, with core connectivity at the branches coming online in 22 minutes and online banking within 40 minutes, Leber says.

The result?

Each of the five branches now connect via VPN and all core-related functions are moving 60% to 70% faster, including screen response, through cable-based connections averaging 100MB a second downloading and 20MB a second going back up. Minnequa Works also has improved its ability to handle the data needed for effective business analytics.

CU QUICK FACTS

Community Choice Credit Union
Data as of 09.30.16

HQ: Commerce City, CO
ASSETS: $56.0M
MEMBERS: 6,508
BRANCHES: 2
12-MO SHARE GROWTH: 0.2%
12-MO LOAN GROWTH: 6.8%
ROA: 0.46%
Minnequa Works, American United, Community Choice and Sooper credit unions use the CUProdigy core processing platform from the CUSO of the same name. Find your next solution in the Callahan & Associates online Buyer's Guide.

Financial And Operational Benefits From The Cloud

American United Federal Credit Union ($190.5M, West Jordan, UT) has noted a similar increase in speed since converting to the cloud version of its existing platform earlier this year.

“Things that used to take 10 minutes now take 90 seconds,” says Matthew Tingey, the Utah credit union’s vice president of accounting and special operations. “Our biggest improvement, though, is in disaster recovery. If something were to happen to our servers before we went cloud, we could be out of commission for hours, days, or weeks. Now, we can switch from one data center to another in a matter of minutes, with only a few seconds of lost data.”

CU QUICK FACTS

Sooper Credit Union
Data as of 09.30.16

HQ: Denver, CO
ASSETS: $334.5M
MEMBERS: 36,082
BRANCHES: 5
12-MO SHARE GROWTH: 9.4%
12-MO LOAN GROWTH: 16.0%
ROA: 0.23%

Tingey says the cost of running on the cloud servers is about the same as American United’s original in-house servers, which ran in a VM environment. But Tingey, a self-described “big computer nerd,” says if the credit union were ever to have a disaster, the risk from losing data and member confidence is lower, which alone saves the credit union money.

Meanwhile, Community Choice Credit Union ($56.0M, Commerce City, CO) is reporting immediate sharp savings. One of the original owners of its core processing CUSO, Community Choice moved from in-house to the cloud version earlier this year. According to Rainy Thoen, the credit union’s CEO of 25 years, giving up the outsourced IT support her small cooperative had been using will save Community Choice some $50,000 in 2017.

“I encourage credit union leaders to consider the cost, time, and challenges that come with maintaining new and secure hardware,” Thoen advises.

Core processing costs at Sooper Credit Union ($334.5M, Denver, CO) have also dropped sharply.

Paying $1 per member per month for the software, licenses, hardware, hosting, maintenance, updates, backups, and support now totals approximately $35,000 a month, compared with the $50,000 a month it was paying before converting last year from another core platform it was using in-house.

But the Centennial State credit union points to operational as well as monetary benefits.

“Our staff is more self-sufficient,” says Sooper CFO Carrie Langgard. “We’re finding it much easier to rotate people among branches and departments.”

Leber at Minnequa Works says his credit union is now saving on core services, hosted cloud servers, communications, and third-party vendor integration, and can simply connect to its chosen vendors instead of from a list provided by the core processor.

As for the human factor, credit unions must be ready to deal with the objections some IT employees will have with the loss of control. Others might be concerned about cloud storage itself. 

“I was concerned the cloud was not safe,” says Thoen at Community Choice. “I now realize this is a private, secure cloud product. I know where our data is. I also struggled with concerns about downtime, a slowdown in the system, or the ‘what ifs’ list. None of those occurred.”

9 Tips For A Successful Cloud Conversion

Greg Leber, CIO at Minnequa Works Credit Union in Colorado, offers advice on how to convert to cloud-based core processing.

  • Map the existing core. Know the moving parts, including Vendor IP Whitelisting, security certificates, third-party flat files, and online banking live/batched transmission. Have a comprehensive list wrapped around connectivity to facilitate an easy transition.
  • Work the steps. Put compliance documentation in order before changing the architecture.
  • Consider communications changes. A credit union will only be as fast as its line to the core. Research bandwidth and requirements needed for the size of the operation and make the step up. Packet loss, bad routing, or low bandwidth are definite black holes of frustration. 
  • Designate department contact to coordinate the move. Require everyone to report through those channels. Too many hands increase the chances of issues arising.
  • Conduct thorough pre-deployment testing. Make sure everyone, including the support functions of accounting, collections, lending, operations, etc. have a chance to work in the new environment.
  • Compare apples to apples. take an end-of-mouth cycle and review every piece of data and report that comes with it. Make sure there are no oranges.
  • Let go. Processes on an Excel spreadsheet in the back office? Pass those off to the core to save time and money. Look at any and all opportunities to automate with the new technology.
  • Reach for new opportunities. Interal IT operations are no longer working from the closer, they are remoted into someone else's. Keep DR, Incident Response, IT SOPs, etc., up-to-date and explore the benefits of the additional security provided by the cloud umbrella without the additional expense to the credit union.
  • Ask every question. Even if you think it's redundant or irrelevant, ask anyway.