It’s fitting that a tech-savvy credit union founded in rocket technology is now propelling itself and other cooperatives to new innovation heights. Founded in 1951 by 11 employees at the Army’s Redstone Arsenal post in Huntsville, AL, the early Redstone Federal Credit Union started out with just $55 in the “vault,” at the time an old shoebox. In the 61 years since, Redstone has grown into a $3.4 billion institution with more than 350,000 members.
Redstone’s technology department is distinct in that it not only provides the expected IT support, fixes, and operational efficiencies required to keep the institution’s 23 branches and remote channels humming along but also drives sizable revenue to the bottom line through a new income source many credit unions have yet to uncover.
This wasn’t always the case, says Harry Gunsallus, senior vice president of technology and operations. Redstone in years prior had been primarily internally focused. And that approach, while not unlike that of many credit unions in the marketplace today, limited where and how the IT department could impact the organization.
“The credit union used to look at challenges and problems as just that: challenges and problems. It wasn't creative about how it could do something more with the solution,” Gunsallus says.
The shift away from this mentality started slowly, but the decision last year to participate in Open Solution Incorporated’s DNAppstore — a space where credit unions sell core software solutions they have developed to other community financial institutions — provided real momentum.
“With this new development option, there’s a paradigm shift happening every day,” Gunsallus says. “Redstone now looks at challenges as an opportunity to sell into a broader market and that never happened before.”
Mobilizing The Back Office
Today, 10 out of the credit union’s 42-person IT department works on developing core applications in one of two areas — the software development department or business automation and analytics.
“We still have the same number of folks, the same infrastructure, network engineers, helpdesk — all the same folks,” Gunsallus says. “But we’ve created these opportunities for our people for things like process improvement, automation, business intelligence, business support analysis, and software development.”
By creating these nontraditional, challenging IT roles, Redstone has not only altered the level of talent that it is able to attract but also has created new career paths that revolutionize the experience of being a back-office employee.
“Take a person that used to just solve problems internally and in terms of job satisfaction on a scale of one to 10, they’d maybe have a four,” Gunsallus says. “We have found that by taking their solution and putting it out on the market, their satisfaction level rises to at least a seven or an eight. Our employees derive a personal sense of satisfaction because their work matters on a bigger scale.”
This 10-person team still operates through the primary filter of solving internal problems at Redstone. However, the frequent overlap between Redstone’s issues and the experiences of similar institutions has allowed the credit union to achieve rapid success in this marketplace, selling more than 200 applications to date.
From Problem, To Solution, To Market
The initial spark for each potential app starts with a group of five business support analysts, whose job it is to meet with Redstone’s business units.
“Each of these employees goes to their assigned divisions asking one main question,” Gunsallus says. ‘“What is the biggest pain point you have today?”’
After the analysts uncover a problem, they run multiple factors through a decision tree to determine the best solution for that specific case.
One option would be to create an internal workflow as an alternative to an app or something the credit union would sell. Another might be to outsource the issue to a third party vendor or purchase an off-the-shelf solution. A third option would be to build the app in house.
If the credit union selects the third option, an analyst meets with a programmer on the software development side and they start the software development lifecycle to write a functional specification. They then create a screen mock-up or wireframe of the app to take back to the business unit — ideally within a week of uncovering the initial issue.
Step two is to tweak that spec based on the department’s feedback, which can take up to another week.
“The department will say things like ‘I’d like that field here’ and ‘I’d like to bring that field in from this core system,’ so we do a couple of iterations,” Gunsallus says.
Then, in the next week to 30 days, depending on the project’s complexity, the programmer builds the solution using over-the-counter development tools such as .net and C#. Once built, the credit union submits the code to Open Solutions for validation, which takes anywhere from three to 30 business days. Once approved, the product is put in the OSI marketplace and Redstone must download the solution there.
“We can’t actually use our own code until and unless Open Solutions validates it,” Gunsallus says. “They need to regression test it against their base code line. Once they validate it, any revisions they do to their core code will still be compatible with our apps.”
The fastest timeframe to go from initial app idea to actually selling the finished, approved solution in the marketplace is 30 days. At its longest, the process takes six months.
An Overdraft Example
Redstone’s best-selling solution to date is its overdraft research tool, which sells on the market for $15,000 and has been purchased more than 140 times.
Frequently, Redstone members would go into online banking, see an overdraft charge, and dial the call center. The resulting research — including things such as soft posts against the account by merchants — took reps 20 minutes on average to complete.
“In an open solutions environment, it was almost virtually impossible to figure out in real time what was happening in your account,” Gunsallus says. “So we built an app that shows real-time activity.”
The solution pulls together the more than five screens a member representative would typically have to access and places that information in one concise location.
“The call time gets reduced from 20 minutes to five and we can even email the member that screen through a secure solution,” Gunsallus says. “The member might not like the charge, but they can at least understand it.”
Internal Priorities Versus Marketplace Potential
Occasionally, other credit unions will offer up a wish list of things they would like to accomplish. If there are items on the list that Redstone could also use, it will build them and offer the requesting institution a significant discount.
Regardless of where the idea comes from, every potential app is still subject to standard ROI and total cost of ownership calculations over specific time horizons. This helps the credit union determine the product’s potential.
Looking forward, Redstone sees opportunity for selling directly to buyers outside of the OSI marketplace — a possibility solidified by formation of its new CUSO, Redstone Consulting Group, LLC.
“We believe there are opportunities to do similar work for areas like risk management as well as audit and compliance,” Gunsallus says. “Phase three of this may be a pure market play.”
And the CUSO structure shields the credit union itself from financial or reputational risk brought on by the sale of software solutions.
“My group is really good at building apps and we drink our own Kool-Aid, that’s what makes it relevant,” Gunsallus says. “But the reality is the way the contracts are written, we have the responsibility if anything goes wrong.”
This article is from the 3Q 2012 edition of Technology@CU, available in print, online and in the Callahan Media App for subscribers. Look for this publication, along with your 3Q 2012 Credit Union Strategy & Performance (CUSP) guide, arriving on desks this month.