Not so Black and White: Service-Oriented Architecture

Service-oriented architecture is an area many credit unions are unfamiliar with, but should be when considering data processing operations.


A core system conversion is a key decision for your credit union’s future.  As the main link between members and the credit union itself, the core system is integral to each credit union’s service culture and product offerings.  According to September 2006 call report data, 592 credit unions are undergoing a data processing conversion or plan to within the next 12 months.  This number may be slightly inflated due to the fact that credit unions could report this whether they are actually undertaking a conversion or are simply considering one.  However, it shows the dynamics of the market and how many credit unions are reviewing their options.

Three Data Processing Options

The decision on which vendor to work with and the type of core processing system to implement is based on several factors – including their size, member needs, and flexibility for future growth considerations. Three main types of data processing systems exist that a credit union can choose from: vendor-supplied in-house systems, vendor-supplied online service bureaus, or credit union-developed in-house systems. Due to the large investment it takes for a credit union to develop a core system on its own, 99% of credit unions over $25 million in assets turn to vendors.

Available systems to choose from have historically been categorized in two areas for credit unions: open-architecture systems or closed.  Open DP systems allow your credit union’s IT team to go into the source code and customize the program internally to fit your institution’s and members’ needs.  A closed system means there is little opportunity for the credit union to customize the system on its own.  It requires little man-power and maintenance to run as modifications or additions are carried out by the vendor.

Service-Oriented Architecture

An often overlooked but increasingly popular third option that exists for a core system’s architecture is service-oriented architecture.  In its simplest form, this type of architecture means that third-party programs or processes are easily integrated with the core system, but the system’s actual source code is not modifiable. 

Integration is the key word when discussing service-oriented architecture.  Without the ability to integrate, it would simply be a closed system.  The advantages of a service-oriented system include the minimal IT staff needed to maintain the system due to the easy integration, and easy integration of previously used and future interfaces and processes.  A disadvantage is that in order to customize the system, new third-party platforms must be purchased or additions must be made through the vendor itself.  It does not lend itself to in-house customization like an open-architecture system would.  The other disadvantage would be ensuring that the core system is compatible with all relevant third-party packages.  The credit union must ensure that the system they are converting to will mesh with the other applications they need to integrate. 

One reason a credit union would consider a service-oriented architecture is if some existing applications are used to run various processes at a credit union.  These third party systems may work well with certain processes.  Therefore, implementing a brand new system infrastructure may not be the best decision for the institution.

Remaining Member Focused

When considering a conversion, credit unions must analyze all options available.  The core system must balance credit union and member needs and help position the credit union for future growth.  Although there are many options available – whether it be open, closed, or service-oriented architecture – improving service to your members must remain the highest priority.

For more information on DP conversion decision making and success stories from credit unions who have recently converted, please just us for Open or Closed: Cutting to the Core of System Conversions, a webinar brought to you by Callahan & Associates.




Nov. 27, 2006



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