With Core Processing Decision-Making: Service Bureau Environment or an In-House System?

Credit unions are facing critical points for core processing replacement over the next few years. Credit union CEOs and their boards need to look ahead at where they want to guide their institution to handle today’s changing market forces and regulatory developments.


Credit unions are facing critical points for core processing replacement over the next few years; they are either paying high maintenance costs or suffer an inability to easily integrate third-party applications. Yet credit unions, like most institutions, are often wary of implementing a new core platform until they see other successful conversions and calculate the potential return on investment. Sooner or later, credit union CEOs and their boards will determine where they want to guide their institution to handle today's changing market forces and regulatory developments.

Technology has clearly enabled credit unions to compete very effectively against their larger rivals with focused technologies aimed at achieving specific competitive advantages, according to Gary Glenn, Senior Vice President of Synergent. Core processing, often viewed as a back-office operation primarily aimed at processing transactions, has undergone a powerful transformation in the past decade. Companies, like Synergent, provide a service bureau environment that serves as a partner to credit unions, replacing "back-office" operations with a full array of technology services.

In recent years, researchers have identified outsourcing as a key component of business strategy. Competitive pressures continually drive organizations toward greater efficiency. Researchers in the financial services industry have indicated that outsourcing data processing needs is often determined by the credit union's size and the diversity of its product offerings. Ultimately, credit unions try to align their data processing selection to their business and members' needs for the future. An individual institution must determine which option – partnering with a service bureau or doing its own processing in-house — is the most efficient and cost-effective, given its own operating requirements and technical resources.

John Reed, CEO of Maine Savings Federal Credit Union, Hampden, Maine, switched to a service bureau environment from an in-house system. "We were responsible for everything — our in-house system required more staff, who had to be very knowledgeable. With today's technology, moving to a service bureau allows us the time to have more focus on our members. It has also been a good financial move for our credit union."

Reducing application development time and reducing costs are emerging as main drivers of transforming or replacing existing core system solutions into an outsourced model. A credit union must weigh the increased staffing needs and greater initial hardware and software expenses that go along with processing data in-house. However, today's technology is complex. The decision to bring core processing in-house is a major one. An internal operation may be challenged to stay current with technology and to re-invest in hardware. As a result, in-house operations struggle over time with solutions that are supported less and with hardware that becomes less reliable. The capital and human resources required to maintain an in-house system often prevents credit unions from capturing other growth opportunities in the marketplace.

If a credit union is looking to control business operations and customization in-house to handle members' changing financial needs, they must have the IT staff in place to manage the platform, according to John Laverriere, Synergent technology employee/programmer for 20 years. Laverriere points to an important consideration: "Is the technology running the business when you have an in-house approach?" he said. "Or is the technology helping you run the credit union to better serve your members?"

Synergent has completed more than 50 successful conversions to the Symitar's Episys® platform in the past four years, making it the largest provider of this solution in a service bureau environment in the country. What makes this platform a credit union solution is how Synergent delivers it. Even in a basic delivery, Synergent adds customization and integration with third-party solutions that support credit unions' strategic initiatives.

Synergent's expertise in a back office environment provides its partners with services only found within a service bureau, such as customized programming, installation of regular software releases, analysis and research specialists, disaster recovery, regulatory compliance, business continuity planning and technical support.

For additional information, contact fbarber@synergentcorp.com or visit www.synergentcorp.com. Synergent works with over 200 New England credit union partners for core processing, payment systems and marketing.

Episys® is a core processing system of Symitar, a Jack Henry Company.



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