Why Credit Unions’ Members Are Moving Them Into the Cloud

It is an exciting time for banks, neo-banks and credit unions all of which can benefit hugely from the vastly-improving technology landscape.

John Schlesinger
John Schlesinger – Chief Enterprise Architect

It is true that Credit Unions have a tough job on their hands to make themselves more attractive to the millennial generation – but there are lots of ways they can expand the services they provide to their customers.

When it comes to facing competition from retail banks and neo-banks the credit unions know they have an uphill battle. Robert Cooper, Chief Executive Officer of Dublin-based credit union Savvi, recently said in an interview with FORA: “People tend to have a staid impression of them, which obviously isn’t something that you really need if you’re looking to get into the Fintech space and you’re trying to attract younger consumers.”

Amid the digital hype, it is important to remember that “transform or die” is not the reality for most credit unions—and that each organization’s path to growth is unique. Yes, there is a need for growth, but transformation does not need to be an all-or-nothing process. Innovation is not one-size-fits-all. It looks different for every financial institution based on its identity, maturity, and landscape. This is particularly true of credit unions which traditionally have kept close to their customers and provided them with a small menu of specialist services.

Temenos writes and runs software for all sizes of retail and corporate banks – our Irish clients include Bank of Ireland – but our Community Banking product perfectly addresses the needs of smaller institutions like credit unions. In early 2020, Temenos signed three deals with credit unions in Dublin, Meath and Offaly to bring them on to our Software as a Service (SaaS) platform.

Previously these credit unions used on-premise infrastructure including their own data-centers – now they are using cloud-based SaaS systems that allow the credit unions to build and deploy services like loan products.

While the platform is similar to that used by banks it has been configured specifically for credit unions: “It brings the same rich functionality available to every other bank in the world but has been pre-configured to meet the specific needs of the credit union market and Irish regulations,” said Des Noctor, Temenos’ regional director for Ireland and the UK.

“Temenos has been operating in the Irish market for many years and we are very committed to it,” he said. “Credit unions are increasingly the new banking force in Ireland as a result of consolidation, growth and stronger balance sheets.”

“What credit unions need is access to scale – there is a huge fragmentation of credit unions. At the moment there are 250 credit unions in the country so they are all very individual. The way forward is through collaboration and gaining access to scale,” Cooper said.

The opportunity for credit unions lies within processes such as Open Banking which are widening the services which they can offer their customers as they separate distribution services from manufacturing services, putting a layer between the channel and the underlying service. Credit unions need to be getting closer to their customers using the ability of software to achieve their goals. Temenos Infinity provides the distribution and channel services while Temenos Transact provides the manufacturing services. Using Temenos Infinity, credit unions can get much closer to local SMEs, travel companies, healthcare education, cars and suppliers of these services.

The time is right since most credit unions are reaching the end of life of their present systems. They have to move to new systems and cloud-based systems are the best answer and they are now mature, affordable and secure. Over the lifetime of a Cloud-Based Temenos system the typical credit union will make massive cost-savings.

To ensure that credit unions can improve their services to all customers, what they should be doing is using distribution as a service. Temenos offers Infinity as a service on the cloud. And, for a community bank, because the SaaS will be complemented by Temenos’ country model bank, the platform will have elements inbuilt that they would otherwise need to build themselves, such as local payment services, local products and open banking interfaces which can work with manufacturing banks in the region.

At the moment, credit unions are put off by the cost of investing in new systems. They are worried that they do not have the money to invest in the automation needed. They think it is too expensive for them. However, using Temenos SaaS on a pay-as-you-go basis provides them with an inexpensive platform and an effortless migration from their current processes to new cloud-based ones.

The commoditization of core banking functions makes it more important than ever to recognize and promote what makes your credit union unique. As the number of your competitors— and their digital sophistication—continues to grow, you need a clear vision of why members should choose you. In a crowded market, this is your key to growth.

You can start by asking questions such as:

  1. How does your community banking experience compare to competitors?
  2. What do you provide that is diagnostically different?
  3. How do you feel about the digital banking experience you offer?
  4. Is it aligned with your business and customer proposition differentiators?
  5. How well does your technology support your ability to stand out from the crowd?
  6. What about your staff? How are they using technology to deliver a differentiated experience?

Credit unions have unique relationships with their members who see them as trusted partners in their financial journey through life. They are often based in small towns with a uniquely individualistic outlook on life. But their profiles are changing as their members’ needs and expectations change. By adopting SaaS, the credit unions can reciprocate with great new services because they are closer to what their customers need.

As Cooper said: “Allowing more freedom for credit unions will bolster competition in financial services in the country and create more choice for the consumer.”

“Our strategy is to provide banking without banks. In many respects we need the legislation and regulation to reflect the fact that credit unions can deliver the range of products and services that any ordinary person on the street would want from a financial institution,” Cooper said. That will ensure that credit unions have the will, technology and customers to keep on growing.

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John Schlesinger
John Schlesinger – Chief Enterprise Architect