From In to Out: News driving core processing to outsourcing

The news of credit unions making the switch to outsourcing for core processing has been getting increased attention. And, in a recent article published by Jack Henry & Associates, Inc. about the migration of credit unions to outsourcing core processing workload to a service bureau, there are key factors that a credit union must consider before choosing an outsourced environment.

The Economy: When a credit union is faced with “unexpected capital outlays” outsourcing can be an attractive alternative. This is connected with the unpredictable cost associated with core processing. While outsourcing is not always the less expensive option, many credit unions find the benefit of predictability of knowing what their expenses will be month to month and eliminating unexpected surprises offsets the extra cost.

Mergers and Acquisitions: Outsourcing can also make any acquisitions much simpler. Instead of an acquisition being a resource drain to the credit union, as well as unanticipated expenditures on the IT side, outsourcing allows the credit union to focus on the “business at hand”, which will ultimately help keep member satisfaction high. Service providers, such as Synergent, maintain fulltime conversion teams to help the credit union through any sort of acquisition on both the internal staff side of things, but also make things as easy as possible for the credit union’s newly acquired members.

Regulatory Issues and Audit Issues: Regulatory agencies, such as FFIEC and audit entities, are spending increasing amounts of time on examinations. Providing adequate amounts of resources to both these audits and good member service is a struggle for a community credit union that can be avoided if they outsource. If a credit union is outsourcing, the vendor they are using can use their resources to work closely with regulators, allowing credit union staff to focus on the other areas of credit union operations. Annually, vendors provide members with an SSAE16, which provides all the documentation that a credit union needs to share with regulators pertinent to the data processing operation.

Disaster Recovery: An important facet for every credit union to consider, whether they choose to operate in-house or outsource is their disaster recovery plan. Outsource providers provide this service as part of its standard product offering.

Staffing Concerns: Staffing changes are a fact of business. For credit unions, hiring and/or replacing key data processing positions is a challenge. Apart from hiring IT staff, another problem is evident in the credit unions ability to retain them because the skillset is so specific it is often difficult to offer these individuals a career path. Outsourcing relieves strain on staff, allowing credit unions to build a stronger member service culture. Furthermore, outsourcing frees up credit union employees to work less, and enable them to focus on “the business they know best”.

Permission to use concepts from Symitar.