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​Why Cloud-Based Core Processors are the Future of Credit Union Banking

In today’s rapidly changing digital landscape, credit unions face intense competition from larger financial institutions, community banks and new market entrants, like fintechs. To remain competitive, credit unions must break free from the shackles of outdated, legacy technology and leverage innovative technology solutions that enable them to deliver better services to their members while reducing operational costs. With credit union’s core processors at the center of it all, moving to the cloud allows credit unions to transform their banking operations for improved efficiency, enhanced member experience and future growth opportunities.

What are cloud-based core processors and how do they work?

Older core systems were designed for reliability, and mostly succeed in being always on. However, they were not designed in the ‘80s and ’90s using ‘70s tech with the current-day consumer demands in mind.

For example, according to a NerdWallet survey, 72% of modern banking consumers use a mobile banking app, and consider that nearly all millennials use mobile banking apps. To tap into tech-savvy users, credit unions need to be able to offer the best mobile banking, and that’s more than just your digital banking channel,  for their members, but many older cores limit the various app providers a credit union can choose from or charge a heck of a lot more for adding it.

Cloud-based core processors use modern code to offer much greater flexibility and easier integration with mobile banking providers, fintechs, CRMs and many other integrations a credit union might want, reducing costs for everyone and increasing speed to market with new services. Additionally, the cloud can provide access to real-time data processing and automate workflows.

Benefits of cloud-based core processors for credit unions

Think of cloud-based core banking processors as that perfect T-shirt that fits well, even just after the holidays. The environment has the stretch to grow with you – or scale back – as needed. Whether it’s the holidays and credit card usage is up or the housing market continuing to slow, cloud-based cores can handle all of this efficiently for your credit union in both time and money.

In addition to its flexibility, credit unions can reduce their costs by eliminating the need for expensive hardware, software and maintenance. It can also reduce reliance on growing your credit union’s IT staff, and instead free up their time on more important, strategic work that they’re in a severe time-crunch to do now.

And regarding security, cloud-based core infrastructure is built around data protection, as opposed to on-prem, which are more easily brought down in cyberattacks. Just be sure you know who and what parties are protecting and backing up your credit union data and ensure their business continuity plans are comprehensive should a disaster strike – natural or manmade. Plus, data backups are a breeze – well, not really – but much easier, so when there is a problem, you’re back up and running quickly.

Members can also experience faster, more accurate service because of the real-time data that’s available to them and they can achieve a greater sense of control over their finances.  And, because you’re able to offer them best-of-breed on a wider range of services, you’ll build trust with them, so they’re more likely to bring even more of their financial business your way.

In fact, one of the biggest challenges can be the dreaded core conversion. Many credit union CEOs have avoided this day like the plague because it is complex and time consuming to ensure a smooth transition.
However, Prodigy client, First American Credit Union CEO Phil Peters said this of our conversion process at his credit union:

“We were on a legacy core, and we just knew we have to rip this Band-aid off for our future. It’s going to be well worth it, no matter how painful it is in the moment. And then, interestingly enough, the core conversion was not painful at all. Prodigy did an amazing job.”

Northern Illinois FCU’s experience

When Northern Illinois FCU was looking for a new core, the credit union had a few things on its wish list, and one big one was not to mess with its home banking platform. The credit union loved it, and members loved it, so whatever core they chose, their home banking platform was non-negotiable.

That eliminated a lot of cores. So, Mark Lenaway, CEO at NIFCU, said they asked their home banking provider for recommendations, and Prodigy was one of them. He hadn’t even heard of Prodigy at the time.

Lenaway said he liked that it didn’t require in-house servers, the code was modern, and the interface was really easy to use. “Prodigy is not attempting to run a 1960s technology and just put a happy face on it,” he observed. Lenaway added that he also liked that Prodigy was a CUSO, and the cloud-based core processor really does listen. An additional benefit is that some of the larger credit unions on the platform are driving the innovation, which his credit union can access for free, allowing the credit union to offer more services than the typical $20 million credit union. While other cores were promising the moon – and adding to the price tag for each – Prodigy was incredibly transparent about everything.

Why credit unions should consider cloud-based core processors
Cloud-based core processing is the future of credit union banking. Technology leaders, like Amazon Web Services, investing heavily in this area serves to solidify this statement. In fact, Deloitte found that financial institutions moving to the cloud tripled between 2016 and 2018. A more recent American Banker poll found that cloud computing was a top-five spending priority in 2023 for more than 40% of U.S. bank executives. Adopting cloud technology helps credit unions stay competitive with the flexibility they need, and the services members deserve.

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