Cooperatives: Catch me if you can
ISSUE 16.1, Sep 06
Against a backdrop of consolidation, can technology put credit unions on a par with the big banks?
Cooperatives including credit unions and Caisse Populaires are no strangers to mergers. As with other financial services sectors, there is a trend towards consolidation in Canada’s cooperative movement. Amalgamation of credit unions has led to an increase in their average size, particularly in Ontario, British Columbia and the Prairie provinces. For example, in Ontario the number of credit unions has declined by almost 50 per cent in the last ten years. According to statistics by the Credit Union Central of Canada (CUCC), although the number of credit unions is in decline, the member numbers are up and assets are also on the rise. ‘There are 10.6 million members,’ according to Art Chamberlan, manager, media and public relations, CUCC.
It seems that, on the whole, most software migrations have been relatively successful. This is in contrast to large bank mergers which have often ended in failure. How have some of the credit unions fared and what routes have they taken?
Meridian Credit Union
In speaking to Steve Gesner, CIO, Meridian Credit Union, it appears that one of the main reasons his organisation chose its system was, ‘to have a platform that could grow with us. These technologies [it has changed over 50 systems as a result of its merger] allow us to add members very quickly, whether organically, through mergers, or with big banks cutting loose some of their branches. For example we could double our capacity within a very short time.’
‘Banking systems are like wine and cheese. Too young and they have no character, too old and they stink.’ - Steve Gresner, Meridian Credit Union
Meridian is the result of a merger between Niagra and Hebco Credit Unions that took place in April 2005. According to Gesner, ‘When Niagra and Hebco came together they had different approaches to banking and technology. Our initial decision was around banking technology.’
The combined credit union had three basic choices, to adopt the system used by Hebco, use Niagra’s system (Fincentric’s Ovation) or build or buy a new .Net banking platform. ‘The risks and benefit [of the latter] were high,’ says Gesner.
In choosing Ovation, Gesner showed an interesting take on technology: ‘Banking systems are like wine and cheese. Too young and they have no character, too old and they stink. Ours is mature enough to give us the services we need and it has a migration path which is Wealthview [Fincentric’s latest solution].’
Another issue that was playing on Gesner’s mind in his choice of solution was, ‘our ability to support underlying technology.’ He wanted a Microsoft technology path but there were other decisions about the future infrastructure. ‘With these decisions out of the way we looked into other technologies.’
Neither credit union had looked into technology within the last two years so, according to Gesner, ‘We were looking at a new banking ecosystem. This included new desktop, servers and networks. Over the last year we have prepared the infrastructure for a new banking platform. We have also moved to Telus’ IP PLS network to prepare us for things we wanted to do in the future. We had two point of sale ATM switches. We scrapped them and decided to work with Threshold [an Ontario-based supplier] to manage ATM networks. We also went with CUCBC, [Credit Union Central of British Columbia] who provide us with a variety of services including third party transactional internet processing. We then just started pulling the plug on our in-house solutions.’
One factor that complicated the merger process was that both predecessors ran call centres. Gesner feels that, ‘this is a great touch point for our members. We do a lot of business through branch, but telephone has really helped us to connect with our members. We had basically two call centres with ten year old technologies. We had the decision to buy new or go through a service provider with the latest business solutions. We went with Call Centre Anywhere through Telus. Therefore, agents log on through an IP-based network. This has given us a quantum leap in terms of servicing our members. The agents work from two separate locations but there is really only one call centre. The way it works is that Telus has a free 1-800 number which terminates at the Telus data centre and is rerouted to agents. The centre is located in Toronto, but agents could just as easily work from any location they choose.’
Gesner’s innovative approach to technology has led him to a goal for 2007. He says: ‘We plan to offer a service [co-browsing] so members can initiate a call from their website.’ The technology would basically allow call centre staff to take over their browsing in order to provide customer service. ‘By taking advantage of a service like Telus, we can vault ourselves and be able to operate at the same level as the big six banks for example.’
Choosing Fincentric was a bit more complicated than simply unplugging Hebco’s existing solutions. This was a big project according to Gesner, ‘involving 43 branches and 68 ATMs. We had to switch out virtually all of our technology infrastructure. We had a variety of moving parts that had to happen with the conversion of the main system. I would have preferred having a much less complex merger, but we had a lot of other work we had to do to ensure we had the capacity and flexibility going forward.’ According to Gesner, ‘In going with Fincentric’s Ovation platform, we knew we were going to a platform that could not only support our merger, it could also grow with us. We are using Ovation but can easily migrate to the new platform, Wealthview, and this will allow us to continue with our strategy with Microsoft.’
Meridian’s merger process started in May 2005. ‘The first two months were spent capturing 50 projects that needed to be executed.’ The vast majority of the projects were devoted to infrastructure. Also on the critical path were things like training. ‘Our big concern was to ensure that our employees were able to work with the new technology,’ says Gesner. ‘We also rolled out a new loans origination. We also had to change all our signage and integrate HR issues’. This all culminated on the 1st July conversion weekend.
‘Of course a few things dropped through the cracks,’ recalls Gesner, who seems very pleased about the results. ‘It went 99.8 per cent right.’ However, ‘the 0.2 per cent is still important when you are doing 30 transactions a second’.
‘Our big concern was to ensure that our employees were able to work with the new technology.’ - Steve Gresner, Meridian Credit Union
Looking back, there are a few changes Gesner would make. First, he says, decision-making in a more timely manner would have helped, so too more time in general and a larger dedicated team. ‘We had 20 people dedicated full-time, but there were 300 people involved in the entire project.’
Gesner was particularly keen to keep decision making in-house as opposed to having hired consultants. He feels that, ‘we kept the members in mind when we made all of our decisions’.
The new platform was officially released on 4th July and, according to Gesner, ‘despite having three days, as it turned out we didn’t need three days as things went exceptionally well’.
Capital City Savings Credit Union
In marked contrast to Meridian’s plug and play approach, Capital City Savings’ CIO, Yves Auger, believes that its highly customised solution has its advantages. He believes that 65 per cent of the code is its own, using Ovation as a base. He says, ‘this has been a huge advantage in the market. We can launch quick product releases and are very adaptable.’
Comparing Capital’s approach to working with a service bureau where enhancements can take years, Auger feels that Capital City Savings (which will become Servus Credit Union from 1st November) has an advantage. Of course its approach comes with a cost.
It has 45 technical staff including IT help desk, technical staff, design analysts, security and testing. According to Auger, ‘Our costs are higher, but we get a lot more out of it [Fincentric’s software]. We are not on a fixed price model, we can decide what and when we invest’.
According to Auger, ‘another advantage to having your own solution is that it has directly led to business from large commercial accounts. This is because we built our own cash management software.’ Due to an upcoming merger, it will also be increasing its members from 170,000 to 180-185,000, with C$2.7-3 billion in assets under management. ‘Having control makes this possible,’ according to Auger.
In reference to the challenges facing its upcoming merger, he says, ‘merging is old hat for us. Our policies and procedure are all wired, fairly clear-cut’. Of course, every merger has its own challenges because every credit union has different cultures and procedures. For example, bringing loans into sync is always a challenge. ‘But after so many mergers, the IT people are getting really good at it.’
|
Merged Entities |
New Name |
Banking System |
|---|---|---|
| Richmond Savings Pacific Coast Savings Surrey Metro Savings |
Coast Capital Savings Credit Union | Open Solitions' TCCU |
| Niagra Credit Union Hebco Credit Union |
Meridian Credit Union | Fincentric's Ovation with planned migration to Wealthview |
| Envision Financial First Calgary |
Keeping individual brands | Fincentric's Wealthview |
| Community Savings Credit Union Ukrainian Credit Union |
Community Savings Credit Union | Open Solutions |
| Heartland Credit Union Moosomin Credit Union Prince Albert |
Conexus | CGI integrator, using Ovation |
| Border Credit Union Common Wealth Credit Union Fairview Credit Union Grand Prarie Credit Union-2003. |
New Common Wealth Credit Union | Open Solutions, outsourced through Celero |
| CWCU then merged with Emergency Services Credit Union |
||
| Civic Employees Credit Union United States Credit Union Burnaby Savings Credit Union United Savings Credit Union G & F Financial Group Allied Savings Credit Union Mount Pleasant Credit Union |
G & F Credit Union | Open Solutions |
| Brant Community Credit Union Waterloo Regional Credit Union |
Grand River Credit Union | Straight Info Tech's (SIT) Portfolio Plus |
The sum of four parts
Coastal Community Credit Union is the coming together of four smaller players, each with its own systems. What route is the combined entity taking?
It is well documented that IT integration for merging financial institutions can be exceedingly frustrating and can even lead to failure. There is still a long way to go before the merger process at Coastal Community Credit Union (CCCU) is complete, but many of the hurdles have been cleared and most decisions have been made.
Today, CCCU has 80,000 members, 550 employees, $1 billion in assets, 20 branches and 19 insurance offices, business centres and financial planning offices. While still small, this is a quantum leap from the pre-merger CCCU, which had 20,000 members, 145 employees, $332 million in assets, ten branches, five insurance locations and four financial planning offices.
The first stage in the merger saw the coming together of Coastal Community, Comox Valley, and Evergreen Savings Credit Unions. Then, on 31st July 2004, CCCU acquired 100 per cent of Chemainus Credit Union. As with most mergers in Canada at this level, it was felt that the greater bulk would improve the ability to grow.
Each partner had its own technology and each was proud of what it had achieved. At present, CCCU is running three systems. Visionwest is a legacy banking system operated as a service bureau by Open Solutions Canada (formerly Datawest – see below). This system was implemented in the mid-1990s and is a highly customised multi-institutional version of the Sanchez-derived Profile system, which was selected and licensed by Datawest in the early 1990s. It has a text-based interface, accessed using terminals (usually PCs running terminal emulation). Open Solutions Canada is expected to honour existing service arrangements with credit unions by continuing to operate this system through 2010, at which point it will be decommissioned.
Also within the CCCU mix is Ovation, a PC-based banking system licensed from Canadian supplier, Fincentric (formerly Prologic). The system, launched in the mid-1990s, is Microsoft Windows-based, and has a GUI. This system is operated on the premises of CCCU in Comox by Telus Enterprise Solutions (TES) under a facilities management agreement.
Also being used is Fincentric’s newer version of Ovation, Wealthview. This is also PC-based and the CCCU system went into production in April, 2004. It is operated by Cutasc, a subsidiary of CCCU.
The challenge was to overcome individual bias in selecting a new system. According to Rob Grundison, senior VP operations at CCCU, ‘we achieved this by building a set of key objectives. In the end, the RFP included 800 functionality metrics and was conducted in three phases. We wanted to take out personal bias and establish a framework about what it was we were trying to achieve today and into the future. Members of the committee represented each of the merged entities.’ That selection committee consisted of 15 members made up of individuals from each merged entity.
There was a three phase approach to the selection of a single core system to support the combined entity. There was a cursory review of ten systems and, after the RFP process, selection of two vendors, comprising Open Solutions and Fincentric. The credit union then sent teams into the field where the products were evaluated and a scoring system was put in place to rank the two front-runners.
The selection committee at CCCU was surprised to learn that the two front-runners’ scores, based on the initial RFP and review, were practically identical. CCCU’s executive vice president, Shelly McDade, says, ‘With over 800 functional metrics that were measured, this meant that both of the two products that made it to the final stage had all the functionality required.’ She adds, ‘This put some stress on our decision because it meant that we had to really check under the hood to find a differentiator.’ Price was not one of the criteria as the purpose of the merger was to position CCCU for anticipated growth. It considered such things as its objectives for the merger and concluded that it needed a solution that fitted into its long-term plans. ‘This meant we needed an integrated solution that could manage our CRM, Sales Driver, Business Intelligence and had features like an Integrated Dashboard,’ says McDade. ‘We also had concerns related to the Canadian market. Today, because of government regulations, we have to separate our products. For example, loans can’t be sold out of our insurance office. We expect these regulations to change though. Eventually we want to have a consolidated offer.’
In the end, the credit union opted for Open Solutions. The aggressive vendor moved into the Canadian market in 2004 when it bought data processing and payments provider, Datawest, for C$49.7 million (IBS, September 2004). Datawest had been looking for a replacement for its Profile platform; Open Solutions responded to the RFP and the discussions then took on a bigger dimension. The supplier subsequently tailored its US solution, The Complete Credit Union Solution (TCCU) for the Canadian market. CCCU conducted site visits and attended Open Solutions’ user conference, with 1500 other delegates. Doing this gave Coastal the reassurance it needed. According to Grundison, ‘Not everything we heard about Open Solutions was ideal. In speaking with other Open Solutions clients, they had hiccups during conversions and other problems. What we heard though, was how well Open Solutions dealt with issues: they are very responsive.’ McDade adds, ‘The fact that I can pick up the phone and call Elliot Liesey [general manager for Open Solutions Canada] whenever there is an issue and the fact that he personally oversees monthly planning sessions demonstrates where their priorities are.’
There are still some decisions to be made. Open Solutions offers multiple delivery structures comprising complete outsourcing, in-house, facilities management, and other forms of managed service. CCCU is leaning towards a managed service support structure. ‘Ultimately, though, we wanted our software vendor to act like a partner. We wanted them to take ownership of any problems we might have. We still feel that it is a partnership. Even well into the relationship, it still feels that way,’ says McDade.
According to McDade, ‘The conversion for three [plus one acquired] merged entities, each with legacy systems already in place, is daunting’. The project has been extensively planned and is monitored to minute details. Open Solutions has assigned two dedicated project managers and has helped the adoption of the industry’s best practices. It is too early to say that the project will be a success, but the signs are promising.
