By John San Filippo
In what is a recurring feature, Finopotamus, in cooperation with NACUSO, profiles credit union service organizations (CUSOs) that offer innovative technology combined with the credit union ethos of people helping people. This is the first of four installments on the CUSO of the Year winners announced at the recent NACUSO Network conference. The four winners were:
Prodigy – Traditional CUSO of the Year (formerly CUSO of the Year before other designations were added)
Zest AI – New CUSO of the Year
LenderClose – Contemporary CUSO of the Year (recognizes CUSOs with a fintech business model, including non-credit union investors)
Member Driven Technology – Distinguished Service CUSO of the Year (recognizes long-term, consistent commitment to the credit union industry)
Bold from the Beginning
The Prodigy story begins in the early 1990s when a group of smaller credit unions, each under $90 million in assets, received notification that their core processor, INI, was being dissolved in bankruptcy court. These credit unions were further informed that each would need to select and convert to a new core processing platform of each credit union’s choice.
This was an unfortunate development because these credit unions were satisfied with the technology they received from INI and had no desire to go through a core conversion.
“They didn't like the options available to them at the time, especially considering the speed with which they would have to move,” said long-time employee and current CEO Amber Harsin. “That limited them to the big players like FIS, Fiserv and Jack Henry.”
So, the CEOs of these credit unions got together and came up with a bold plan. They would buy the source code for the INI platform from the bankruptcy court, hire some of INI’s former employees, and form a CUSO to serve the data processing needs of those credit unions. Thus, Credit Union Data Processing was born.
“This was a pretty bold, mildly rebellious move at the time,” asserted Harsin. “It was quite an undertaking that most credit unions probably would not volunteer for even today.”
For the next 15 years, the CUSO remained focused on serving those original credit unions, with no plans for further expansion.
“They weren't necessarily looking to make money,” said Harsin. “This was more a collective effort for them to maintain their own technology and have ownership of that technology and drive it where they wanted it to go.”
A Need to Modernize
Although the credit union owners were for the most part satisfied with the control they had over their technological future, by 2006, the architecture of that original INI system began to show its age. Even then, it was clear that a credit union’s ability to integrate new third-party applications would be key to its success. And it had become increasingly difficult to integrate new products coming on the market with INI’s legacy technology, including and especially its proprietary database.
“At this point, none of them were over $100 million in assets, but they made another really bold, gutsy decision,” recounted Harsin. “They pooled a couple million dollars together and funded a complete rewrite of the system from the ground up using open, modern technology.” That rewrite took the CUSO four years to complete.
The Better Option
A little more than halfway through the rewrite of the core system, something happened that could have jeopardized the whole project. Two of the CUSO members announced that they were being acquired by other credit unions.
“As part of the due diligence for those mergers and acquisitions, both of those acquiring credit unions decided to stay with the CUSO,” said Harsin. This occurrence, she added, surprised the CUSO members and they began to wonder whether they should offer their system to other credit unions.
“The CUSO did a lot of research into why these two institutions made the typically unpopular decision to convert to the non-surviving entity’s system,” noted Harsin. “It became pretty clear that they had some technology on their hands that would be very beneficial to the credit union movement and that they should open the doors to invite some others in.”
Within the first two years, the CUSO added seven new credit unions. “That’s a lot considering we had never marketed the system before,” said Harsin. The CUSO was so successful, it had to halt sales for about 18 months just to make sure that all the new credit unions could be properly onboarded and that the CUSO had all its processes in place for this new venture.
Enter the Cloud
The Prodigy platform had always been an on-premise solution. However, in 2014, Prodigy acquired another CUSO that provided its member credit unions with data processing in a service bureau environment. That CUSO was running the Ultradata core system. This acquisition provided several new credit unions, plus a prebuilt cloud infrastructure with data centers in Salt Lake City and Denver. This allowed Prodigy to create a credit union-specific cloud platform akin to Amazon Web Services (AWS) or Microsoft’s Azure.
Then came bold move number three. Realizing the tremendous benefits of the cloud to both Prodigy and its members, the CUSO decided to migrate all of its credit unions to Prodigy’s private cloud and eliminate its in-house offering completely.
“We were able to easily convert all of our credit unions at that time into the cloud environment and provide them with a lot of redundancy and uptime,” said Harsin. “We were also able to create a secondary product line for CUSO users and other credit unions who may not necessarily wish to use the core, but did want to take advantage of a private CUSO-owned cloud environment for non-core infrastructure.” She said this allowed Prodigy to virtualize any credit union’s entire network and host it in the CUSO’s private cloud.
Investing in Human Capital
Over the years, Prodigy’s owners invested plenty of money in technology, but staffing started to fall behind.
“We relied very heavily on the credit union model of do more with less,” said Harsin, “but a few months ago, we made another really bold decision. Our leadership team identified that we needed to make some pretty drastic human capital investments in order to maintain the dream that the credit unions had when they started the CUSO, which was having a cutting-edge, modern, agile, nimble core that could integrate with anyone, provide open access to their data, and keep the power in their own hands.”
The net result was a 45% increase in staffing. This was paid for with a voluntary price increase for the member credit unions. According to Harsin, even with that price increase, Prodigy’s core is priced competitively compared to other best-in-class solutions. She said that other similarly functioning systems are more expensive than Prodigy, while similarly priced systems can’t compete with Prodigy’s technology.
“There's a rebellious, scrappy little spirit to Prodigy that really parallels the credit union mentality,” concluded Harsin. “We're always the little guys, always fighting against the banks. Now we're fighting fintechs. Now we're fighting neobanks. It's all about this tenacity of believing we're doing the right thing.”