By W.B. King
While BlackBerry is not officially dead, when the Canadian company announced in early January 2022 that it would be discontinuing provisioning services, the QWERTY writing was on the wall: The once ubiquitous phone would soon have trouble joining the cellular network.
“BlackBerry learned the hard way that market share can disappear quickly when you don’t continue to innovate and you don’t make it easy to work with other applications,” said Cornerstone Advisors’ partner Brad Smith. The Scottsdale, Ariz.-based firm provides credit unions and banks with consulting and engagement services.
“Legacy core vendors’ middleware solutions aren’t much different than BlackBerry’s feeble app world. Credit union executives should consider their core’s approach to integration as a key to future proofing. And approach means more than just the application programming interface (API) technology,” said Smith. “Proprietary tools, API toll charges and a begrudging attitude water down the effectiveness of any integration tech.”
Sabeh Samaha, CEO of the Miami Beach, Fla.-based credit union consulting firm Samaha & Associates, Inc., said he wasn’t surprised by the BlackBerry development as there were many indicators.
“Credit unions should learn from these warning signs and understand the evolution of old systems,” Samaha said. “If your vendor is delaying maintenance and upgrades or is increasing costs for these services, this could be a sign that the technology is becoming outdated.”
NCR Digital Banking’s President and General Manager Doug Brown added that the “end-of-life” for Blackberry underpins a critical trend. “Technology is moving more quickly than ever before, and you have to either evolve with it or risk becoming irrelevant.”
What Does BlackBerry’s Demise Say About Your Legacy Systems?
In Samaha’s view, a legacy operating system, such as a core, shouldn’t necessarily be viewed in a negative light. Put simply, he said there are “good” legacy systems and “bad” ones. The good ones are constantly evolving. And just because a system is “open” doesn’t mean it represents a better solution.
“There are bad open systems and good open systems. You have to be careful when pushing a credit union to an open system from a legacy. If it is a bad legacy system to a good open system, that’s great, but if you’re pushing a bad legacy system to a bad open system that, of course is a bad move,” said Samaha. “You can’t lump all legacy systems together. Credit unions don’t have many choices and we certainly don’t want to shoot the good legacy systems in the foot because then we end up with fewer choices.”
CO-OP Financial’s Chief Operating Officer Nick Calcanes explained that legacy systems are still in use today because “they tend to be reliable and familiar” for most of their users. The Rancho Cucamonga, Calif.-based company operates an interbank network connecting the ATMs of credit unions in the United States.
“That said, legacy systems cause a myriad of problems, such as excessive maintenance costs, data silos that prevent integration between systems, lack of compliance with regulatory requirements, and degraded information security,” he added.
Since every credit union is unique, industry insiders agree that before upgrading a legacy system, an in-depth analysis of the pros and cons is required.
Often considerations include familiarity, competing budget priorities, and the fear of change, explained Justin DiPietro, co-founder and chief strategy officer for Glia. The New York-based company helps credit unions reinvent how they support members in an ever-increasing digital world.
DiPietro added that credit unions should be careful not to fall too far behind. And certain legacy systems, he said, should definitely be phased out sooner rather than later.
“Many credit unions are still leveraging traditional telephony systems for member service, which is ultimately detrimental to member relationships and loyalty. Forcing members to disengage from a digital journey to dial into a clunky phone experience, re-authenticate and then take time to explain context around the issue at hand is time consuming and frustrating for all involved,” said DiPietro.
“Instead, leading credit unions are embracing a digital-first approach to member service,” DiPietro continued. “By meeting members where they are in the digital domain and empowering them with choice on how to engage, such as video, chat, or on screen voice, credit unions can improve the member experience while also boosting efficiencies and reducing costs associated with legacy phone-based member service models.”
Cornerstone’s Smith noted that the majority of credit unions are currently using legacy core systems and the vendors supporting those systems “are loathe to officially sunset” respective cores.
“I’d suggest anyone on a core that’s no longer being actively sold such as FIS Miser, Finastra UltraData, Fiserv Spectrum and DataSafe, for example, should present its core strategy to its board,” Smith said. “There is nothing wrong with remaining on a legacy core, but it makes sense to keep your board current on your core strategy and timeline.”
To Upgrade or to Not Upgrade – Is That Really the Question?
NCR’s Brown said that many credit unions “fear the perceived risk of adopting new technologies,” but in actuality, the biggest risk is not being proactive.
“To help reduce risk, aim to select a partner with a proven track record of successful digital transformations. While there are many new and emerging fintech players in the space, credit unions should prioritize a partner that has demonstrated they can navigate the imperative security and regulatory nuances of the industry,” Brown continued. “Finding a partner that also leverages extensive APIs to nimbly keep up with new capabilities and offerings provides that strategic balance of innovation and stability.”
In most cases, DiPietro said that a credit union’s reluctance to consider new technologies is due to three primary reasons: priority, time and budget.
“However, strategic technology investments should be prioritized, as the institutions that don’t innovate fast enough will be increasingly left behind as their competitors evolve their offerings and gain greater traction in the market,” he said.
For many credit unions, the decision to upgrade or change technologies is triggered by contract expiration dates. Depending on the situation, leading industry consultants suggest taking 18 to 36 months when considering a significant technology upgrade.
“Plan on about a year to evaluate core options and negotiate a new contract, about 12 to18 months for your core conversion and give yourself another six months for any customization or if you need to convert digital or cards separately from your core conversion,” Smith said. “If you’re considering newer, next gen cores, you’ll need to start even sooner, because you’ll need more time for development and the conversion of more surrounding systems that will be unbundled from your current core.”
So as not to fall in to the BlackBerry trap, CO-OP’s Calcanes said it’s best for credit unions to stay ahead of the curve as opposed to playing catch up.
“Having a committed strategy to eliminate legacy systems, associated technical debt and then ensuring a consistent investment to keep all technology current will reduce expense, increase performance and strengthen risk management,” he said.
And as Glia’s DiPietro looks at 2022 and beyond, he said credit unions should rethink how they serve and support members in a digital world.
“In the past, credit unions relied on members being in close proximity or part of the community the institution was founded on, but as the world has transitioned to digital and credit unions have members that are further away from the locations or communities of which they were founded, institutions will have no option but to adopt a digital-first approach to member service,” he noted.
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