THE CORE PROCESSING INDUSTRY LEADERS FORUM ™

I’ve seen many credit unions stare at what is becoming a very common question: WTF to do with their core? Legacy core banking systems, plagued by outdated technology architecture and limited innovation, have hindered growth and exposed them to increased competition from fintechs and big tech companies.

The time for incremental change in core banking is over—these days, a comprehensive core modernization strategy is essential for survival and long-term success.

Unfortunately, core providers frequently prioritize short-term profits and stock market prices over long-term innovation and doing right by the client. This often results in systems that cannot adapt quickly to changing market demands and member expectations. They may struggle to support new digital channels, integrate with emerging technologies, or offer the personalized member experiences that today's consumers demand.

There is a huge technical moat that prevents credit unions from freely adopting new cores. This is a gift to the legacy cores—they own a sticky product that customers will be trapped with. Because customers can't fight them, they can ignore the need for innovation and R&D.

More or Less from Your Core? 

There is a market narrative suggesting that credit unions should minimize their reliance on their core and, instead of changing the core technology, simply bolt on and surround it with more advanced digital tools and middleware technologies.

Unfortunately, this narrative sounds amazing as a sound bite but is impossible in reality and ultimately advocates the proverbial “lipstick on a pig” approach. Simply put, credit unions can’t provide the modern features members expect and receive from megabanks without a modern core.

Additionally, in directly acknowledging legacy core inefficiencies, legacy core providers such as Fiserv, FIS, Jack Henry, Finastra, and others have scrambled to create marketing and positioning, claiming they can modernize the outdated core they still sell banks and credit unions today. Many of these cores are 30+ years old. Anyone who has spent time in software engineering knows this scenario is entirely manufactured by executives around a board room who have likely never written a line of software code in their lives. Software modernization doesn’t happen with bandages and baling wire. It requires an entirely new architectural approach.

If you doubt that the major cores are conjuring these stories, pay attention when they announce new features. It’s always right before earnings calls, an excellent method for pumping up shares for the executive teams. 

The Competitive Landscape Realities

Meanwhile, financial institutions struggle to compete with fintechs and mega banks, which tend to offer seamless mobile experiences because their legacy systems don't easily accommodate mobile-first banking features. A modern core is crucial for gaining a competitive edge, helping community banks and credit unions enable the rapid development and launch of new digital products (like mobile wallets,

peer-to-peer payment services, push notifications, real-time data integration, advanced analytics, and open-banking integrations) and allowing them to compete effectively with fintech.

A modern core helps eliminate operational inefficiencies that lead to increased costs, reduced productivity, and slower time-to-market for new products and services and allows for automated processes, increased automation, and the eradication of data silos, reducing delays, errors, and increased processing costs. 

Real-time Processing and Unlocking Your Data

Through modern core solutions, streamlined operations, reduced costs, and improved data utilization drive operational efficiency and enhance profitability. For example, automated loan origination methods can significantly reduce processing times and improve efficiency. At the same time, AI-powered fraud detection systems can help prevent losses and improve member security in real-time. 

Modern cores should go well beyond “cloud native and API first” - again, clever vendor speak which tells you absolutely nothing about the product's efficacy. Modern enterprise software architectures are constantly evolving and creating more efficient models. For example, while the legacy cores are still catching up to the use of microservices, Nymbus leverages the modern data streaming protocol to create robust data integrations capable of creating near real-time replications of data and events in downstream 3rd-party systems. It provides extremely efficient and robust access and allows a bank or credit union to manage fewer endpoints when integrating their technology.

Takeaway? It costs you less, and you get new integrations faster. Plain and simple. 

Core as a Growth Strategy

Modernizing the core is not merely about upgrading technology; it's about transforming the foundation of your institution.

It can also power personalized financial dashboards, which provide members with real-time insights into their spending habits and offer tailored advice.

A modern core that’s a cloud-native and an API-first platform can quickly and easily scale to accommodate growth and adapt to new technologies, complete with features that ensure financial institutions remain competitive in the long term:

• Robust and scalable infrastructure to ensure business continuity and minimize downtime.

• Customizable solutions to meet your unique business needs and adapt to evolving market demands.

• Robust security measures and compliance support to protect sensitive member data and ensure regulatory compliance.

• Continuous innovation and a commitment to meet evolving member expectations.
  

The hard reality is that a one-size-fits-all approach to modernization is not feasible. The modern core offers a flexible approach that allows financial institutions to choose the modernization path that best suits their needs. These paths can range from gradual improvements to existing systems to a complete overhaul of your technology stack with a new cloud-based solution.

Core modernization is not optional; it’s crucial for your institution's long-term success—allowing your FI to leverage modern technology to enhance member experiences, improve efficiency, and gain a competitive edge.

To learn more about Core Modernization, visit https://nymbus.com/solutions/core/