Credit union network farms out key technology

Armed with the idea that there is strength in numbers, seven B.C. credit unions have banded together to solve their common IT problems with the help of CGI Group Inc.

Okanagan IT Alliance, a credit union network consisting of Revelstoke Credit Union, Enderby and District Credit Union, Salmon

Arm Savings and Credit Union, Vernon and District Credit Union, Thompson Interior Savings Credit Union, Castlegar Savings Credit Union, and Creston and District Credit Union, has signed a seven-year, $16 million outsourcing agreement with CGI of Montréal.

Through its Western Canada operations, CGI will manage the banking, electronic payments, loan origination and customer relationship management services for the alliance members via its Retail Financial Services Platform using an application service provider model.

The alliance was formed about two years ago and actually started with nine credit unions, until three merged to become one, says alliance chairman Michael Wagner. “”We really wanted to put our heads together, primarily around technology because of the escalating costs associated with trying to keep up with what everybody else was doing,”” he says.

With a total customer base of about 132,000, says Wagner, the seven credit unions worth roughly $100 million are competing with the large banks worth $200 billion. “”It’s pretty challenging.””

And while departure of the large banks from rural areas has pushed more people to their local credit union, it means added pressure on their resources infrastructure, says Wagner.

When the alliance first formed, it began by looking at the technology already in place from a strategic point of view, says Wagner. “”Primarily, the banking system was the anchor.”” But there were other issues the alliance wanted to address. One was the automation of loans, he says, another was CRM. “”These systems are incredibly expensive.””

So the alliance turned to some outside consulting firms who were experts in the area of technology. “”They helped us guide these nine credit unions through what technology was important to them and how it was is important.””

One of the challenges early on is that each of the credit unions is at a different stage in their technological development. In addition, some of them are already CGI customers, while others had a previous relationship with Datawest Solutions Inc. “”We have to connect the existing banking systems,”” says Wagner.

Another early priority will be automating the loans process and implementing cheque imaging, which will speed up the process for the credit unions and their customers. “”(CGI is) a world leader in this area,”” notes Wagner.

CRM will be rolled out over the next 24 months to 16 branches within the alliance, which employ about 1,000 people in total.

Credit unions often get together when they have common goals, says Jason Bremner, research analyst with IDC Canada Ltd. in Toronto, but it’s unusual in other industries. “”Credit unions are a unique example,”” he says. “”They band together for IT needs. They understand that they can’t do it alone.””

On the heels of CGI’s announcement, Vancouver-based Datawest signed another seven BC credit union renewal contracts for its banking system and payment processing solutions. The seven credit unions include Prince George Savings, Bulkley Valley, Lake View, Spruce, Nechako Valley, North Peace Savings and Quesnel & District, which each entered into seven-year banking and payment renewal contracts for a total value of $15 million.

“”Datawest has been in that business a number of years,”” notes Bremner. CGI also has a health market share in the West with its acquisition of CDSL Holdings in 1997, which was the other competing group that served the IT needs of credit unions, he says.

While credit unions could go to large vendors to meet their requirements, says Bremner, it’s unlikely that those vendors would see the business as worthwhile, especially when many credit unions often only have three or four retail branches.

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Gary Hilson
Gary Hilson
Gary Hilson is a Toronto-based freelance writer who has written thousands of words for print and pixel in publications across North America. His areas of interest and expertise include software, enterprise and networking technology, memory systems, green energy, sustainable transportation, and research and education. His articles have been published by EE Times, SolarEnergy.Net, Network Computing, InformationWeek, Computing Canada, Computer Dealer News, Toronto Business Times and the Ottawa Citizen, among others.
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