Commission on Credit Unions
The Future of Credit Unions in the
Republic of Ireland
Submission by Wellington IT Solutions
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Contents
Reason for WIT Submission ... 2 Introduction ... 3 IT within Terms Of Reference (TOR) ... 5 TOR 1 - Role of CU’s in Context of restructured financial services ... 5 TOR 2- Model for modern financially viable Credit Unions ... 7 TOR 3 - Options for restructuring ... 8 TOR 4 - Shared Services ... 9 TOR 5 - Set out Basic Governance & Regulatory requirements that must be met ... 10 TOR 6 - Make recommendations for legislative change ... 11 Concluding Remarks ... 12
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Reason for WIT Submission
We note the published terms of reference (TOR), and the obvious and clear references made regarding Information Technology (IT) within the sector.
This submission has been made in order to avoid any inferences that might be drawn unintentionally from the TOR as being interpreted, as Fact, that appropriate modern financial systems or appropriate IT capabilities do not already exist within the sector. Whilst we accept that this was not intentional, we however feel that making this submission will help clarify the matter.
It is hoped that this narrative will give our own unique WIT perspective as a major supplier of these IT products and services, will provide clarity and avoidance of doubt on the matter of Systems and IT capability for the sector, and will be helpful to the Commissions‟ work and subsequent deliberations.
If we can be of any further assistance to the Commission, please contact:- Mr Alex Dunne Director Wellington IT Solutions 91 Wellington Park Belfast BT9 6DP T: +44 2890 681531 F: +44 2890 660181 E: [email protected] W: www.well-it.com
The submission does not contain any confidential information and may be used as the commission se fit.
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Introduction
Wellington IT Solution (WIT) has an interest and significant business „footprint‟ within the Credit Union (CU) Sector in Ireland.
We are a privately-held company, employ over 45 people with Offices in Dublin and Belfast and are financially stable, having an Experian Commercial Delphi 5 star rating with a score of 100/100, and a very strong balance-sheet.
Having an extremely low attrition rate, we value and enjoy good working relationships with our CU customers.
Wellington IT have considerable CU business and technology experience gained over many years, processing approximately 850,000+ Credit Union accounts. Credit Unions themselves range both in size and cross Community and Industrial CU types.
We provide, from a single source, Mission-Critical products and Services to all sizes of CU, including many who are in the top 50, and are accredited to ISO 27001 standard, the independently audited and internationally recognized Information Security Management Standard.
We also have extensive experience in the area of Electronic Funds Transfers and connectivity, including SEPA, and have the largest number of CU participants in the sector availing of the clearing system.
Wellington leverage smart technology for Customers benefit. Technology is a key enabler utilizing lower-cost, commodity and Standards based approaches, which we exploit to our customers advantage.
The CU‟s who avail of these are part of a community whose „footprint‟ is significant in the sector and who have the capability to access “Banking Services” from their CU‟s right now, utilizing modern financial systems. What we do is
Proven
Low-risk
Exists now
Is a strong foundation going forward
As a commercial organization, we have an enviable track-record of innovation, delivery and service to CU‟s, having proven relationships with our CU customers. We respect our customers and enjoy working in tandem for mutual benefit, as we both have common interests in ensuring successful and viable Credit Unions.
4 We take professional satisfaction in facilitating in particular, our own customers to be successful, but we also appreciate successes in the wider Credit Union sector in general. We must, and do, compete successfully to ensure our own customers have the highest quality Information Technology at lowest cost consistent with highest standards for the sector.
We offer support to our CU customers Professional Services from a single source. This provides
Oversight necessary to manage ever increasing complexity and Risk
Clear Responsibility and Accountability We provide
Mission-Critical Software and Services
Business Continuity Services
o Fail-over & High Availability
o On & Off-Site real-time data replication o Escrow Services
Network & Security Management, supporting ISO27001 standards
Project Management
Systems Migrations & Verification
Subscripton-based „Cloud‟ Deployment
Direct Access to Irish Clearing System
On-Line access to the Irish Credit Bureau
Hub-based ATM connectivity with banking partners
Maintenance & Support Services (Dublin & Belfast)
Data Centre Operations (Dublin)
5 IT within Terms Of Reference (TOR)
To put some practical „flesh on the terms-of-reference bones‟ however, the observations below correspond to those in the Commissions published terms of reference where the subject of Information Technology is explicitly mentioned. The intention here is simply to give an appreciation of what is possible now and in the future within a possibly restructured sector.
TOR 1 - Role of CU’s in Context of restructured financial services Member Services
The commission terms mentions using “modern financial services systems” to give “members the services they require”. Consider that today, right now, any Credit Union can offer its membership a full range of “Banking” facilities and access channels.
For example, approximately 25% of all CU member in the state can potentially already avail of
EFT - their Pay and/or Welfare payments transferred directly into their CU
through the Irish Clearing System just as Banks currently facilitate
BillPay - Pay, or have, their Bills paid automatically
Internet Banking - check information and move funds on-line via the Internet
using a sophisticated CU web site, (including social media)
ATMPOS - use their CU debit card world-wide in any ATM, or at point-of-sale in
shops
Receive Mobile SMS text alerts for a variety of circumstances, such as low
balances, transaction verification, all automatically
Use telephone Banking to check balances, or place a „hold‟ on for example a lost
ATM card
Define a range of ‘Financial Products’, such as traditional Shares & Loans, but also
integrated Deposit, Term, Notice and full Budget accounts, all integrated into a 360⁰ Member View
This happens right now, but of course not all CUs currently do, want or need to do all of these things, but are examples of CU‟s utilizing technology to provide modern financial services.
As a company, we have supported a number of innovative „firsts‟, from being the first to introduce modern database technology into the sector, through accessing Irish EFT clearing, Internet Banking, to services such as guiding CUs through the ISO 27001
6 International Information Security Management Standards, where CU‟s have adopted the highest standards regarding their information security, and not just their IT. We have always provided competitive ways, relative to other financial institutions, to make smarter technology work at lower cost for Credit Unions, which ultimately benefits their memberships.
One ‘Source of Truth’
Unlike practically all other available systems, we operate a single ORACLE data repository for all CU information, with literally thousands of fields of valuable information on all aspects of a CU‟s business, all in one place.
This means that the CU does not have to invest in, for example, separate Front Office, Back Office, Accounting, Collateral, Loan Management, Document Management, or delinquency tracking systems, or expensive in-house specialists to operate their IT. High levels of Integration and automation are designed into the CUs software.
This, when coupled with an all-round Member and relationship profile means an easier to manage and more cost effective system. These are reasons that many larger Financial Institutions currently seek the „holy grail‟ of one single source of data enjoyed currently by our CU customers.
Credit Union Innovation
Historically, CUs have worked with and indeed demanded from WIT over many years many facilities, the majority of which were innovative for the sector, and enabled WIT to support those CUs with many sectors „firsts‟, examples of which are:
• 1st with world-leading Relational database (Oracle) and open systems and technical architectures
• 1st with AIB ATM network
• 1st with ILCU/Bank of Ireland Janus ATM initiative
• 1st with CUSolutions Bank of Ireland EFT & ATM initiatives • 1st with ICB, & also Online - Credit Referencing Agencies
• 1st with Full EFT shared services, via BNP Paribas bank via Irish Payments System
• 1st with integrated ATM & Integrated „hot-card‟ Telephony • 1st with Integrated SMS member alerts
• 1st with full CU „Banking‟ Website • 1st with integrated inbound Debit Card
7 Risk Management and Standards
As the Financial Services landscape evolved CU customers have also managed the IT risks to their businesses as they have been coming increasingly complex over time. CUs have led the way in adopting global standards (ISO 27001) for Information Security which indeed are not yet widespread in other areas of financial services in Ireland. This initiative has led to a number of other CUs in the sector themselves becoming ISO certified, and we as a supplier also are accredited to this standard and have first hand expertise in guiding CUs to certification.
A full range of our „on-the-fly‟ data replication and testing services are now in place throughout the user-base, with a significant number also availing of High-Availability features and failover options, all of which help mitigate operational Risk.
Financial Inclusion and Full Budget Account facilities
It may be a feature going forward that sector restructuring may feature greater
emphasis on Financial Inclusion, and this is documented elsewhere1, but it is possible
right now for CUs to offer a separate a Payments Account, which taken with full access to clearing, Internet Banking, Debit Card and physical CU access channels opens up the way for CUs if they desire to offer such accounts in the future.
CUs can also offer their membership a inbuilt Budget Account facility which appears to complement the MABS initiative, whereby Income and Expenditure can be recorded working with the Member, and payments levelled out once agreed to help Members manage their funds more effectively. The inbuilt access to all relevant data afforded by tight integration with the Core system enables complete oversight of the members circumstances.
TOR 2- Model for modern financially viable Credit Unions
Wellington products and services support, all from one source, all sizes and types of credit unions, offering a very broad range of services and choice to each CU.
Systems cater for the full range of CU types and sizes, from „Traditional‟ savings and loans providers, to those CUs who wish to provide a greater range of Financial Products, with full accessability across many channels.
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So those CU‟s who may want to offer more complex services can do so, and those that wish to provide more „traditional‟ services can continue to do so if that is deemed appropriate in these times of change.
Each CU as an autonomous entity can develop at a pace and in business areas that suit them, and as in other jurisdictions; one size does not fit all.
Even though there may be a “Credit Union” sign over the door in, say both Canada and Ireland, they are not the same thing, and generate their surpluses in different ways; In Ireland most trading income is from personal lending, but this can be quite a small part of the income of an overseas CU, particularly one in the more „advanced‟ economies, where they are in effect Banks, and CU‟s may compete head on with them.
CU‟s need to determine their role in a restructured world, but technology already exists to support and underpin the uniquely local CU signature going forward.
TOR 3 - Options for restructuring
This is obviously a very sensitive area for all, possibly affecting CU membership, staff, management, and Boards. The majority of Credit Unions are by their nature
community-based, and so many have possibly multiple Credit Union neighbours; some Industrial-based CU‟s also operate in the same or similar industry sectors.
Many will be considering how potential restructuring may affect them, depending upon their own current circumstances, and the general economic and regulatory
environment.
We have practical experience in the methodologies and project management and risks involved in managing differing options to help both potential Acquirer and Acquirer CUs if required.
Some of the restructuring possibilities to assist those CUs who may want or need to consider this and which can and have been supported by us range from:-
Different CUs remaining autonomoust but sharing Infrastructure
Two credit Unions merging into one CU
Possible Shared Branching across differing CUs
„Software-as-a-Service‟/Application Service Provider deployments, whereby CUs use “Cloud” type setup
9 Data Migrations and Transfers of engagements are particularly challenging; we have direct and very practical experience in managing data migrations and Transfer of Engagements: We have
Managed over 100 successful Data Migrations, some involving many millions of records and this is a particular strength of the company
Performed a number of successful Transfer of engagements last year, including one of the largest integrations to-date
An extensive library of Data Migration tools and expertise available
Knowing this range of possibilities may inform CU‟s on possible restructuring options if they decide for any reason to consider these options.
TOR 4 - Shared Services
Sometimes it may be that apart, from Support, this aspect of IT usage is not evident, and so it‟s worth mentioning that Wellington has been active in building and deploying Shared Services for some years now, although it‟s not widely thought of in those terms. We leverage smart distributed technologies and falling costs for the benefit CU‟s. In particular, we have effectively built uniquely for CUs in Ireland a federated „network‟ allowing CUs the benefit of autonomy, whilst also at the same time take advantage of sharing appropriate Infrastructure. Retaining full control of their own affairs, they also have the ability to share services and costs, in effect through a “Virtual Credit Union”. Consider that one of the reasons why we are able to offer Banking facilities to CU Members is that Wellington customers can get Banking Services at relatively low cost, relative to other financial institutions; Provisioning a Shared Services Infrastructure has helped this to happen, and probably at much lower costs than competing offerings. Wellington have built Shared Infrastructure specifically designed to meet sharing requirements across CU‟s; this supports access to
Full EFT access, via „BNPP‟ into Irish Payments Clearing System, as per Banks
Internet banking
ATM/POS via CU Debit Card
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On-line Credit Referencing via ICB
Off-site Disaster Recovery & testing
We also support a “Shared Branching” initiative, which may become more relevant in time, which could be leveraged if this is seen as another one of the ways forward. Again, we use modern technology and methods in this area and support this with increasing the levels of assurance (Aka the International Security Management Standard - ISO 27001) independently audited by external third-parties.
Shared Services have become an intrinsic part of delivery to CU‟s on an on-going basis, and we will continue to build upon our wide experiences in this area as time goes on. TOR 5 - Set out Basic Governance & Regulatory requirements that must be met
Historically and for most of their history, CUs in Ireland have been recognized as being different from other financial institutions, as manifested by the fact that they were not regulated until fairly recently by the Central Bank. Having previously been regulated by the Registrar of Friendly Societies, CU‟s were not historically „calibrated‟ on the same scale and with metrics which applied to Banks.
That is to say, until recently, both the current „Bank‟ Regulator and CUs developed and managed their affairs somewhat differently, and CU‟s evolved against a background and ethos of community-based self-help.
That regime changed and now Credit Union Regulation is likely to change further. Whilst it is not within the remit of Wellington to decide what Regulation is appropriate, or indeed to decide strategy, where we think we can help and contribute we will
continue to do so.
Wellington systems and Services have already proven they can deliver, as judged by CU responses after the recent battery of Stress-testing, Loan Book Reviews, and indeed more intense Audits, all from an almost impossibly short and highly demanding timeframe.
We seek to offer complimentary products and services to support Governance & Regulatory issues going forward.
11 TOR 6 - Make recommendations for legislative change
Of course, it is not the role of a company such as Wellington to define business strategy for customers, let alone legislative changes, and generally technology follows along after a clear business strategy or legislative framework has been defined.
We see our role as being that of utilizing Information Technology as a tool to support the future business strategies of customer, and we have proven capabilities to do so. We would welcome greater levels of engagement by the Regulators office if at all possible , to ensure that all requirements are known in a timely manner and dealt with to the satisfaction of all parties concerned. It is appreciated that time may not have been available recently given the overall evolving Financial situation and European
12 Concluding Remarks
The future of the CU sector in Ireland needs a considered and balanced approach taken now, and all stakeholders will have intense interest in the outcome of the Commissions work.
There are many challenges for all the stakeholder groups involved, not least from CUs‟ themselves who must evaluate to how best serve their members in a perhaps
restructured sector, together with their roles in making aspirations become realities. Whilst it may be too simplistic we would make the following observations:
Significant numbers of Credit Union Members can have access now to many modern facilities expected from a bank, building upon their existing investment
Proven capability exists to help manage potential restructuring
Technology is only a tool to support a business strategy and each CU is entitled and can determine its own future and strategy, subject to keeping within the law of the land. All CUs in Ireland have access, if they so choose , to systems which suit their own needs, the environment in which they operate, and can decide upon their own strategies
Credit Unions are currently not branches of a Bank, nor any centralized decision-making entity; their role is legally defined, and are they are autonomous
democratically run co-operative financial institutions. They have a unique cultural and social place in the fabric of Irish society. It is unlikely that an „top down‟ approach will work as well as encouragement to change from the
„ground-up‟. Whilst CUs are not Banks, they can leverage relatively inexpensive technology that was once the sole domain of larger Financial Institution, to satisfy the need for „consumer convenience‟ , attracting membership and offering appropriate Financial products in the future
If a belief exists now, or a determination made for any reason, that there must be a smaller number of bigger CUs, extreme caution must be exercised in how this is encouraged. Scale and growth needs careful planning and expertise. In all things there is an appropriate scale.
13 We enjoy what we do, we are committed to our CU customers, and as the work of the Commission evolves and concludes, we will work for mutual benefit in concert with as many parties and stakeholders as possible to support Credit Unions‟ own efforts going forward in any proposed restructured CU landscape.
It may seem appropriate that CUs came about through Need in hard economic times, and there is no doubt that a similar backdrop has again come around. It can be a time of opportunity for CUs once again.
