Open, but It’s Not Business as Usual

EPL
June 3, 2009 | COMMENTS

We hear terms like “open technology” and “open standards” bandied about with more frequency. Everyone wants to be perceived as “open.” What does “open” mean, why is it important, what does it do for your credit union, and how can you tell who really is open?

What Is “Open?”

Put simply, open technology is designed to “play well with others.” Technologically, there are actual layers in openness and each must be present to be truly open. Equally important is the final layer: an open business philosophy.

There are varying degrees of “open.” On one end of the continuum are closed systems and hardware that control all conditions of use. Closed systems tend to hinder or prevent collaboration. This lack of openness was more prevalent in the past. Market pressure, globalization, emergence of open standards, “free” software, and anti-trust legal actions demand change if the manufacturer is to thrive in the current economy.

At the other end of the continuum are downloadable shareware and freeware systems and applications that can be enhanced and shared with the original developer, thereby benefiting from global software engineering talent. An example of this is the Linux operating system.

Today's “open” core systems fall between the extremes, but the traditional model continues to struggle with openness due to technical issues or “coopetition” (a relatively new term to describe cooperative competition).

The proof of this statement is the slow progress of integration across the corporate family of solutions of the data processor conglomerates.

Why Is “Open” Important?

Like credit unions and the members they serve, technology products are not “one-size-fits-all.” With all the challenges faced by credit unions today, it is difficult for traditional core processors to deliver the specialized products and services credit unions need to thrive. Open technology enables choice that leads to effectiveness, efficiency, and delivery of a consistent member experience, regardless of channel. How else can you compete against the likes of the ING DIRECT Orange Savings Account if peer-to-peer lending takes off? How do you reach your members who are falling prey to payday lenders? Credit unions need to grow—not just maintain their current membership. Open systems enable credit unions to offer best-of-breed boutique products and services needed to gain or retain the coveted PFI status.

In today's society, all demographics are more mobile. Boomers are becoming comfortable with alternate delivery channels and are still among the fastest-growing segment to adopt the Internet as the preferred delivery channel. Generations X and Y actually resist walking into a financial institution and are not only computer-literate, but mobile technology-literate to the point of dependence. Traditional 24/7 delivery must change to meet the needs of all credit union members. It is not enough to have an internet channel, a shared branch channel, and call center. Data needs to be able to move seamlessly between the channels and the credit union needs to leverage it.

This will require us to rethink what “open” means. It means the core needs to be able to connect and redirect data from channel to channel, and control access points. A true open core of the future looks less like an accounting system for debit and credit cards, and more like an integration point and manager of independent services.

Who Is Open?

No core processor is as open as it needs to be—not necessarily because they don't want to be, but because their systems were not designed to be truly open. Cores have done what they can

to make their systems more open, or at least appear so. However, “open” is more than the technical ability to connect disparate systems; it encompasses a business philosophy. True open is not the evolution of the traditional core, but a revolution of the very definition of the core.

This article is provided by EPL, a software systems provider for credit unions. This article was reprinted with permission from Credit Union Digest, the publication of the California and Nevada Credit Union Leagues.