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A briefing note for strategists and technology providers Big changes
Key takeaways
Key systems reviewed
1. Core banking systems
Core systems must have very high uptime and be hardened against cyber-attacks and data loss. Downtime for maintenance and upgrades must be carefully managed. Migrating a core banking system is expensive, complex and generally avoided wherever possible (ATB’s 2010 conversion to SAP took years to complete and cost over $300M). It’s not unusual for large banks to be running core systems that were originally built in the 1970s using Cold War-era programming languages and held together with duct tape. Who’s who Credit unions run an unusually large set of core systems. Large credit unions generally operate Temenos Transact (aka T24), or older cores such as Ovation or Wealthview. Fiserv’s DNA platform dominates in the small- to mid-sized segments, either provided directly to credit unions or rebranded under CGI’s (nee Celero’s) eroWorks platform. Smaller credit unions can run one of these platforms or a niche core such as Smart Solutions, Infonantial or CGI’s RFS. Most Atlantic credit unions run CGI’s Horizon via League Data, which is in the process of converting their clients to Mambu. Financial institutions must occasionally replace obsolete, end-of-life or severely underpowered cores. This gives an opportunity to start from scratch and consider innovations such as cloud-based or multi-tenant solutions. In the last decade or so several credit unions have converted to Temenos, while others have adopted Fiserv DNA. Credit unions may choose to run their cores in-house, but many also rely on providers such as CGI and Telus to keep the systems running and kept up to date. League Data provides a third model, where core and other systems are wrapped up in a unified IT-as-a-Service offering. Key issues for credit unions
2. Digital banking platforms
Who’s who Many credit unions have relied on Central 1’s Member Direct platform for online banking. MD was developed by Vancity in the 1990s and licensed to C1. MD provided a critical interface between a standardized online banking environment and the hundreds of core banking systems in use across the country. As digital needs progressed it became apparent that MD needed replacement. Central 1 responded by creating the Forge platform, originally in partnership with Backbase. Despite a number of credit unions successfully converting to Forge, high development costs and architecture issues resulted in Central 1’s decision to discontinue to the offering. Central 1 has promised a smooth transition to other providers. Credit unions on MD or Forge must now decide where to go next. After Central 1, the next largest provider of digital banking solutions to Canadian credit unions is Portugal’s ebankIT. The platform is deployed directly by credit unions such as Coast Capital (rated the #1 digital credit union experience by Serviscor), and Conexus. CGI (née Celero) also deploys ebankIT for their clients under the Celero Xpress brand. A more recent entry to the increasingly crowded space is VeriPark. A Microsoft-partnered global provider, VeriPark is live at Innovation Federal Credit Union and is in the process of converting Beem Credit Union. Vancity, meanwhile, is the first Canadian credit union to adopt Intellect Design’s MachAI platform. FirstOntario Credit Union, which already uses Temenos as their core provider, is live on Temenos Infinity. Other credit unions have developed and maintain in-house digital banking platforms. This provides opportunities for customization but can be expensive and complex for individual credit unions to maintain. Key issues for credit unions
3. Connected apps
Loan Originations Systems (LOS) manage member on-boarding, know your client (KYC), anti-money laundering (AML), loan terms and conditions, rates and other details. The LOS stores electronic versions of loan documents and connects to the core system for recording balances and payments. Key LOS providers to credit unions include Alberta-based Thirdstream, nCino, Valeyo, ASAPP and Finastra. Core providers may also offer LOS functionality as an add-on. Keeping track of digital documents is a critical activity for credit unions. Popular enterprise content management systems include OpenText’s Documentum, Oracle NetSuite and Microsoft SharePoint. Storing member information, running marketing campaigns and reporting are handled by the Customer Relationship Management (CRM) System. Salesforce and Microsoft Dynamics 365 are popular credit union choices. These are often linked to Business Intelligence tools such as Tableau. Credit unions also deploy a range of back-office services for functions like IT automation. Mulesoft is one such provider. Key issues for credit unions
4. Payments providers
Central 1’s payments solutions group also offers bill payment, Interac eTransfers, cheque clearing and wires for credit unions and small banks. Some credit unions get these services via the Prairie Payments Joint Venture, while others connect directly to Interac and/or use 3rd parties such as BMO or Telus for bill payments and business tax remittances. Some important payments assets are owned collectively by the system. Most notable is an ownership stake in Interac Corp. These assets are held and managed by CUCC. Payments modernization is a major driver of cost and complexity. Credit unions must keep up with regulatory and industry changes such as Payments Canada’s Lynx and Real-time-Rail. Central 1 uses Fiserv Dovetail for some modernization services while the PPJV has contracted with IBM. Notably, credit unions split their ~5% transaction share between two services, while the big banks achieve scale by combining their massive volumes in joint ventures such as Moneris (RBC/BMO) and Symcor (RBC/BMO/TD). Debit cards and ATM access are primarily managed by system-owned Everlink, while some credit unions source from Cardtronics. Credit unions share their ATMs via one or both of Ficanex’s Exchange Network and ACCULINK. This results in some degree of member confusion and higher operating costs. Most credit unions source their credit cards via Desjardins subsidiary Collabria. Three credit unions issue their credit cards directly and one issues cards in partnership with Brim Financial. Key issues for credit unions
5. Open banking
Open banking creates a range of strategic challenges and opportunities for credit unions, but there are also practical considerations. Participating credit unions must be registered with the FCAC, adopt certain privacy and security standards and provide API connectivity to their digital and core banking systems. Who’s who Several vendors have stepped forward to enable open banking capabilities. Caspian One has the endorsement of the Large Credit Union Coalition, Central 1 and several large credit unions. Flinks has also been approved by Central 1 and individual credit unions. CGI is expected to provide a solution for their customers, and other vendors such as Symcor may come forward. How these providers will work together or compete against each other is still under development. Key issues for credit unions
6. Cloud solutions
Public cloud adoption is far from universal. Private cloud, hybrid cloud and colocation hosting services are provided by IBM, Telus, CGI and others. Some credit unions continue to operate systems in-house in raised floor facilities. Twenty years ago it was not unheard of for small credit unions to be running their cores out of a basement closet, but those days are (or at least should be) long gone. Key issues for credit unions
7. AI capabilities
RBC, for example, was recently ranked #3 globally for its “outsized team focused on AI-specific Software Implementation and AI Product Management… Most importantly, the bank excels in AI-specific Research citations, Patent citations, and participation in Academic Conferences—underscoring a quality over-quantity approach that bolster’s the bank’s outsized influence.” The Canadian Credit Union Association has introduced training programs for AI. Some credit unions are developing in-house AI business intelligence capabilities, while other have partnered with fintechs such as JUDI.AI. Credit unions will need to rely on delivery partners and pool resources where possible. This is complicated by the variety of systems and solutions currently deployed, and limited collaboration infrastructure. Key issues for credit unions
Technology decision making
The most significant collaboration body is the Large Credit Union Coalition. Credit unions do collaborate in procurement, such as for core banking services or credit cards. However, technology decision-making remains concentrated at the individual credit union level. This results in a lack of standardization and loss of effective scale. Credit unions also tend to source their technology from multiple providers, vs a “Bank-in-a-Box” model that delivers the back office as a unified service and offloads significant overhead. This model is deployed to great effect by Desjardins, where each caisse populaire benefits from a standardized and scaled technology stack. Lack of consistency also provides significant barriers for potential delivery partners. While credit union volumes are attractive in aggregate, requiring individual contracts limits most suppliers to a top-5 or top-10 strategy. As the sector continues to bifurcate, it will be increasingly difficult for smaller credit unions to access technology innovation and maintain competitiveness. What's next?Uncertainty over the future of digital banking, open banking and payments presents a challenge, but also an opportunity. If credit unions use this generational change to leverage scale they will have the chance to drive down costs, deliver enhanced functionality to members and make it easier for partners to integrate services that enhance credit union differentiation.
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Doug MacdonaldAnalysis of credit union, challenger bank and fintech competitiveness. Archives
January 2025
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