Filed under: computers, Internet banking, quantum mechanics, technology, Uncategorized | Tags: bill pay, cloud computing, contracts, definitions, legal aspects, quantum mechanics
Cloud computing is made of hype. Yet, it’s also the future of computing. Like some spooky quantum mechanics experiment, it is both. Credit unions already are taking advantage of cloud computing apps by offering home banking to their members. There will be other examples of how credit unions can use cloud computing coming soon. It’s important, however, to get some type of definition in place to understand just what the heck we are talking about when we throw around the cloud computing buzz phrase.
Fortunately, there’s a good one out there. TheNational Institute of Standards and Technology (“NIST”), the federal technology agency that has been closely studying cloud computing for the purpose of providing guidance on securing unclassified government systems defines cloud computing as :
“[a] model for enabling convenient on-demand network access to a shared pool of configurable resources, for example, network servers, storage applications and services that can be rapidly provisioned and released with minimal management effort or service provider interaction.” It identifies the five essential characteristics of cloud computing as: On-demand self service; Broad network access; Resource pooling; Rapid elasticity; and Measured service.
We can drill down further and break up cloud computing into Infrastructure as a service, Platform as a service and Software as a Service.
“Infrastructure as a service” uses shared facilities, computer hardware and networks to hold and move data. Customers may use their own operating systems and software, but the provider will determine where the data is stored(including, in some cases, moving data from server to server or data center to data center as computing space, and the
customer, permit) and how to configure networks to allow the fastest and most secure movement of data. Amazon, Rackspace and Vertica are among the providers of infrastructure services.
“Platform as a service” allows customers to share a computing platform and operating system. The provider determines the programming language (such as Java or .Net) and provides a web-based computing environment; customers use that environment to develop and configure applications to suit their individual needs. Platform services
may be combined with infrastructure services to offer all of the elements required for a customer to develop and implement its own applications. Providers include Google App Engine and CollabNet.
“Software as a service” is the type of service traditionally associated with both outsourcing services and web-based consumer services like Yahoo and Google. In software as a service, the vendor provides software designed to perform a specific function, like email or social networks, billing, logistics or financial account management, or law firm matter management. Oracle On Demand and Salesforce.com are among the many providers of software services.
See Contracting in the Cloud: A Primer, Peter M. Lefkowitz, 54 B.B.J.9 (Summer, 2010). I would posit to you that most credit unions will be looking at cloud computing via the software as a service model. Bill pay with its ubiquitous access and account information falls into this category.
Now that we know what we’re talking about, we can begin to speculate where it all is going. Apple has given us a big clue with the release of its iOS 5 and by embracing the cloud with a capital C. This new mobile operating system lets people have that ubiquity of access across all of their apple devices. I never started out being an Apple fan boy; I build computers for fun so I’m more of an omnivore. Yet, I now sport a MacBook Pro, an iPad, an iPod Touch and I still have an old iPod lying around that I use as a back up when recording podcasts. So Apple captured a big part of my computer market share and now with its cloud servers, I can have all my data all the time. So who cares? Your members care. Your members want the same thing. They are using bill pay and it will go further into mobile payments. Mobile payment via smartphone or whatever is a cloud app.
Where does it end? We cannot predict what new invention will reshape our lives because to do so, we would have to conceive of it before its inventor does, thereby potentially becoming its inventor. We can watch where things are going and see possibilities and that’s about it. Does cloud computing mean that credit unions will need to buy or lease their own server farms to provide their members with their own membership-based clouds? I don’t think so because what would the members use it for? We can see why Apple created huge data centers in North Carolina because it sells music and video and the users of its products want to store their data on Apples servers.
Credit unions store vastly smaller amounts of data for their members, but data that is far more important. Yes, it’s bad when your digital music collection gets wiped out. Apple now has you covered on that front. It’s far worse when your credit union account gets hacked. In Cloud computing, security then becomes far more relevant to credit unions than vast amounts of ubiquitous storage. Fortunately, that’s nothing new. There are things to be aware of, though, when a credit union looks at a cloud computing contract. Such things as: services to be provided, service level agreements, transitioning data, location of data, warranties, limitation on liability, indemnification, termination and remedies, ownership of data, disclosure of data to law enforcement and of course data security, privacy and breach notification. For an in-depth discussion of these issues and more, see Brenda Barrett Healey’s most excellent article: Cloud Computing Agreements: How can counsel make certain that every “cloud” really does have a silver lining?
As a final caution or advisory or what have you, this really is like a quantum mechanics experiment. Cloud computing may change the way your credit union does business or it may not, or, it may change the world around you and leave you undisturbed. Like Schrödinger’s cat, it may depend upon you to be the observer as to where it is going and then to act on it accordingly.
Filed under: technology, Uncategorized | Tags: app, credit unions, ipad, iphone, ipod
By: Robert Rutkowski
Much has been written about grabbing the Gen Y audience and otherwise leveraging technology to reach out to new and existing members. Looking at the app store for iPhone/iPod/iPad, it shows that many financial institutions (including credit unions) have apps that offer a variety of services. On the more extreme end, a credit union could run a billpay app or something more pedestrian such as finding locations or checking account balances.
In deciding whether or not to take the step of actually creating a credit union app, the first question is how much would it cost? I have heard the number $30,000 thrown around as an example. Really it depends on what you are trying to do. If you want to show your members where you’re located, there are app creators out there that would help a credit union create an app for very little. On the other hand, interfacing a bill pay system through an app would be complicated and accordingly, expensive.
Expense is only one factor, however. Would your members even use it? If your membership base (or your potential membership base) is not tech savvy or not very interested in using apps or internet related products, creating such an app would probably bring a low return on investment. On the other hand, if your targeted member medium or existing member base is young and tech savvy and more importantly, interested in technology, an app could be very exciting to these people. Anything that establishes a communication base between you and a significant number of your members has value. How many of your members use bill pay now? How many of them are potential iPhone/ iPod/iPad users? How many people would ultimately end up using this type of product? This may be hard to identify, especially for a smaller credit union. Perhaps a membership survey would be of some value or even something more informal on the credit union’s website.
Finally, is it even possible for your credit union to interface its data processing system with an app? Ultimately, that is a question for your data processor. Certainly, if you have a bill pay product now, that sort of thing is possible. Depending on how your data processor handles its products, it may or may not be able to help you in this endeavor. I recently gave a seminar where one of the Credit Unions identified the fact that there data processor actually ran the credit union’s bill pay through ATM processing thus, placing its bill pay service within the new Regulation E changes. Such a bill pay system might have trouble getting linked to an iPhone/iPod or iPad via an app. On the other hand, the system using the ACH process probably would link more easily. The credit union wishing to develop an app should involve its data processor, involve its data processor at the very beginning.
For the right credit union with the right membership base, an iPhone/iPod/iPad app would be a good investment to offer enhanced member services and reach out to potential members.
Filed under: technology, Uncategorized | Tags: companion computing, credit unions, gadgets
Normally, I pillage content from the blog and use it in the podcast. Today I’m taking a topic we discussed on the show and expanding it for the blog.
So far my iPad has been my constant companion for the last three weeks. I believe that it is the very first true companion computer to be sold on a widespread basis. The idea behind companion computing is that you have a device that is multi-functional and works as a multipurpose tool that gets nearly constant use. Certainly a cell phone makes some steps toward this goal. But the iPad takes it to a new level.
The value that I see for credit unions and the iPad is not only related to the potential for moving forward with the paperless office. Rather I also see it as a thin client for credit union employees. There are many applications for the iPad that allow the iPad to dial into computers as a thin client. For a device known primarily for its capacity to aid in consuming media, it turns out that the iPad can also be a business tool.
Citrix is one of the largest providers of software in this arena. Citrix has many apps for the iPad already. Instead of buying your employees laptops for $1,500, you may be able to buy them iPads for $500 and achieve the same functionality. Moreover, with the iPad’s ability to do virtually any other type of electronic human activity, you’ll have a happy employee. From e-mail to streaming movies to reading books to playing games, you name it and the iPad does it. I wouldn’t be surprised if many companies adopt the iPad as the ultimate portable thin client.
On the member side of things, many credit unions have developed apps for the iPod. I would encourage them to also develop apps for the iPad. From what I’ve seen, the iPad is selling at an astonishing rate. Your members will appreciate it, especially if they can securely access their accounts and do bill pay via the iPad.
As an aside, once again I am using DragonDictate to create this blog post. I found out the DragonDictate software is so good because it sends a recording of my voice to a supercomputer at the Dragon offices and converts it from speech to text. This is freakishly science-fiction like, yet it’s also been available on the iPhone for some time. There’s a reason Apple has been on fire lately. When has a 1st generation gadget ever done so much?
Like many Discovery Channel junkies out there, I’ve been watching the Planet Earth series recently. In HD, it is truly a sight to behold. Now I’m old enough to remember Mutual of Omaha’s Wild Kingdom shows from the ‘70s. Those old shows had nothing on the Planet Earth series, yet Planet Earth certainly has its roots in Wild Kingdom.
In one particular episode, a monkey strays too far from the trees and too far from other animals that serve as a warning system. Out from the grass sprang what is now almost a stereotypical tiger. Of course the tiger snapped the monkey’s neck and carried it off for lunch.
Here’s the part where I tie this into credit unions. We don’t see this type of imagery enough, I fear. Sure, if you watch the news or read the paper you hear about shootings and robberies and senseless violence that people commit against other people. But we don’t see enough purposeful violence. In the jungle, the cat has to eat.
When we talk about threats to the credit union movement, it seems to me that these come in two varieties: the senseless ones and the threats with a purpose that’s driven by a need. The latter are the real threats and they come from market forces.
Why are credit unions merging? Because the cat has to eat. I think it’s important to recognize that this is a market force. While it is not pleasant nor desirable for the movement, it is a natural process in the economy. One solution would be opening the door to the creation of more credit unions. Yet, do existing credit unions really want that? Doesn’t that amount to more competition in an already intense market?
I would submit to you that part of the reason that the entire financial services industry is so competitive is because of technology. Historically, having a branch close to where people lived meant something. Today it is still important, but less so. In the past, I needed to go to the credit union to 1) deposit a check, 2) withdraw money, and 3) get a loan. Now, I don’t have to do any of those things in person. So if it doesn’t matter if the financial institution is local or not, then essentially all financial institutions across the country (if not the world) are now directly competing with each other. That greater level of competition drives down the total number of financial institutions. It is an oversimplification to say that this is the sole driving force for mergers, but it is a factor. Increasing costs because of regulatory compliance is another factor.
The point is that credit unions need to grow. They need new members, they need to make new loans. If they don’t, they face stagnation in the face of ever increasing costs of doing business. Would it be possible for a credit union to pare down its costs using the same technology that is driving change? Sure! Do many credit unions do this? No.
But eventually it comes down to a choice: do you want to be the tiger or the monkey?