Posted by Diana Hennel, Senior VP CTO, Catalyst Corporate FCU on 3/22/2018

The forecast for credit unions is a bit cloudy… but not in a murky, hard-to-see sense. Quite the opposite. The future of cloud-based computing is sunny, and credit unions’ movement to “the cloud” – in varying degrees – is inevitable.

What exactly is the cloud? It’s a network of servers, storage and software, accessed through the Internet that each provide a different function. Some cloud providers provide IaaS – infrastructure as a service (Amazon Web Services, Azure); some provide PaaS – platform as a service (Amazon Web Services, Azure); and others provide SaaS – software as a service (Office 365, Salesforce, ADP, Workforce). The cloud also allows users to store and access data from a common, off-site source.

One major benefit of the cloud is the opportunity for credit unions to forgo costly, depreciating hardware infrastructure. This makes it a cost-effective solution for many companies trying to add to their bottom line.

Often, credit unions want to know, “Is this type of system safe and secure?” The short answer is: it can (and should) be, with the proper steps. When migrating to the cloud, take these three steps:

Know your Responsibilities. While each cloud vendor is slightly different, it’s important to understand that security in the cloud is a shared responsibility. Your contract with your cloud provider should define what the credit union controls and what the vendor provides as part of the service. What you’re responsible for depends on the level of service you are buying – IaaS puts more burden on the credit union while SaaS puts the majority of the responsibility on the provider. Moving to the cloud doesn’t mean you should get rid of your security stack. Instead, it means you have to understand how your tools support a hybrid environment as you transition.

Consult your Toolbox. Strongly consider using the FFIEC’s Cybersecurity Assessment Tool. Although use is optional at this time, Catalyst Corporate has seen numerous benefits in its adoption of this tool, such as better understanding of its risk profile and maturity level. This tool may also help define an organization’s cybersecurity roadmap based on FFIEC guidelines, whether applications are on premise or in the cloud. The CyberSecurity Assessment Tool also aligns with the NCUA’s Automated Cybersecurity Examination Tool (ACET), which it will begin using this year to assess cyber preparedness in credit unions with assets greater than $1 billion.

Be Prepared. Unfortunately, in today’s environment, it’s not a matter of if, but when, you’ll have to deal with an information security incident or breach (whether on premise or in the cloud). How a credit union responds has a big impact on member perception. Resolve to determine how you will respond before something happens. Establish an organizational plan and understand your credit union’s risk tolerance by holding regular tabletop exercises to clarify everyone’s roles in such an event. Exercises should include the executive team, marketing, legal counsel and even your board members.

Moving into the cloud is inevitable, so make sure your credit union is ready!

Categories: Business Partners, Compliance, Education & Training, Research
Posted by Steve Stovall, AVP, Credit Union Resources, Inc on 3/15/2018
By Chris Nicholas - CUNA Mutual Group
A little while ago, I was giving a talk on predictive analytics, and a young professional in the audience interrupted me: “What exactly is a data scientist, anyway?” he asked. 

Given the number of people who suddenly perked up to hear the answer, I realized he wasn’t the only one in the dark. If you’re wondering, too, allow me to shine a little light science on the topic.
As the Chief Analytics Officer of AdvantEdge Analytics, I direct some very smart people who are busy conducting data science for credit unions. Let’s start there. Data science is the process of extracting meaningful patterns from large sets of data. These days, data science has proven important to all businesses, including credit unions. This is because it employs reliable methods of analyzing data, discovering trends and identifying business insights.
To be sure, many analysts are involved in similar activities, but a data scientist is, naturally, diving deeper into the data. In many ways, the data scientist spans the gap between IT and the business. For most analysts, the data has already been prepared for them, whereas data scientists discover data in the systems themselves. They extract it, transform it and identify connections.  
While working with the data is part of data scientists’ activities, they also take that exploratory analysis one step further. They codify and predict the outcomes of the information they are studying. They constantly search for opportunities to build repeatable, technical assets that we call predictive models 
Predictive models are where the greatest business value lies for the credit union. It’s one thing to use data to understand what’s been happening in the business. But, it is quite another to use data to make accurate predictions of future outcomes. Once these models are created, business areas can use the information to support actions like building marketing campaigns or creating specific business initiatives.
For example, let’s say you’re the credit union: You want to predict which members are likely to churn from your portfolio and isolate the causes for leaving. Predictive models allow you to do that. What’s more, they can help you identify the appropriate actions and programs that can help you retain those members. And, they provide the means to measure the success of the programs.  
So, a data scientist is a multidisciplinary expert with deep skills in mathematics, computer science, statistics and computer programming. In my role, I am always looking out for well-rounded data scientists. They typically must possess a great deal of business acumen to go with their technical expertise. They also need to have strong communication skills because they operate at so many different levels of the business. In my experience in the trade, it's typically a small cohort of experts that fit the bill.
Unfortunately, it’s not very likely that a credit union has the resources to employ a full-time team of first-rate data scientists. The good news is that there are now options in the marketplace. If you're looking to capitalize on the value that data science can create for your organization, take a look at industry partners like AdvantEdge Analytics. We have a full complement of data scientists on staff, with the processes, practices and experience to help deliver the full power of data science to your organization. 
Originally posted on the CUNA Mutual Group Insights blog on Wednesday, March 14.
Categories: Business Partners, Financial & Auditing, Marketing & Printing, Research, Sales & Service, Strategic Planning & Consulting
Posted by Justin Lutes, AAP, NCP, Vice President, Correspondent Services, Catalyst Corporate FCU on 2/22/2018

It may seem like just yesterday when Same-Day ACH became mandatory for credit unions, but it’s been nearly two years since ODFIs and RDFIs began implementing the first of a three-phase process. On March 16, Phase 3 of Same-Day ACH will complete this two-year transition. 

For most financial institutions, implementation of Phase 1 and Phase 2 went off without a hitch, and Same-Day acceptance is looking promising.

For instance, a recent NACHA study shows 82 percent of financial institutions anticipate Same-Day ACH debit volume to grow at a rapid or steady rate, and 78 percent expect ACH credit volume to grow at a steady rate over the next six to nine months.

The study included 22 financial institutions, representative of 78 percent of the ACH Network origination volume. Of the ODFIs surveyed, 84 percent reported their actual Same-Day debit volume was the same or higher than anticipated and 90 percent of RDFIs echoed that sentiment.

What’s most notable is that while volume is increasing quickly, there is no indication of increased fraud. This is all great news!

With implementation of the final phase of Same-Day ACH just a couple of weeks away, credit unions can begin discussing even more ways to assist members with faster ACH payments. However, let’s first look at a few lessons we’ve learned along the way:

Unintended Consequences. Many credit unions intend to have an item process the next day, but sometimes staff or employees enter a current date or stale date (previous date) in the Effective Date space and release the ACH file before 12:45 p.m. CT. These items are processing as Same-Day items. The good news is there’s an easy fix. Simply pay close attention to the Effective Dates and release times when processing Same-Day items.

Late Returns. It’s always better to be safe than sorry, so don’t delay processing returns for Same-Day items. Remember, the return window for Same-Day items always begins on the settlement date of the item. 

Keeping the Balance. Accidents happen; it’s human nature. But, it’s imperative to identify and correct those mistakes ASAP to minimize the damage. For example, if an ODFI sends an item in error and applies a credit without a debit, a member can withdraw the credit before the credit union reverses it from the account. This results not only in a misappropriation of funds, but also decreases confidence in an institution. Balancing daily helps to minimize this risk.

On the Clock. Another reason balancing daily is imperative is that RDFIs have such a short window of opportunity to send returns to the ODFI. If not completed in the allotted time, it may result in a loss to the RDFI. Conversely, when ODFIs receive items from RDFIs and don’t act quickly enough, they are out of Same-Day compliance.

Same-Day ACH transition is winding down, but that doesn’t mean questions will. Tools like Catalyst Corporate’s ACH Central and NACHA’s resource center are available 24/7 to help credit unions navigate the twists and turns of Same-Day ACH, including what’s coming in Phase 3.

Categories: Business Partners, Compliance, Education & Training
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