Best Practices in CU Mergers: Legacy Data Management


While credit union mergers slowed a bit in 2017, the industry is still experiencing more than 200 mergers a year. The last time the credit union industry experienced less than 200 mergers in a year was 1980. Regardless of economic condition or political winds, the industry is merging.  As a result, more credit unions face a unique challenge: how to manage the huge influx of data that comes when two institutions combine. 

Often that means business as usual as most credit unions settle on one of three expensive and risky options:

  • do nothing and leave the data in a legacy system,
  • dump the data to an external drive, or
  • let the core provider handle data conversion with the financial institution mapping all the legacy data into the new system to ensure it’s compatible

All of this can create unexpected cost, disruption and risk. Fortunately, many financial institution executives now know proven alternatives can optimize this challenging-but-crucial process—and position the credit union for short- and long-term success. All it takes is a more strategic, data-driven approach.

Tradition, but at what cost?

Traditionally, legacy vendors will complete a full data conversion—even when unnecessary. That costs cu's on average anywhere from $40,000 to $250,000. Disruption to the cu’s operating environment can result in further expense and negative member impact. CU's that simply leave data in the legacy system will also shoulder many avoidable costs; the maintenance of the legacy servers (licensing costs, upgrades, support to address technical issues, etc.) usually averages between $10,000 to $100,000 per year. The legacy provider may also charge annual storage and research fees on top of that, also in the $10,000-$100,000 range.

Risk also represents a major downside of traditional merger data management. As it can’t be audited or updated, unsecured data on old systems or external media can potentially fail, disappear, suffer damage or fall into the wrong hands. Neither indexed nor converted, this data can cost credit unions even more money because it’s hard to locate.

Members can take a hit, too. While they usually access just the last 12-18 months of information, cu's must provide historical data for 7-10 years past its useful life. When members need to access it, cu's might need much more time to locate it—if they can at all. Incomplete or incorrectly converted data can also hinder employees’ efforts to address member needs.

In the worst cases, data breaches or mismanagement could lead to regulatory and audit issues or even lawsuits. That creates even more expense on the member service side and damages the cu’s reputation.

While credit unions may find it easier and more comfortable in the short term to stick with familiar approaches, they also incur much more expense and risk. So where should credit unions begin?

Legacy data strategy

Credit Unions in the M&A process have several data management options. To select the best one, credit unions first need to clean and organize existing and incoming data from the merged credit union. This avoids introducing suspect or unknown issues into the current system.

First, segment the data by each main type—for example, checks, statements, loan documentation or financial reports—that you can complete quickly and easily. You can break down segments even further by date (e.g. check statements from the last 12-18 months versus those prior).

Once data has been segmented on paper or in the data project plan, give an overall rating to each type. The rating system can be unique to each credit union, but it should take the following into account:

  • What type of data is it?
  • Who needs access?
  • How critical is the data?
  • Do we need it for processes/functions in the cu itself or simply regulatory purposes?
  • How sensitive is the data?
  • Do we need to keep it?

After scoring, cu's should group data into three categories:

  • data they need immediate access to (signature cards or the last 12 months of check images)
  • data they must keep but access infrequently (closed loans, internal or system reports, check images older than 12 months, etc.) and
  • data that’s nice to have but not required (cold reports, miscellaneous imaged documents and reports).

If you work with a conversion or migration vendor, they can easily categorize data once you and your business units define and document segments. These categories will determine how to implement the data; cu data compliance officers may already have this information.

Your institution's best blueprint

With data segmented and grouped, credit unions can make more informed choices on the best, most cost effective data management blueprint during a merger.

If a credit union needs immediate access to all legacy data, it’s wise to undergo full conversion to map it into production. CU's can mitigate costs and ensure minimal disruption by using a third-party specialist, like ILS, with industry knowledge and experience working with many different systems—including those the cu migrates to and from. They’ll also have the cu’s best interests in mind since they have more objective business goals.

Most likely, credit unions will need instant access to just a small part of their overall data archive and infrequent access to the rest. If so, employ a hybrid approach where you convert a portion of data needed for immediate access into the production system; migrate the rest to a less expensive archive solutions, such as the ILS Image Browser, OmniView. This ensures your credit union only pays to convert what you actually need within the core system. Quickly migrating other data minimizes costs and disruptions.

From intimidation to optimization

Data management needs that result from mergers can be intimidating. But it’s crucial to address needs head on and optimize the process. This not only reduces costs upfront and with long-term data storage: It also heads off retrieval frustrations, potential disruptions and future consequences. Smart data management during the merger process positions credit unions for across the board success. Surely, the numbers will back this up, even as you back up the numbers.

For more information on how Integrated Legacy Solutions can help with your merger strategy, visit