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Cut to the Core

The next-generation technology awaits, but re-investing in your current core system might be a better move.

By Trent Fleming

In spite of the hold that the larger core vendors have on the community bank market, we have recently seen a handful of companies promoting “next-generation” core systems. Generally, their sales pitch involves explaining why your current legacy core system is not right for the future, and encouraging you to change.  There are at least two problems with this approach.

First, your basic accounting needs have not changed.  The requirements for bank data processing remain the same: accurate, timely posting and reporting of customer and bank information. The surviving core vendors have proven themselves over time to be reliable partners, have invested heavily in infrastructure and staffing to support their bank customers, and yes, continue to invest in research and development to bring out new products and services.

Second, converting to a different system — any system — is far more complex than it used to be, and will have a tremendous impact on both your employees and your customers. The customer impact in particular is troubling, because they are likely using systems ranging from mobile to internet to bill pay that they’ve become comfortable with. Change will bring about apprehension, and may in fact adversely impact utilization — utilization that you’ve worked hard to promote.

There are four reasons you should consider re-investing in your current core system rather than converting to a next-generation product. To be fair, I’m making the assumption that your current software is still supported and enhanced by your vendor. If that’s not the case, a separate conversation is necessary.

First, your existing core software covers the basics very well. Your customer accounts are posted in a timely and accurate fashion, and you have access to the products and services that your customers need. To be successful, you have to cover the basics and execute on them well. This level of processing is not your end goal, it is merely the start. It builds a solid base upon which you can begin to add internal services, including financial analysis and reporting and customer-facing solutions, including mobile, distributed capture and P2P. Don’t take for granted that your core system performs as expected, day in and day out.

Second, address the underutilization of your existing systems. The result of this widespread failing is reduced productivity and higher costs. In my experience, most companies are using less than 25 percent of the available features/functions of the current software. Doubling that utilization will pay significant benefits. Underutilization is caused by several factors, including minimal training at conversion time, no follow up training and failure to keep pace with new releases. All of these factors will contribute to a growing gap between your usage and the product’s capabilities.

Training is the key, and it requires a commitment to establishing and managing a formal regimen.  Options include vendor supplied utilization assessments, web-based training and attendance at regional and national vendor conferences for education on new capabilities and training opportunities.  Frankly, I’ve seen too many banks dissatisfied with their core vendor, when a lack of training and utilization was the real cause.  Vendors and bankers must share equally in the blame, and seek to resolve these problems together.

Third, you must actively manage the relationship. While it seems trite to call the relationship a partnership, it really must be. Your commitment to the core vendor is huge, both financially and in terms of relying on them to help you meet and exceed customer expectations. Two key elements of this partnership are support and contractual issues. Support is highly dependent on a number of factors, but let me encourage you to employ these two techniques — document and escalate.  Don’t accept poor service. If your initial support experience is not good, work to escalate to someone who can help you. Consider sales and management channels if the traditional support channels don’t work.  For serious matters, especially if systems are not working at all, make sure you properly document the incident. This is not only a regulatory and management matter; it will also be of great value if the relationship turns sour, or when you begin to negotiate a renewal. I frequently hear clients relate stories of poor service, but when asked for details they haven’t kept them.

The contract with your vendor is the governing document for pricing, service levels and all other matters involving the relationship. It is important that you are familiar with it, and that you use any excuse — new contract, renewal or extension — as a time to negotiate better terms and conditions. I find many cases where banks have signed the “boilerplate” language from a vendor, and later discover that those terms and conditions are not necessarily in their favor.  Please also use the pricing section of the contract to evaluate your billings, to be sure it is accurate. Especially in outsourced situations, these are often lengthy and complex bills and only the contract can guide you in understanding if you are being properly charged.

Finally, community banks don’t need to be beta testers. Resist the urge to be the bank where a new vendor works out the kinks in their system. Your goal is to deploy reliable technology that meets the needs of your employees and customers. Testing and development environments are generally not conducive to those goals.

You can do a couple things now to improve the value you get from your core banking solution:

1) Seek to improve utilization through better training. Engage your vendor in this effort and put together a game plan that provides immediate help, along with a game plan for maintaining a higher level of utilization.

2) Acticely manage the vendor partnership, engaging with the vendor to understand current contract terms and conditions, ensure your pricing is accurate, and demand a satisfactory level of support.


Trent Fleming is a frequent speaker at industry meetings and serves on the faculty of the graduate banking schools at the University of Wisconsin and Penn State University. Contact him at


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