By Donald Beaulieu
Transitioning to a new core platform is a daunting task for most bankers. While only 47% of banks are extremely or very satisfied with their core banking system, most banks plan to remain with their current core provider, according to a 2023 survey conducted by ABA. Just 21 percent said they were likely to switch.
ABA’s Core Platforms Committee has developed a three-part guide to navigating conversions while minimizing the headaches.Access the guide.
But finding the right core consultant for your bank can seem like an overwhelming task of its own. Bankers who have experienced their own conversion challenges offer three considerations before you start.
1. Determine your goals.
“I think the first thing you need to be clear on is, why are you engaging a consultant, and what are the outcomes you are trying to achieve?” says Kristiane Koontz, the director of banking transformation at Zions Bancorporation, headquartered in Salt Lake City, and chair of ABA’s Core Platforms Committee. “It really starts with business strategy.”
A bank’s goals in hiring a consultant will comprise some or all of these objectives:
- Assessing and documenting a bank’s current operating environment, strategic objectives, and technology goals.
- The development and management of requests for proposals.
- Engaging potential core vendors and hosting technology presentations.
- Selecting the right technology architecture, functionality and vendor support, including tradeoffs such as cloud-based versus legacy technologies, support for important customer segments or growth objectives and the quality and breadth of customer support.
- Pricing negotiation.
- Contract negotiation, including the length of the contract, termination fees and terms, service level agreements and remedies, and exclusivity.
“You have to look at what you have today and figure out if it is working or not working — or where you have gaps in your technology,” says Kim Kirk, chief operations officer at Queensborough National Bank and Trust in Georgia, and the past chair of the Core Platforms Committee.
It’s also valuable to rate your bank’s priorities — for example, “if customer service is top of the priority list, and technology is number two,” Kirk says. “It is important to have these conversations with the consultants you are entertaining, to know that they have the knowledge and expertise to deliver what you need.”
2. Evaluate the consultants.
Once you have decided on your goals, the next step is to evaluate consultants for a long-term working relationship — one that starts with choosing a core provider and lasts throughout the core contract or potentially longer. In this interview process, there are some primary questions that any potential consultant should be asked.
What are the consultants’ areas of expertise? Do they work mostly with small community banks or midsize or regional banks? Do they work mostly with specific core providers, such as the “big three” — Fiserv, FIS or Jack Henry — or their resellers? Do they specialize in certain technology strategies, like headless core banking or sidecar cores? Are they more adept with any particular part of the core modernization process — say, contract or pricing negotiations?
A consultant with a broad market knowledge of core pricing can be a tremendous asset, because nondisclosure agreements leave banks in the dark about what others are paying. “Consultants can bridge that gap because they are seeing it for hundreds of banks,” Seeterlin says. “A consultant can’t tell me what the other banks are paying, but they can tell me if I’ve got a good price.”
What compensation model does the consultant employ? Some charge a flat fee, while others receive a percentage of what you save in core pricing compared with your previous system. If compensation is based on a percentage of savings, you need to know how that number is determined. Each model has advantages — the flat fee is more transparent, while the percentage-savings model can motivate the consultant to get the bank a lower-priced deal.
Whatever compensation model you choose, Kirk says price is not the most important factor in settling on a core provider. She bases her decision on “the three Ps, which are partnership, product, and price, in that order. When we get to price, if the partnership is good and the product is good, I may be willing to pay a little bit more.”
Do they have good references? It is important to know what some peer bankers have to say about the consultant and if the consultant is an associate or partner member of any trade groups. “References from the bankers always weigh heavier than just an advertisement,” Kirk says.
3. Develop a set of deliverables.
After choosing a consultant, the bank should generate a list of key consultant deliverables that go beyond the goal of getting a core platform that suits and supports your bank’s business strategy. “This is really about setting expectations with your core consultant — managing that consultant relationship and what you are going to get out of them,” Koontz says.
These deliverables may include:
- Articulation of the bank’s technology strategy and key enablers.
- RFPs and scoring / decision assistance.
- A full understanding of the exit fees if a contract needs to be terminated, including the amounts, interconnectivity with individual projects, triggers and notice periods.
- Complete knowledge of the business impact of any exclusivity provisions.
- Comprehensive understanding of any ancillary, product or toll fees that could be triggered in the contract.
Even after a bank chooses its new platform, the consultant’s job need not be over. The consultant can help prepare and implement the core banking transformation, as well as maintain and support both the new banking system and the new relationship with the core vendor. “The core is really the technology workhorse for most banks,” says Koontz. Finding the right consultant to guide your core conversion is an investment that can pay vast dividends.
Donald Beaulieu is a writer in the Washington, D.C., area.
