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The computational needs of a financial institution are difficult for the human mind to fathom. Not only are there impressive numbers to keep track of, but all sorts of customer metadata, point-of-sale software for employees, online banking applications, and much, much more to keep straight.

It likely comes as no surprise that making changes or upgrades to a bank’s software system — through a process called a “core conversion” — is daunting and challenging to undertake.

To better understand how a successful core conversion is completed, we will detail the high-level process your company needs to carry out to make it happen. But first, let’s get a better handle on some important concepts.

What Exactly Is a Core Conversion?

The core processing system is the complex web of computer language and systems that a bank uses to carry out its business. Included under this umbrella are all the major systems like ACH transfers, general ledger, fixed assets, depository, lending, digital account opening, online & mobile banking, and other essential functions to serve bank customers while meeting all State and Federal Laws and Regulations.

Even for a smaller local bank, the sheer amount of data that a financial institution deals with daily is complex. To store and compute that much data — especially data as sensitive as financial information — banks need powerful servers to ensure timely processing and provide acore banking software high level of compliance and data security.

The challenge is that most banks can’t afford to run and maintain their own onsite farm of servers while also conducting their daily business. That’s why most banks forgo running their own core processing, called in-house, and choose to outsource these tasks to the core software providers.

A core conversion becomes necessary when a bank grows and changes, requiring additional functionality or an improved level of service from their core processing vendor. In these circumstances, the bank will need to take great care and effort to ensure that all files and programs are migrated from their incumbent vendor to a new, better-matched vendor that gives them the opportunity to grow and expand with new products and processes.

Keep in mind that conversion is not a simple process. It will take months of preparation and work between the bank and the new core software provider. With the help of the new provider and a team from the bank, you will be able to determine the answers to key questions, like:

  • Is the existing system compatible with the new host?
  • What potential adjustments will be needed to ensure compatibility?
  • How can possible damage or corruption in the system be avoided or mitigated?
  • What measures do you still need to take after moving the system?
  • How and who will train the bank employees on the new software
  • What new programs will be introduced to the bank’s clients and how will the bank announce these enhancements

Along with others, these will be critical questions to answer on the road to an upgraded system under your new core provider. The process of core conversion, while rewarding, needs to be entered into with the understanding that it is a specialized project that requires the supervision of qualified professionals.

Why Do a Core Conversion?

As stated before, a core conversion is a huge undertaking, and banks should start these processes with that expectation in mind. A complete core conversion will typically take in the realm of 6 to 9 months from start to finish. Additionally, it’s essential to know that outgoing core providers may charge the bank de-conversion fees to disincentivize switching. There comes the point, however, where, paying the fee makes more financial sense for a bank to leave their provider to be more aligned with the bank’s goals and objectives. Core conversion is an unavoidable part of doing business if you hope to grow and innovate.

In most situations, banks make the switch to a new core provider for the simple reason that their current core isn’t meeting their needs anymore. Either the current provider doesn’t support the technological capabilities the bank is striving for, or there’s another provider out there that provides a similar benefit but is more cost-effective in the long run and provides a higher level of customer service.

Steps for a Successful Core Conversion

1. Assemble Your Conversion Team

Knowing that a conversion is an extensive long-term process, it should come as no surprise that teamwork is vital. No single individual in your company should be tasked with overseeing the core conversion.

To successfully complete an effective core conversion, you must bring together a strong team that is responsible for the internal tasks and projects that need to be taken care of in the leadup to and during the conversion. The team will ensure that the most critical aspects of your business, like accounting, compliance, consumer-facing transactions, and technology applications, are all well-organized, and plans are in place to keep them going strong during the changeover.

Make a point to consult with your staff on their day-to-day tasks and outcomes, especially those responsibilities that require them to use the core system. In doing so, you provide your conversion team with a better set of priorities regarding which functions are most important for the bank’s continued operation, showing the team where they need an extra level of care to minimize bugs and outages.

2. Thoroughly Research Your Vendor Options

At this point in the process, your conversion team will need to take a detailed look at the vendors available and appraise their various tools and limitations. There are many different core processing vendors for banks to choose from, and they each have their pros and cons. Have your conversion team meet with as many of these vendors as possible to discuss compatibility. This gives your team the information they need to compare each vendor’s offerings and provides a better understanding of what options of systems, customer service, and pricing are available.

3. Decide on a Core Vendor

Once the initial vetting of vendors has taken place, the conversion team, executives, and board of directors should carefully deliberate over the options your bank has. Resist the urge to wrap up the decision-making in a single session because this decision will have a far-reaching impact.

Once the conversion team and any other relevant stakeholders have had a chance to comb over the data, make a group decision that prioritizes the core vendor that is most aligned with the bank’s goals and growth strategies. If you keep in mind your long-term goals and understand the tools your bank will need to accomplish them, the right vendor will become more apparent.

4. Commit Specific Employees and Their Work Time to the Conversion

Up until now, the conversion team has been in planning mode, but now that it is time to put those plans into action, you’ll need to expand the team. Involve any internal departments or key individuals who will need to change focus for the conversion process.

It’s important to remember not to overload these individuals if they have other business-critical tasks on their schedule. You shouldn’t just add the new conversion duties onto their already busy day. Ensure that you designate specific people an appropriate amount of time to get things done.

You will also want to allow your internal conversion team to work in conjunction with the core vendor’s corresponding implementation team, which will keep essential tasks from getting forgotten.

5. Train All Staff on the New System

Implementing an entirely new core platform will bring changes to your bank’s workflow, and your employees will need time and assistance to get up to speed after the move to the new core software provider. To minimize downtime in the changeover, prepare your employees for their new work environment by providing a test system with the new core provider. Training on the new processes will be mandatory for all individuals whose work brings them into contact with the core system. This will quell any growing pains and improve the basic knowledge and understanding of the entire team.

6. Get Ready for the Changeover

Constant communication with your new core vendor is vital to make the final decisions and arrive at a reasonable date to roll out the new software system. Your internal conversion team and the core vendor’s implementation team should have a forthright and open conversation to set the critical deadlines and expectations. It will also be helpful to discuss any possible challenges that either team should expect as the process unfolds. Especially as the conversion date becomes closer, make sure that your internal team stays flexible and ready for any hiccups and can assist the implementation team at a moment’s notice.

Make the Change with BMA Banking Systems, the Core Conversion Experts

For banks looking to upgrade their core processing systems, BMA Banking Systems is a leader in the core software industry. With over 60 years of providing core processing solutions for banks, BMA has the experience necessary to tailor solutions to your bank’s individual needs, ensuring that your system is dependable, innovative, and cost-effective.  To schedule a discovery call, go to www.bmabankingsystems.com or call 801-887-0122 today.