Modern: [mod-ern] – of or pertaining to present and recent time; not ancient or remote.
There is a concerted push in the industry to modernize the core banking platform, but what exactly does modern mean in this scenario? Is it moving away from legacy systems? Does it mean migrating to the cloud? No matter the specific architecture you choose, the definition of modern should include completeness, meaning a system that is inclusive of all things needed to drive consumer adoption, retention and loyalty, helps your institution drive efficiency ratios and improves your management of resources.
An intensified regulatory environment, increased consumer and commercial demand for faster innovation and constant security threats have made system upgrades nearly inevitable. But similar to how needs have become more complicated, so too has the search for the right platform. It’s hard to argue the benefits of updating a core system, but the conversation needs to expand beyond the nuts and bolts of the technology. In today’s banking environment, core modernization begins with how the decision is made. Banks do not have the luxury of selecting a system that they hope meets their needs - they must know before implementation begins that the technology decision supports their business environment.
The decision making process should start with one key question: Why are you looking for a new core platform? It is vital for your team to understand the driving factors in the search prior to forming any opinions. Taking a deep dive into what your current system is lacking, or the advanced functionalities you now require, will help narrow down your options and provide a much more targeted perspective as you review the candidates.
Once you have laid the groundwork, there are more specific aspects to be determined. First, create a team of stakeholders who have a global and strategic perspective of how the institution operates and shares a common view of how it should work in the future. Have the team then identify the bank’s top concerns from a technology perspective. During this step in the process it is important to focus on both the current needs as well as the bank’s future endeavors. How does your institution plan to expand in the marketplace? What types of new clients does your institution plan to pursue over the next few years? With what types of new products will the platform need to integrate? The solution your team selects must support the institution through growth, the emergence of new technologies and other market changes. A decision that does not take future needs into account is shortsighted and will leave the bank searching for a new system again, far too early.
Again, today’s core decision should not focus solely on technology and should include what type of relationship you want to have with the vendor. Some banks seek out vendors that take a partnership approach while other institutions simply want a technology provider. There is no wrong answer here, but your team should be clear on what it is looking for in a provider in order to ensure a long lasting match.
There are numerous questions your internal team should discuss, but the modern core decision must expand beyond the bank’s walls and seek input from external sources, namely other banks. Product presentations can show you how a core platform works, but nothing can replace spending time in the marketplace with vendors’ current customers to learn how it will work for your bank. To narrow down the list of banks that your team will visit, seek out those that share similar demographics with your institution, such as asset size, number of account holders and product offerings. Also place emphasis on those that leverage a similar solution set to the one you would integrate.
Beyond learning how the platform works, use site visits to learn more about the vendors themselves. If your team has chosen to work within a partnership environment, ask the institutions how they interact with the provider. Find out how often they are able to meet with the vendor’s executives and fellow users, as well as if there are opportunities for customer input in product development and enhancements. If your team has selected a simpler approach to the vendor relationship, it is important to learn more about the provider’s ability to quickly address service issues and how often you can expect product upgrades.
With all of the information in hand there is one last question that must be answered: How will you more adequately allocate resources and drive efficiencies to better serve customers while running a profitable institution? It is an intimidating inquiry, but one that you must address with a comprehensive thesis that reaches beyond the technical capabilities of a platform. Don’t let the word “modern” apply only to the technology, make it a part of your decision making process as well.
Stan Viner is the General Manager of Sales at Jack Henry Banking, a division of Jack Henry & Associates, Inc. Jack Henry Banking is a provider of integrated computer systems for banks ranging from de novo to mid-tier institutions.