Converted Thinking

There are several reasons a community bank may choose to migrate to a new core system and take advantage of new features and functionality, according Bob Hunt, an analyst at TowerGroup. These include system obsolescence and changing business models.

For instance, an institution may already have decided that a capital expenditure is necessary to upgrade its hardware, so why not make a complete change at the same time? In the case of software, banks are realizing that the older systems dating to the 1970s and 1980s not only are outdated, they also are very account-centric. Newer systems are much better incorporating the entire customer relationship and supporting emerging bank and customer requirements.

Another reason for switching to a new system comes when banks switch charters. This happens when a thrift switches to a commercial banking charter, for example. The original core system supported delivering services to traditional thrift customers, and now the institution's market and focus may have changed and expanded.

When it comes time to switch systems, Hunt recommends that community banks look for a new core system that: integrates new products easily and quickly; has the ability to support 24/7 banking; offers the ability to see the entire relationship with the customer at any customer touchpoint; and uses open systems architecture, which allows integration to outside vendors and third-party systems.