Intel Report Core Replacement - Flipbook - Page 19
Take consumer mortgages. Automating and managing consumer mortgages seems simple
enough. In reality, though, such mortgages all have various terms and lengths. This can create
hundreds of different versions of a consumer mortgage, which the bank needs to track. Banks
automate the management of these loans as much as possible, so the system can track the loan
and notify the right team when certain terms are reached. The more accounts a bank has, the
more complex the situation, since it expands the various types of loans the tools must track.
If an old core can’t automate the management of the mortgages and the bank finds that
employees must handle a significant portion of the process, it’s a good reason to upgrade and
replace the core. Newer core providers haven’t proven they can handle more complex situations,
adds Grottke. Hence, the appeal of using a greenfield or split-core approach, since you can transition parts of the bank while keeping more complex services on the old core.
Other issues that split-core designs face:
1. Multiple Systems: By introducing a new core, the two systems cannot interact. This means
that organizations need new staff to handle the requests and responses from the new system, or
must train employees to handle both systems. This can funnel down into the call center, where
responders will need to access a different system to answer questions, depending on the core the
customer uses. It also impacts accounting, since the two systems will need to be consolidated.
For VirtualBank, First Horizon adopted the staff that the bank already had when it operated under IBERIA’s banner. It kept that staff in place to keep the group under the one core
instead of teaching First Horizon employees a new core. But during the installation of the core
replacement, it required VirtualBank to work with vendors to develop tools to integrate systems
between VirtualBank and First Horizon, to ensure accounts could be consolidated and other
data could move between the two cores.
2. Legal Battles: When banks choose a core provider, they often sign non-compete or exclusivity
clauses. This means that the bank can’t use other core vendors for new solutions. Banks considering a split-core solution must check their large core contract to ensure that they won’t face a
lawsuit by moving forward.
For VirtualBank, since a merger occurred and IBERIA was moving to First Horizon’s core, it
reduced any concern. The old core vendor already knew a transition would need to take place.
3. Fear of Going First: Few banks want to be the guinea pig. When First Horizon replaced
VirtualBank’s core, it became the first U.S. bank to convert an existing line of business from a
legacy core provider to Finxact. Banks don’t often want such accolades. Instead, many CEOs
would prefer to watch and see what happens from other banks’ experiences. If they like what
they see, then they will test out the core through a product, like VirtualBank, before switching
the entire core. The larger the bank, the more this holds true.
CORE REPLACEMENT: HOW BANKS ARE REPLACING THEIR CORES | 17