What prompts a core conversion, and what do credit unions look for when they do one?
“Conversion usually isn’t a question of legacy technology but of system capability,” says Santo Cannone, chief product officer, Credit Union Solutions, at Fiserv. “Each year, 5% to 7% of all credit unions nationwide re-evaluate their core and reach out to us or other conversion experts.
“The motivation to change core systems typically comes down to a credit union’s business model: Does the current core meet its needs? Has the credit union become more emphatic about efficiency, operations, and the products it wants to create for its membership?”
From a strategic perspective, says Cannone, the credit union often wants to increase market share or improve member service.
“Credit unions typically look for general functionality, cost, and integration with various third-party applications,” says Fran Kester, Symitar’s national sales manager. “Sometimes the catalyst is a change in leaders, with the new management team taking the opportunity to convert.”
Are credit unions compromised by legacy core systems?
For Theresa Benavidez, CEO of Corelation, which offers the KeyStone core system, “it stands to reason that all credit unions on legacy core systems are compromised to a certain extent. The ability to separate one credit union from the next comes down to how efficiently each can provide relevant, high-quality, and efficient service to their members.”
Legacy cores, she says, are based on account numbers and don’t focus on members.
A primary element of successful core conversions, according to Benavidez, is a willingness to collaborate with other providers: “A core system’s ability to interface with best-of-breed peripheral solutions that match business and member needs is key.”
The core system also has to meet a credit union’s distinctive requirements.
“Each credit union has its own unique set of needs, so there’s a good deal of discussion involved in determining whether the fit works both ways,” Benavidez says.
“Clients who are open to collaboration and have a clear vision of where they want to take their credit union technologically tend to experience the most successful conversions,” she adds.
The ‘sticky note’ factor
Core system providers typically receive requests for proposals via consultants credit unions have hired to scope out the conversion process.
“Once we’re invited in we do a discovery process,” says Jan Frymyer, Fiserv’s vice president, client experience. “We send a team onsite so we can understand the client’s needs, goals, and vision.
“We meet with the credit union’s executives,” he continues, “and ask, ‘Where do you want to go with the system? What are your pain points?’ We even observe the ‘sticky notes’ on workers’ monitors that show workarounds they’ve developed to circumvent core shortcomings.
“We learn a lot about the credit union,” he adds. “Then we take what we’ve learned and put it into a custom presentation. If a credit union chooses us, we set up benchmarks and calendars for conversion—a process that usually takes 14 to 16 months.”
Near the end of the conversion, Frymyer’s associates deliver converted data to the client, then test it with a mock switchover. “We actually call it a dress rehearsal,” he says. “We try to mimic the real thing to make sure tellers, customer service representatives, and back-office staff are ready to roll.”
Fiserv offers training for credit union personnel entering a conversion process. “For one client, we trained 1,000 tellers,” Frymyer says.
The actual conversion takes place over a “conversion weekend,” during which the existing core and the new core operate side-by-side for a period of time.
“Some functions might slow down,” says Frymyer, “but most members won’t experience it. Following the conversion, a transition team works closely with the client for six to eight weeks—longer if necessary—to take the client from needing hands-on assistance to what we call ‘steady-state support.’ This in-the-background help works much like coaching from the sidelines.
“We create a list of best practices and come back months later to see if a client has followed recommendations—and whether new sticky notes have appeared on employees’ monitors,” he adds. “Clients will adopt up to 75% of the best practices we recommend. Once we’ve completed the conversion process, it’s rare for us to see new sticky notes appear.”
According to Symitar’s Kester, the conversion process can take from two to nine months with smaller credit unions, and up to 12 months for larger credit unions.
“In any case, conversion is a big investment,” he says. “Credit unions want to minimize the conversion’s impact on members, such as not requiring them to change their passwords. Successful core conversion opens up improvements in ATM services, debit/credit products, mobile, and many other areas.”
The hard part
“Nobody wants to do a conversion. It’s a very complex task, especially if there’s no overriding, consideration,” says Symitar President Ted Bilke.
“Two concerns that inspire a conversion are that the current core has peaked and there’s no longer any efficiencies to be wrung out of it—or a credit union wants best-of-breed and the ability to rely on third-party software, but the software won’t integrate with its current core,” Bilke continues. “Most credit unions have specific concerns rather than an overriding sense that it’s simply time to convert.”
Other considerations can feed reluctance.
“With a process this complex, you hit bumps along the way,” says Cannone.
Frymyer notes that people often fear change. “When a credit union’s executives have decided to change, we offer a course on change management to help their staff make it through the process,” Frymyer says. “This is crucial: If the executives are excited, the staff catches on.”
Cannone adds that “some credit unions even use our sales process to educate themselves about the best way to approach conversion and the questions they should ask about it.”
One thing core system vendors take into account is credit unions’ desire to have a system that gives them room to make their own modifications.
“Our platform has been around for 30 years, but we’ve never waited to expand or improve its capabilities,” says Bilke. “We devote significant research and development to keeping Episys fresh and modern. But a platform’s age isn’t as important as its ability to allow users do-it-yourself capabilities. Instead of waiting for us to offer a new capability, they incorporate modifications themselves.”
Bilke says a conversion team has five or six members, headed by a seasoned project manager, who takes responsibility for every step in the process to foster accountability. There also are analysts, a programmer, and a trainer who instructs a client’s in-house trainers.
About one month before the actual conversion, Symitar conducts a “test week,” a dress rehearsal for the conversion.
“Leading up to that, we’ve done a lot of trial-and-error testing to make sure we have successfully integrated a customer’s software. Even a small credit union can have 30 to 50 integration points,” Bilke says. “We do a week of parallel processing where the old and new cores process side by side. We’re looking at ATMs, automated clearinghouse transactions, loans, etc., to make sure our system is working without glitches. On day one, everything has to work.
“About 10 years ago,” Bilke adds, “we started our Vendor Integration Program, where we work directly with third-party vendors to test our integration of their applications with our core system. We now work with 100 vendors and test how their products integrate with ours. For both us and them it’s a matter of self-defense—we want to make sure integration is seamless.”
Is there any “retro” trend toward more holistic core systems, while still maintaining flexibility for integration with other products?
Not necessarily, says Benavidez: “While a more holistic offering might simplify things on the back end, credit unions know members come first.”
The flexibility provided by an open system, Benavidez says, allows credit unions to focus on a much more important trend: top-notch member service.