Why Core Conversion Is Critical To Digital Transformation For Banks


Legacy core banking systems can pose a significant obstacle to businesses striving to implement a digital strategy. The banking industry has long been challenged to transform, partly due to the outdated model of core banking.

The Basics Of A Core Conversion

huge bank buildingDue to the complexity of core banking systems, excessive strain can be put on resources that ultimately stall digital transformation. While platform changes can be overwhelming, a core conversion can be a critical step for modern banks. A core conversion occurs when a business chooses to change or update its platform software that performs all major functions and transactions, as well as manages data.

Today, banks and credit unions are under extreme pressure to update their core banking technology. Learn how core conversion can aid financial organizations in achieving a successful digital transformation.

Why Must Banks Perform Core Conversions?

Many financial institutions find core conversions to be an inevitable part of overall business evolution. Performing a core conversion simply to convert cores can be a chore, but switching cores as part of digital transformation can be strategically advantageous.

Existing systems can often become obsolete overtime or a current platform may no longer be positioned to meet an organization’s growing needs. With new, updated systems, banks and credit unions can become more efficient and provide a larger selection of services. Implementing a new core system can also help banking institutions perform more secure transactions and better handle data.

There are many other reasons why a financial organization may choose to move to a new core solution, including the following:

  • Current platform software does not support the business process flow
  • Inability to accurately define and segment customer population
  • Diminished competitive advantage
  • Legacy systems have negatively impacted business growth
  • oor customer experience and interface
  • Governance, risk and compliance problems
  • Lack of integration with other technology, including member-facing, third party add-ons
  • Disparate data sources have caused weakened analytics and reporting

Steps For A Better Core Conversion

The process of performing a core conversion can be challenging but also very rewarding. A core conversion can cause a disruption to customers and members for several days so it is important to clearly communicate when these disruptions may take place. However, the behind-the-scenes process for organizations can take several months to more than a year. No two core conversions are ever the same but most financial institutions will go through similar steps.

1. Opt For Componentization When Dealing With Large Banks

bank professional after meetingMore than a decade ago, a standard core conversion could take upwards of five to 10 years to complete. However, technology has enabled modern businesses to convert to a new system in less than 12 months. Larger banks and credit unions may need additional time depending on the complexity of the conversion.

To limit disruptions to members and speed up the amount of time to launch, some core software providers have made it possible to change core software in pieces. This method is known as “componentization” and can be a useful tactic for larger banks.

2. Develop A Plan To Minimize Disruptions To Normal Business Operations

Any type of change implemented by a bank or credit union runs the risk of disrupting normal business operations. However, a core conversion is a large event that can prevent members from gaining access to their banking information for an extended amount of time. Businesses can help minimize the negative impact of a core change by temporarily using alternative technology that allows members to get the information they need.

3. Choose The Right Partner To Assist With The Selection and Implementation

Choosing the right technology to run a financial institution is one of the most strategic decisions that an organization will make. There are several things to consider when assessing a core banking system, such as the competitiveness of the technology, alignment with business needs and processes, how the costs will scale with organizational growth, and if the business has access to the data they need to manage and grow their organization. Working with an experienced IT consultant can help financial organizations achieve their business goals.

Schedule A Consultation With Hartman Executive Advisors

Choosing the right core banking solution requires an organized approach that includes analyzing key requirements, assessing business processes, organizing demonstrations, screening vendors and negotiating software agreements. For more information about the importance of core conversion for digital transformation or to schedule a consultation with an IT professional, contact the experts at Hartman Executive Advisors.


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