Are you getting the most out of your core relationship?

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The reality is that most community banks aren’t likely to switch to a new core due to perceived time or cost restraints. That makes leveraging that existing core relationship all the more important to reaching strategic goals. Here’s how to make the most of this vital relationship, according to community bankers and core providers.

By Katie Kuehner-Hebert

Switching core providers can be a long process, which is one reason why about three in four community banks chose to stick with their existing core provider, according to ICBA’s 2020 Core Processor Survey. In fact, a third of the banks surveyed have been with the same provider for 20 years or longer. Bankers report that there are significant hurdles to switching, including the disruption of converting and staff time constraints.

Quick stat


of community banks say they will stick with their current core processor, rather than switch

Source: ICBA 2020 Core Processor Survey

That said, community banks that choose to stay with their existing core system should evaluate if their provider can help them accomplish strategic goals. This is where strengthening that vendor relationship becomes paramount.

While the legacy platforms developed in the late ’80s and ’90s are still sufficient to run core operations today, the systems may need modernizing to support growing regulatory and customer demands, says Jackie Herman, chief operating officer at $332 million-asset Flagship Bank in Wayzata, Minn.

“Upgrading the core with additional innovative options to augment existing platforms does provide for integration and fewer vendors to manage,” she says. “However, we use our core as a data warehouse and use add-ons to support the focus of digital transformation in the front office and across all customer channels without a major core upgrade or replacement. This has kept our expenses down while giving us flexibility to meet changing customer demands.”

More and more community banks are employing third-party risk management solutions that adhere to regulatory requirements. They not only mitigate risks and control costs but also increase the value of the relationships between vendors and community banks, Herman says.

“We have taken the conservative, yet acceptable approach of aggressively managing our contracts from negotiations to strategically align contract maturities,” she says. “Coinciding our core banking platform agreement with our add-ons allows the potential to not pay out to switch or change [platforms] upon maturity [of the contract].”


Active core–bank relationships

Ruth Christopher, executive vice president and chief financial officer at $815 million-asset Citizens Bank of Las Cruces in Las Cruces, N.M., says the bank has been happy with its core provider. “Their products enable us to meet the needs of our customers,” she says. “Therefore, we have felt little need to work around them. We believe it is important to be actively involved with our core.”

The community bank actively participates in the provider’s conferences and, prior to COVID-19, regional user groups. “Our preferred method when dealing with service issues is to work through proper channels with our core. However, we do not hesitate to escalate when necessary,” Christopher says. “This is easy to do, since we have developed relationships with upper management at our core.”

While Citizens Bank of Las Cruces tends to be hands-on with its core provider, the bank hired a consultant several years ago when it renegotiated its core contract.

Working with consultants can have its benefits, as they are often knowledgeable about the core providers and their service level offering, says Maria Schuld, division executive for the Americas Banking Solutions Group at Jacksonville, Fla.-based FIS.

“While they can give you great insight and perspective due to this expertise,” she says, “the decisions made by the bank should be informed by clear expectations, objectives and costs to achieve the best outcomes in these situations.”


Evaluate your core vendor

Community banks looking to accomplish strategic goals should see their core provider not simply as a vendor but as a partner, Schuld says. Banks can build their core relationship by better understanding what solutions, services and functionality they already offer and by reviewing account and support resources. Banks should make their core providers aware of their business goals, too. “Sharing your strategy is an important step to ensure your core provider understands your needs and is able to collaborate with you,” she adds.

As with any relationship, Stacey Zengel, vice president of Monett, Mo.-based Jack Henry & Associates and president of Jack Henry Banking, says communication between a community bank and its core provider is integral to a successful partnership. He likens it to the importance of communication between spouses to maintain a strong relationship.

When evaluating a core relationship, community banks should ask themselves if there are gaps in functionalities and if their provider honestly discusses how—or if—it can fill them, Zengel says. Often, banks mistakenly believe there are gaps because they aren’t leveraging the functionality that their core provider already offers. Community banks should take advantage of their provider’s user groups to discuss issues and possible solutions that other banks have employed, Zengel adds.

“Banks should get to know what the provider can already do for them,” he says. “It’s important to get educated, and consulting services with your core provider are available.”

A guide to managing your core relationship

The newly updated ICBA Core Processor Resource Guide includes steps to evaluate your core processor, your business needs and potential core vendor alternatives. The guide, which is free for members, also offers insights into negotiating contracts and resources for banks switching systems.

Katie Kuehner-Hebert is a writer in California.