How to Maximize Value in Your Core Processing Contracts

January 23, 2020 | Article

The banking technology you deploy is a critical part of customer attraction and retention. It also comes with its own set of risks, challenges and headaches. Compliance has also become a larger factor in setting up your core processing systems as regulators push for organizations to reduce the number of third parties they contract.

Core processing analysis services are a way to help alleviate the burden of researching, selecting and negotiating your core banking solutions. With the assistance of experienced professionals, you can be confident you are maximizing the value of vendor contracts and choosing solutions that meet the needs and goals of your bank or credit union.

What Does Core Processing Analysis Do?
Core processing analysis generally has three phases that can see your bank or credit union through the entirety of a deal or any portion of it. Core processing analysis is really about collaborating with your organization and delivering a tailored approach for your specific organization to achieve the best results.

The phases of core processing evaluation, core processing selection and technology contract negotiation.

Phase One – Core Processing Evaluation
The first phase involves the review and evaluation of existing contracts. This typically also involves determining your current strategy and future strategy regarding things like new markets, products and services. Contracts to examine could include:

  • Core platform (core, teller, accounting opening, general ledger, etc.)
  • Item processing and imaging
  • Loan origination
  • Debit processing
  • Online banking (retail, business, mobile, etc.)

There should also be an evaluation of your vendors. This could include:

  • Detailing all vendor relationships and systems in place.
  • Evaluation of any long-standing relationships with current vendors.
  • Interviewing departments on usage and performance of current systems.
  • A cost analysis.
  • Analyzing digital channels, debit and credit cards.
  • Assisting management with renegotiation-only strategies and strategy sessions with potential vendors if needed.

Phase Two – Core Processing Selection
The second phase involves the actual core platform selection. This may involve assisting management with:

  • Creating a list of requirements for the selection process.
  • Evaluating proposals based on that list and against current costs.
  • Obtaining references, setting up corporate visits and making the final selection.

Phase Three – Technology Contract Negotiations
The third phase is participation with management in the transaction negotiations. Core process analysis professionals can serve in an advisory role to look at:

  • All current products and services
  • Service level agreement language
  • Liquidated damages language for protection of future growth
  • Early termination language
  • Deconversion language
  • Future value adds product and services

Experience Matters
When choosing a core processing analysis professional, you want to be sure you are working with someone you can trust. Core processing analysis involves a thorough understanding of your organization’s structure, needs and goals in order to deliver the best results. These professionals may end up feeling like employees of your bank or credit union—and that’s a good thing. You want to work with a firm that holds its relationship with your organization in the highest regard and understands what it is you want to accomplish. Core processing analysis achieves the best results when it is a true collaboration between your bank or credit union and your service team.

Core Processing Analysis
Are you starting or in the process of selecting a new core system?
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