Banks turn to remote “core conversions” during COVID-19 pandemic

Conversions surge as institutions seek to unlock growth and boost digital engagement

The COVID-19 pandemic has accelerated many things in the financial services world. One of those is the increased number of remote core conversions taking place.

Banks, credit unions and other financial institutions have ramped up dozens of remote core conversions over the past few months in an effort to increase digital engagement with their customers.

Let’s start out by defining just what a core system is. The core system is the central processing system of the financial institution, or in other words, the platform that contains the essential information about each account hosted by the institution, from individual savings accounts to corporate business accounts. The core system also serves as a hub into which other capabilities, such as online banking and mobile banking, integrate.

According to Fiserv, a Brookfield, Wisconsin-based financial services technology provider, core conversions are uncommon, with many bank or credit union professionals only working on one during their career.

A core conversion encompasses the movement of all account information and associated integrations from one platform to another. Because of the core’s central role in day-to-day banking, a conversion is often foundational to the institution’s customer or member service strategy. And now because of COVID-19 and the related travel restrictions, conversions must be completed remotely. It’s something that had rarely – if ever – been common practice in the industry before April 2020, according to Fiserv.

Demand for remote core conversions has surged since the pandemic began, Fiserv said. Some banks had already started the conversion process and others needed to start it to close mergers and acquisitions.

In Fiserv’s case, 20 financial institutions completed their remote core conversions over the past five months as banks seek to increase digital engagement with their customers.

Financial institutions undertake a core conversion so they can pursue growth or technology strategies that are better enabled by a new core platform, said Malcolm Grice, a senior vice president of client operations for account processing at Fiserv. 

A core conversion is often a “major stepping stone” for a financial institution to deploy its strategies, he said. 

“A financial institution might want to expand into small business banking, but its current system doesn’t have strong capability in that area,” Grice added. You’re bringing in this new platform so you can leverage modern technology and enable that strategy.”

Corelation, a San Diego-based core processor for credit unions, conducted four remote core conversions recently. In July, the company finished a conversion with Lancaster, S.C.-based Founders Federal Credit Union which has $2.8 billion in assets and 230,000 members.

Founders Federal Credit Union CTO Robert Bender said in a written statement that the credit union pursued an aggressive conversion schedule timeline to upgrade its system.

“I would recommend a remote install over an onsite install anytime,” he said. “Allowing employees reduced travel and back home at the end of the day was not a distraction for the project. In many ways, it accelerated the benefits and project timeline of the conversion.” 

Corelation also conducted remote core conversions on June 1 with two smaller credit unions despite a six-hour time difference – Cross Valley Federal Credit Union in Wilkes-Barre, Penn., which has $167 million in assets and 19,200 members and HFS Federal Credit Union in Hilo, Hawaii, with $596 million in assets and 50,900 members. 

Conversions usually take nine to 12 months although some can take even longer. The bank conducts a large portion of the work internally while a technology company like Fiserv provides guidance on how it can prepare its data and systems for the conversion, Grice said. 

“We then step in to facilitate the change and train staff on the new system,” he said. “It’s a very intense few days leading up to the switch over to the new system.”

The pandemic prevented conducting this process live, but the Fiserv team had experience in remote conversions before the pandemic when they conducted ones for mergers, he said. 

The teams at the banks and Fiserv conducted the conversions by having several videoconference and phone lines open 24/7 to manage the conversion. 

Investors Bancorp, (ISBC), the holding company for Investors Bank, a Short Hills, New Jersey bank with $25 billion in assets, conducted its conversion to move an acquired bank, Gold Coast Bank, onto its existing core platform.

The bank’s go-live date had been scheduled a couple of weeks before it had to go into lockdown from the coronavirus, said Chris Blotto, executive vice president and chief information officer at Investors Bank. The bank proceeded with the conversion with Fiserv because it had been preparing for several months. Except for a handful of employees who worked on-site, most of the conversion teams and their vendors were remote. 

“We kept to the plan, modifying only as needed to accommodate the new circumstances,” he said. “We proceeded with the conversion at the very beginning of the pandemic when there were so many unknowns and the idea of being virtual was still relatively new for the bank.”

Core replacement is the single most disruptive undertaking a bank could embark on, said Louise Lassen, a vice president who leads the professional services team and manages core conversions and implementations for Finastra, a London financial technology company. Many bank executives are fearful that updating their core systems could create business disruption. 

“Rather than continue to be held back by outdated legacy systems that cannot adapt to emerging technology with remote functionality, banks need a core banking platform that is open, so they can respond to their customers’ needs with new technologies and services in real-time,” she said.

Core conversion and migrations are now occurring remotely due to the global pandemic. 

“Finastra’s implementation team has created an extended communication model to simulate the onsite collaboration experience and is using secure communication and collaboration tools to create close collaboration between our internal and customer teams, mirroring what was traditionally achieved onsite,” she said. 

Computer Services (OTCQX: CSVI), a Paducah, Kentucky-based financial technology provider, finished 15 virtual core conversions since the beginning of the pandemic. Over 90% of five conversions were conducted remotely for bank mergers, including one with $1.6 billion in assets.

Greg Hayes, president and chief operating officer of Belleville, Pennsylvania-based Kish Bank with $1.05 billion in assets, said in a written statement that since the bank was 18 months into a 20-month process, it would not delay the rollout.

CSI utilized WebEx and Microsoft Teams to create a live, virtual communications channel with the banks.

COVID-19 “placed a magnifying glass” on the ability of banks to adjust quickly to a digital world, said Vince Campisciano, head of implementations at SEI, an Oaks, Pennsylvania-based investment processing and management company

“SEI was able to remotely implement our clients onto our wealth platform, on time and on budget,” he said.

“It provided them increased efficiency and scale, user-friendly mobile access to key technology databases, enhanced communication and automation improvements. Seamless remote conversations that provide an improved quality of work and flexibility for our banking clients are a key priority as they navigate the current crisis.”

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