It’s time to give that core a much needed overhaul, Gonzo Style. Of course, we’ll need to bring in the big guns for this major undertaking. Xzibit and the boys from Pimp My Ride are just what the doctor ordered. However, this won’t just be about the Bling but more about efficiency and execution.
There are a few design principles to review before starting. I doubt Xzibit would agree with all of these but when it comes to pimping the core and selecting the right ancillary applications, following a few simple guidelines may prove valuable.
Rule # 1 Make the driver as comfortable as possible behind the wheel
Nothing is more important than providing user-friendly tools to employees. And there’s no doubt that opportunities to enhance the user experience are plentiful. A few examples include core-based loan origination, general ledger and Internet banking, which have been behind best of breed providers for years. Two things to keep in mind as these systems are upgraded and third parties are contemplated are integration and navigation, both of which need to be understood prior to signing on the dotted line.
Rule #2 Try to buy parts from the dealer as much as possible
What? Tell me it’s not so! Buying parts from the dealer may be no way to pimp your ride but in banking it’s a different story. Going to the core provider, at least early on, is not a bad first step. While it’s not always the most popular decision, selecting core-based ancillary systems is certainly worth consideration, especially recently as some core providers have purchased best of breed ancillaries and are differentiating these products through tighter integration to the core. In the future, look for this behavior from the core providers to be even more pronounced.
Keep in mind that integration will be the biggest roadblock if a decision is made to go with a third party provider vs. a core-provided solution. This is more important for some systems than others. The following chart provides some guidance for understanding how important integrating with the core may be.
Not usually an issue |
Can be an Issue |
Always an Issue |
| Financial – GL, AP, FA | ATM and Debit | Sales Prompting/Tracking |
| Loan Origination | Fraud | Loan Servicing |
| General Ledger | Document Imaging | Branch – Teller/Platform |
| Marketing | Internet Banking | Contact Management |
Rule #3 Don’t over engineer
A Porsche may not be the best car choice for a family with six kids. And similarly, it’s unlikely that a minivan would be parked in front of a bachelor pad. The same holds true with core systems. It’s no secret that all core systems have strengths and weaknesses. Before any core pimping takes place, the first job should be to make sure the core system fits strategic goals and objectives set by the financial institution. Too often, bankers over-engineer core wraparounds that can cost millions and not work as advertised. Don’t fall into the trap of over engineering a core that just might need to be replaced.
Rule #4 Always ask the question: Is there a cheaper way to accomplish the same or close to the same outcome?
While some won’t admit it, car buffs think about the almighty dollar as well. Maybe chrome dipping those rims instead of buying expensive forged wheels or installing durable, faux leather interior vs. high dollar Corinthian leather. Given the recent economic downturn, many CEOs have a similar perspective. I often ask bank execs if they would trade 80%-90% of the functionality for 50% of the price. Not surprisingly, most jump at the opportunity. 
It’s always a best practice to enforce this behavior through an ROI analysis for every large project.
Rule #5 The more skulls and crossbones the better …
OK, now that the rules are out of the way, let the pimping begin.
The Rims – “Loan Origination”
Let’s start with some nice 40” chrome spinners in our ride. The good news is there are many options out there when it comes to finding a retailer. The same holds true with loan origination. While many core vendors offer solutions, don’t tie yourself down just yet. The marketplace is full of vendors willing to help out for commercial, consumer and mortgage solutions, whether in the branch or online.
Recent Trends: Many folks have tried to consolidate online and branch decision engines and as a result use the same provider for both. Also, no vendor has emerged as the leader in providing one platform for commercial, consumer and mortgage … the challenge is these are all very different in nature. Some have crossed the line from consumer to small business on the same application. Many vendors claim to be able to originate mortgages on the consumer platform, but when you dig under the covers, there is definitely a give on functionality.
Spoiler – “MCIF”
Marketing folks … don’t take this the wrong way. Many think spoilers have no purpose other than looking good. But, that’s not the case. Yes, the car will run whether it has a spoiler or not just like a bank or credit union will run with or without marketing software. On the other hand, a top of the line MCIF system can make your core system hum like you wouldn’t believe. Like loan origination, there are many vendor choices out there, and while core providers offer solutions, this is another system that doesn’t need to be purchased from your core provider as data extracts are pretty simple to do.
Recent Trends: Not much to report here other than banks still struggle with how to communicate campaigns to the front line. This is definitely an area of development for the core providers and should be a consideration as systems are reviewed. While the guts of campaign management can be one-off, pushing campaigns out to the branches as well as online, mobile and to the ATMs should be a consideration.
Paint Job – “Financial Software”
How ’bout metallic black with some ghost flames on the hood? The point is options are endless. Of course, general ledger is the biggest animal here. You can spend nothing and use the core-based general ledger system or spend thousands to implement best of breed customized solutions. And like MCIF and loan origination, the core really doesn’t matter. A simple mapping and daily batch extract and you’re on your way. Well, it’s not that easy but you get the picture.
Recent Trends: We’re finding more and more CFOs and controllers willing to go out and buy third party solutions that meet their needs as core providers have ignored them for the most part. Today, with the exception of general ledger, most banks use third parties (including a lot of Excel!) for fixed assets, accounts payable, asset-liability management, investment tracking, budgeting, profitability … the list goes on.
Exhaust System –“Branch Delivery”
Let’s go with a Flowmaster performance exhaust kit to give our ride a little more power and of course that heart pounding aggressive old school roar. In the end, there’s not a lot that can be done with the car’s exhaust, but some tweaking can make all the difference. Think about teller and platform the same way. Going out and buying a third party platform and teller system can be expensive and a nightmare when it comes to integration. As a result, most banks are tweaking branch systems whenever possible. Buying cash dispensers to help efficiency at the teller line is a good example, although for some reason these things can be a nightmare to integrate. The biggest improvement on the platform side is typically the elimination of rekeying of data. By now, pretty much all core-based platform systems can provide integration to Chex Systems, Check Order and electronic forms – for a fee, of course.
Recent Trends: It’s all about workflow, man! While many vendors continue to struggle, we’re beginning to see a light at the end of the tunnel. Many vendors have taken this to heart and are rebuilding their branch solutions from the ground up to enable dynamic workflow in not just opening new accounts but also servicing customers as well. This has been a long time coming, and I’m optimistic that we’ll see some new stuff very soon.
Unfortunately, time is up. Stay tuned for the next overhaul where we’ll be installing a tight sound system and souping up our engine to give it another 100 horses. Clearly, there is much that can be done to enhance the core system. Most of the time, this involves going out and selecting ancillary solutions. Keep in mind that integration can be complex and, in many cases, impossible. While core providers claim to be “Open,” it’s not always the case – especially when competing for the same business. Before signing your next ancillary contract, keep these points in mind, and good luck!
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Bring in the experts! Cornerstone Advisors’ Technology Assessment starts with a comprehensive analysis of your organization’s software applications and infrastructure. We then look at your technology staffing and spending as compared to peer institutions and make recommendations for optimal staffing levels. Finally, we work with you to align your I.T. governance and management processes with the institution’s goals.
Cornerstone shows our clients best practice techniques for achieving profitability and efficiency. A good place to start is with technology. Contact us and we’ll take a look at whether a tune up or an overhaul is in your institution’s technology future.
Cool article, Eric. Your comment about keeping it simple and starting with a strategy by identifying key objectives is so important. Building on the analogy, chrome straight pipes may look cool, but if there is no engine under the hood the entire ‘ride pimping’ is pointless. Therefore, keep it simple and add on features that fit with your core strategy.