Few industry sectors have known disruption like the payments industry. Over the past few years we’ve seen rampant innovation in EMV, card controls, contactless and mobile pay apps. More recently, Elan, First Data and Worldpay announced acquisitions. Which all happened right on the heels of Jack Henry launching a new card offering. Because of all this activity, we’re likely to see a wave of banks and credit unions looking to change their card processing providers. And, of course, changing systems means a conversion.
A processor conversion affects the entire cardholder base, and with 25% of non-interest income revenue at stake, a crisp conversion is imperative. Planning, training, communicating and testing are key components of a successful conversion. These four GonzoBanker tips will help make a financial institution’s card processor conversion go as smoothly as possible:
1. Develop a comprehensive project plan. During a conversion, there is no more crucial step than the project plan. The project plan keeps the FI in control and significantly increases the chances of successfully implementing industry-leading card features within a reasonable timeline.
The project plan should outline the technical, cross-functional and stakeholder teams and include budget and time projections for each phase of the conversion. The timeline is only complete when every component touched by the card and its processor is identified and a plan developed for its conversion.
Simply adopting the vendor’s project plan will not work. Vendor plans cover data conversion and the vendor’s software setup; the bank’s plan needs to speak to the bank’s and cardholders’ interests.
Using a project management software system can add transparency to the project. Team members will be able to visibly communicate with one another, upload and review relevant documents and monitor the conversion’s progress.
Once complete, the project plan should be presented to all stakeholders for final approval prior to conversion kick-off.
2. Prepare the team to assume 80% of the work. Card processing is highly technical and requires an ecosystem of services, card networks, plastics production and integration. A card processing conversion typically comes along only once in 13 years, so the expectations for and toll on the institution’s conversion team go significantly above and beyond what is required of them to “just run the business.”
The new card processing vendor will generally execute about 20% of the total conversion effort, which leaves 80% to be executed by the financial institution. While FI teams do a great job of running the business, a conversion creates an environment that puts extreme pressure on the supporting team. The conversion team will include the card manager and his/her staff as well as team members from nearly all functional areas of the institution (IT, accounting, operations, lending, etc.) who will be expected to devote 70-80 hours per week for six to eight months.
It is not unusual for team members who are unaccustomed to or unprepared for this grueling schedule to experience performance burnout. Unfortunately, when the FI’s talent experiences burnout, the vendor “takes the wheel” and drives the conversion, which can result in cut corners and unnecessary risks.
Helping conversion team members prepare to meet the demands of the 80% expectation can ward against burnout. Conversion managers can assist their teams by adequately staffing the project and conveying realistic expectations for the amount of work the vendor will do.
3. Make the quarterback a first-draft pick. In a debit processor conversion, it is typical to see as many as nine sub-project managers assisting in the overall project from the processor side, which means the institution could have nine different sub-projects going on inside one conversion. This creates a huge volume of communication that if not managed effectively can leave the FI’s team overwhelmed and, in many cases, missing key tasks or cutting corners to make milestone timelines.
The FI needs someone running the project from the top who is backed by a strong internal team with clear responsibilities for each segment of the plan. The overall FI project manager quarterbacks the team by coordinating calls, meetings and project assignments across a vast spectrum of team members and processor PMs. The criticality of this role cannot be undervalued as the FI’s PM stands to be the asset that helps the FI skirt the bumps and potholes characteristic in any processor conversion.
4. Conduct rigorous testing, balancing and data validation. A card processor can be converted with or without a mass reissue of the card base, but because mass card reissues are a major inconvenience for card holders, the majority of card processing conversions are executed without it.
Even without a mass reissue, some key practices will need to be undertaken to ensure a successful conversion, including user acceptance testing, balancing and data conversion validation. The same goes for the training required to make it all happen. Without the testing and validation of a large percentage of the data, key issues can surface later. Testing only 10 out of 100 validation samples could mean missing issues, which would result in an extremely bumpy transition.
FIs should “just say no” to the vendor that says it will do all of this for the institution. The vendor doesn’t know all of the processes and developments the FI made over the term with the previous processor. It’s very likely these processes will need to be changed, altered or eliminated. Only the FI team knows which processes need to be validated with rigorous testing to ensure a seamless conversion.
Whether the switch to a new provider is strategic in nature or mandated by performance issues on behalf of the software or the vendor, moving to a new card processor is a high-risk, high-complexity undertaking. A change of this magnitude can yield significant payoff and greatly enhanced cardholder experience, but on the flip side, an improperly executed conversion can result in negative reputational risk and cardholder attrition. Careful execution throughout the planning, training, communicating and testing stages can help financial institutions fend off the downside risks of a card processor change and pave the way to a smooth conversion.