What to Look for In a Core Evaluation Consultant

A bank’s core processing system is one of the largest single capital outlays for financial institutions and should not be a purchase decision that’s made overnight. Banks’ executive teams need to start looking for new processors 18-24 months before their current contract expires. Given the price point for new systems, even companies satisfied with their current vendor are conducting extensive due diligence before deciding whether or not to renew or move to a new provider. This is an exhaustive, time-consuming process, and unless your bank has all the requisite skills in-house, you’re likely to outsource the management of the many required tasks.

Here are attributes you should look for in a core consulting provider:

An Objective Position

Your core processing consultant should take a neutral position when it comes to vendors, instead of holding predetermined notions of what vendor you should use. Unfortunately, many consultants have preset notions surrounding which vendors you should choose. A better approach is to identify your specific needs through discussion and interviews. Once the consultant understands your pain points and long-term business strategy, they are more likely to find a vendor to meet your needs. Look for a consultant with no affiliations to potential vendors and ask them how many different vendors and products they have recommended to other clients. This will ensure whether or not the consultant conducts an objective assessment process.

Expertise in Core Banking Applications

Banks typically work with a core processing vendor for 10 to 15 years. Finding a new vendor is complex, and the more experience your consultant has with core banking applications, the better. Choose a core consulting advisor with enterprise software experience who understands the intricacies of the banking environment. This will provide the resources that can help your organization identify your requirements and provide guidance on finding and implement the correct solutions.

A Well-Developed Process

Performing the due diligence required to select a new core processing vendor isn’t a task for just any project manager. To secure expertise in areas where you need it most, select a business partner with a well-developed process comprising formal planning, project management, identification, and implementation of core banking applications.

Extensive RFP Experience

Appoint someone with extensive experience in managing the RFP (Request for Proposal) process. Make sure they are capable of:

  • Developing required documentation and sending it to vendors with the right capabilities
  • Reviewing and scoring responses according to predetermined weightings
  • Presenting the financial institution’s project team with appropriate options
  • Conducting thorough due diligence to identify two or three vendors to make presentations onsite to your leadership
  • Reviewing detailed pricing and proposals revisions, re-scoring, and making appropriate recommendations

Once a vendor is selected, your consultant should also be equipped to handle contract negotiations with the vendor on your behalf.

Knowledge of Ancillary Systems

Every financial institution is different, and that means different approaches and different ancillary services exist. If you have a specific need for mortgage processing, for example, and the best option for you is a specific ancillary system, then your consultant should be prepared to direct you accordingly.

Finding the right core consulting professional is challenging, but if you contract a professional firm with prior enterprise application experience in banking, you’ll have a seamless transition to your new system.

Isn’t my Core System my data warehouse?

data warehouseIt’s a common misconception in the financial services industry that a database and a data warehouse are the same thing. Put simply, they are two different aspects of data storage, and each has its own role to play. Both are critically important, however, to enable financial institutions to hold their own in an increasingly competitive environment, and having either system without the other is like having a car with only three wheels.

Understanding the Big Difference

The core database system in a financial institution is designed to handle transactions. It’s usually organized for storage, access to and retrieval of records. Most often, a database is in the form of an online transaction processing (OLTP) system, and are restricted to being used with a single application. This could be Excel, CSV, XML or text, all of which are great for storing data but limited in their ability to analyze and make sense out of it.

A data warehouse, however, is an online analytics processing (OLAP) system that incorporates data from multiple different sources. It’s capable of identifying a single source of truth for all your data and can perform much more complex queries than a transactional database can, and has vastly superior reporting abilities than an OLTP system.

The Importance of Analytics in Finance

In the financial environment, analytics are vital to enable banks and other institutions to withstand the enormous economic pressure they are under. According to McKinsey, 54% of the world’s top 500 institutions are priced below book value, and just 18% hold all the value in the industry. That leaves a large number of players pressed to make improvements, and with the advances in technology and the push to digitization being exploited by the top institutions, it’s essential the rest follow suit. Without the ability to produce and utilize advanced analytics, maintaining any sort of position in the industry is likely to be impossible.

Where Analytics is Going

So, just what can analytics do for the financial services industry (FSI), which could argue in favor of acquiring a data warehouse? We’ve identified three trends worth noting because of their implications:

  • Automation is burgeoning, with the increase in robotic processing automation (RPA) and cognitive automation. Financial institutions are rapidly turning to automation for investment reporting, fraud detection, interpretation of regulatory requirements and non-human customer service. All these use complex repositories of business rules and logic gathered from data sources to deliver their services.
  • In spite of huge investments by the FSI in technology, mobile apps, social mining and data lakes, the customer experience hasn’t changed significantly enough for the struggling players to retain their clients. The solution to this is enhanced personalization, which can only be done based on the thorough analysis of data collected from multiple sources.
  • The FSI might be well-positioned to leverage large repositories of client data, if they can reach a balance between the loss of privacy and the value gained in its place. So far, the jury is still out on this one.
  • Cyber-security is an ongoing problem, and as institutions move their data and analytics to the cloud they acquire a whole new security challenge. Frequently, a data warehouse hosted with a professional ELT provider (extract, transform and load) is not only more secure than an in-house OLTP system that’s subject to any number of social engineering opportunities, but it also has the benefit of regular backups and disaster recovery protocols.

The Take-Away

The value of your analytics depends on the value of the data input as well as the platform you use for analysis. A database alone is not enough to generate the insights you need for survival. A data warehousing application will give you that.