Independent Banker - April 2024 - 22

PORTFOLIO
bankers to find other bankers to
talk with, above and beyond those
on a prospective vendor's reference
list. He also recommends building
service-level protections into new
vendor contracts for accountability.
Once a contract is signed, he warns,
" You lose a lot of your leverage until
the contract comes up for renewal. "
Eric Devine, president and CEO
at Vitex, which advises community
banks on core contract evaluations,
decisions and conversions, also
emphasizes the importance of candid
advice from peers. User groups,
he says, can be an excellent way to
gather information, as well as annual
industry conferences sponsored by
the core providers you're considering.
Q: What is the timeline for
switching to a new core?
A: It makes sense to begin assessing
a core change 24 to 30 months
before your current contract expires,
says Devine.
Albertazzi recommends a similar
timeline, noting that it can then take
anywhere from one to three years to
interview, select and switch to a new
core provider.
Q: Is there a rule of thumb for how
many core providers a community
bank should interview?
A: Regulators like to see companies
interview three vendors, as well as
the incumbent, says Genesys's Saylor.
His clients may begin with as many as
eight or 10, but that number is usually
quickly reduced.
Often, he notes, risk appetite alone
will whittle down the selections to a
handful. " At the end of the day, most
community banks are risk averse and
don't want to be one of the first two
or three on a new system, " he says.
" That eliminates the startups and new
entrants really quickly. "
" If the [vendor]
relationship is painful,
it makes it a much
easier decision to
go out and find
somebody to replace
your current core. "
-DAVID SAYLOR, GENESYS
TECHNOLOGY GROUP
Sidecar cores: pros and cons
Instead of switching to a whole new core provider, some midsized
and larger community banks choose to go the " sidecar core "
route, signing with a new and different core vendor to run a single
operation, such as online banking or a BaaS solution, says Lance
Noggle, senior vice president, operations, and senior regulatory
counsel, for ICBA. The sidecar core does not take over traditional
core processes but rather runs in tandem with the existing core.
A community bank might consider a sidecar core when " a new
system can integrate better with fintech or other goals and when the
core of record isn't up to the task, " Noggle says.
Although the sidecar concept is hot right now, Charles Potts, ICBA
executive vice president and chief innovation officer, cautions that
this solution is in no way a " cure-all for problems you have with your
existing core. " For better or worse, a bank bringing on a sidecar
core will be working with two core providers and dealing with the
idiosyncrasies of both.
Q: When does it make sense to
stay with the incumbent?
A: Cornerstone's Smith points out
that in many instances, community
banks begin a core evaluation only to
find that their current provider can
offer advice or solutions to ease many
of the pain points.
Once again, Potts emphasizes the
importance of only undertaking a
core change when the reasons are
extremely compelling.
To better illustrate this, he
references Alice in Wonderland.
When Alice asks the Cheshire Cat
for directions at a fork in the road,
she is told that any road will get you
there when you don't know where
you're going.
" It is absolutely imperative, "
concludes Potts, " that any bank
[contemplating a core change]
think long and hard about where
they're going. "
Elizabeth Judd is a writer in Maryland.
22 // ICBA Independent Banker // April 2024
Independent Banker - April 2024

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