Great Expectations

This he has certainly done, taking the division from fewer than clients to more than 1600 in his decade in the job. We caught up with Norcross to tap into some of his experience about how high customer expectation is driving changes in core banking.

BM. Is this the right time to be thinking about replacing a bank’s core processing system?

GN. The reality is that everyone running old legacy systems should be thinking about core system replacement. I say that not only because today’s technology is superior to legacy systems, but also because there are forces in the industry that are driving banks toward core system replacement.

One of these forces involves the need of bank executives to know more about the institutions they manage. Many banks are still operating on very old technologies. These closed systems do not allow managers to readily mine data from their applications in order to gain the business intelligence they need to make good decisions. As a result, executives are forced to answer questions about the environment, the profitability of their customers, and the viability of their products and services without adequate data. They are understandably frustrated, and looking for solutions that can help them with this dilemma.

But the bank’s customers are also seeking out and embracing new technologies that offer them more convenience and customer-centric functionality. They expect more from their financial institution, and want their transactions to be immediately reflected in their account status, regardless of the channel they use.

Customers also expect a broad range of internet-based services and online access to their account, as well as a bill payment solution, an EFT solution, and access to a call center or a strong Interactive Voice Response system. Simply put, they want all services available across all channels, and they want reliable performance and service consistency regardless of how, where or when they conduct their banking.

It is clear that banks can no longer grow market share and retain customers without a full suite of banking solutions that are accessible online, in real time and in a predictable manner. So it’s really banking customers that are the driving force behind the search for proven platforms that can enable these capabilities.

Taken together, the bank’s need to have better information and to deliver a complete suite of banking services to meet evolving customer demands is a powerful motivator for change. As a result, banking leaders acknowledge they are continually assessing core system replacement as a means to define and deliver competitive advantage.

BM. What should a bank consider before embarking on a core system replacement project?

GN. First, the institution must decide whom it intends to serve and the strategy it intends to deploy in serving that market or markets. The bank must be clear about its business model. For example, an institution focused on the top commercial providers in a particular market would have no need to invest in a high-end retail system. During the evaluation process, banks will find that products, services and technologies will align within the various business strategies. That process is very important if the bank hopes to choose the right solution.

The other thing to consider is the true scope of any new technology initiative. Five to 10 years ago, a bank would make the decision to replace a core system in order to increase the functionality in a single department, such as deposits, lending or the general accounting system. That has changed dramatically.

Now, we see a push toward comprehensive solutions with very robust delivery channels all tied together into a single suite. Today, banks no longer embark on a core system replacement project without considering all the channels through which the institution does business.

And, as they replace their core systems, banks are also completely refreshing their branch automation solution. At the same time, they are bringing in a new EFT channel, a new internet banking channel and commercial cash management channel, a new voice response system and call center solution. All of this makes it even more critical to focus on the art and the challenge of effective implementation.

BM. So is there a ‘right’ solution for banks that want to replace core technology?

GN. There is certainly a right solution for every institution that wants to leverage new technologies to create operational efficiencies and strengthen their competitive advantages. However, the solution deployed by one institution won’t necessarily be the same system deployed by a different institution with unique requirements and operational priorities. Each bank has its own unique set of products, services, delivery channels, operating models, internal processes and long-term goals. That’s why Fidelity offers several powerful solutions to serve the many facets of the banking industry.

A core system that has been tailored to meet the needs of a local community bank, for example, is not likely to adequately address the needs of a large commercial bank with hundreds of branches. Likewise, a classic de novo startup operating with a limited product set isn’t going to need the level of sophistication and functionality that a US$25 billion financial institution will require. In fact, two large commercial banks can be similar in size, yet operate very differently, even though they are focused on the same market space.

The point is, one size does not fit all in the banking industry. Financial institutions need products that fit their specific set of circumstances, including technology that supports either online real time or batch processing. This is an important differentiator with Fidelity, because we don’t force a bank into a product that may not really suite their needs. Instead, we have a diverse range of solutions that are all robust, proven systems, and fully supported with ongoing innovation and investment by Fidelity.

BM. How then does a bank choose the system that’s best for them?
GN. When evaluating core systems, the bank must carefully consider the various channels through which it is delivering products and services to its end customers and how it might be doing business with them in the future.

Some of the bank’s future needs will be obvious. But predicting all of the ways customers may want to interact with the bank in the years to come can be difficult. Will customers embrace wireless technology? If so, will they use a cellular telephone or a Personal Digital Assistant – or some other handheld device? What other ways will customers expect to access their personal financial information as technology, and our culture, evolves?

Regardless of how the bank provides its services, the key to success will always lie in enabling the customer to access accurate information about every account, anytime and in any way that it is convenient for them. The customer must also have the ability to perform the same transaction through any channel and enjoy the same result. That’s why it’s so critical for banks to choose a technology solution and provider that supports not only today’s popular delivery channels, but the new ones that will unfold in the future.

For example, a retail-oriented institution that offers personal internet banking today may have plans to expand its business to serve commercial banking customers. At Fidelity, we have designed one a la carte online banking solution that accommodates consumer needs now, but also includes full cash management functionality for their future business clients. It’s the same with our check imaging solutions. Integrated into our solution is the ability for a bank to gain tremendous efficiencies by capturing images at the branch, as well as by equipping their commercial clients to capture images at their places of business. Banks that are ready to take one or both of those steps can do so today or whenever they are ready, either on a stand-alone basis or as part of our integrated check imaging service.

Truly, core systems must be built with technology that can support both the present and the evolving business requirements financial institutions will face. Technology providers must be the kind of visionaries that can anticipate those needs far ahead of demand.