Coronavirus forces core conversions to go virtual

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The coronavirus has accelerated the transition to virtual core conversions at credit unions and banks, moving a process that has long been done in-person to an online platform.

A number of credit unions moved ahead with plans to switch technology vendors even after the coronavirus became widespread. Now that financial firms and their technology providers have seen this work can be done remotely, it could be the start of changes that continue long after the outbreak has subsided.

The pandemic “certainly provided a strong impetus” for the move to virtual core conversions, said Trent Fleming of Trent Fleming Consulting. “Prior to this year, it was largely a matter of vendor philosophy, with some preferring remote work and others preferring in-person training. I believe COVID will permanently shift the focus to remote work.”

In an attempt to keep employees safe and slow the spread of the virus, the majority of financial services firms moved to employees working virtually once the coronavirus hit. Forty percent of financial services companies implemented an optional work-from-home policy while 58% made this mandatory, according to a recent study from Arizent.

Along with that, much business travel has been canceled because of the pandemic. The Global Business Travel Association found in a survey of members that half had canceled all domestic trips. Forty-two percent said most had been called off, according to the survey, which was released in April.

The pandemic has also shut down nearly the entire 2020 credit union conference circuit, which doubles as a high-profile showcase for a variety of vendors in the industry.

Technology vendors normally send personnel to a credit union for different on-site activities, including training for staff members ahead of a conversion and then again when the actual switch happens. Having someone physically on-site can be comforting for the institution changing to a new system, sources said. The vendor’s employees can quickly answer a question or review a report if they are there in person and a problem arises.

But the coronavirus upended normal procedures, and now credit unions and their vendors have moved to completing these transitions virtually.

“I think generally the core providers have gotten really good about doing the actual conversions,” said Aaron Silva, president of Paladin, which helps banks and credit unions renegotiate technology contracts. “By the time they get to the conversion date, it’s been a long time coming. They can do it remotely.”

Symitar, a unit of Jack Henry that provides technology solutions to credit unions, usually sends six to 12 employees to assist a credit union with a conversion, said Shanon McLachlan, president of Symitar.

The company has done roughly 60 “conversion-related events” — there are multiple steps in switching to a new system — since the beginning of March, McLachlan said. All of these were done virtually since Jack Henry began restricting travel to only essential trips in mid-March. Additionally, about 96% of its employees are working remotely right now, up from its normal 30%.

Before the pandemic, Symitar was working to allow credit unions to convert systems virtually, but there wasn’t much demand for that, McLachlan said. Still, vendors are now better able to do this work and related training remotely than even a decade ago because of teleconferencing capabilities, so credit union employees have the benefit of interacting with Symitar’s staff over video.

“You get that face-to-face via these tools and you can start building those relationships,” McLachlan said.

SAFE Federal Credit Union in Sumter, S.C., started contemplating switching core vendors in 2012 and after a search ended up signing a contract for another six years with Fiserv in 2014.

Knowing that the contract was to expire in May and that changing vendors can be a long process, the $1.2 billion-asset SAFE began its due diligence to find a new vendor in April 2018. This included on-site demonstrations and sending a team of employees to visit other credit unions in Texas, Michigan and Pennsylvania.

The management team made a recommendation to the board in February 2019 to switch to Symitar and then went through four months of contract negotiations. During that time, SAFE and Jack Henry were already discussing the conversion.

Given how long the process took, SAFE’s management team was reluctant to delay the conversion once the pandemic hit. It could be months before the credit union would be able to settle on another date, so the management team decided to forge ahead, even if the conversion happened with only virtual help.

“Once you set a date with all of these vendors, changing that date is very difficult,” said Michael Baker, president and chief executive of SAFE, who noted that the last time the credit union went through a core conversion was in 1989 and a hurricane struck that weekend.

However, SAFE did make some changes in the wake of the pandemic. For instance, it held nearly twice as many internal training sessions for the new system to ensure employees could appropriately socially distance during the process.

SAFE went live with Symitar in mid-May after converting its mobile and online platforms with a different vendor in January. To help with the process, SAFE had a “virtual war room” set up with a conference call bridge open the entire time so employees could quickly get questions answered by Symitar.

“Instead of walking into a boardroom, you were picking up a phone and dialing into the virtual conference room and talking to whatever resource you needed,” said Kevin Thomas, SAFE's chief information officer.

Jack Henry will likely let clients choose whether to get help in person or virtually, McLachlan said. He expects many to choose a hybrid option where some aspects of the core conversion remain virtual, such as training for employees, while personnel would be on-site when the actual switch happens.

“A lot of the steps can be done over the phone or email,” Fleming said. “In most cases, they are sending personnel on-site to hold hands and it probably lengthens the process. If I’m going to be in your institution for a week, there is a level of camaraderie involved. I will go to lunch with you. … I think we will see more virtual conversion activity, even when things get back to normal."

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Core conversions Core systems Coronavirus Workforce management Training Work from home