A core provider is so essential for a community bank that many experts compare it to life-sustaining organs and systems within the human body.

Lance Noggle
Lance Noggle

“Changing cores is one of the biggest decisions any financial institution ever makes,” says Lance Noggle, ICBA senior vice president, operations, and senior regulatory counsel. “The core is the backbone of how your system runs. Everything hooks up to the core, and that’s how your customers see your process.”

Charles E. Potts, ICBA executive vice president and chief innovation officer, puts it this way: “There is nothing more difficult for a bank to undergo than a core vendor change. It’s like open-heart surgery. Switching out a core system is the most complex, difficult thing that a bank will undertake.” Even so, Potts estimates that 2% to 3% of banks do change core vendors in a given year.

Below are seven critical questions, along with some expert advice, to help you decide whether a core change is something your community bank should be assessing, too.

Q: What are some signs that it’s time to reevaluate your core?

A: Brad Smith, partner at Cornerstone Advisors, estimates the lifetime of a typical banking core relationship to be 15 to 30 years, although he notes that some institutions do “get 40 years out of their core.” Therefore, he says, considering a core change “requires bankers to think much longer term than they do in most things.”

One clear sign that a change is warranted, says Smith, is when a vendor is sunsetting a core or no longer supporting that core after a certain date. Less clear is when a bank is using what’s known as a “zombie core,” or a core that still functions but is essentially dead, says Smith. He explains that zombie cores are no longer profitable and so receive only the scantest of vendor support.

David Saylor
David Saylor

David Saylor, founder and president of Genesys Technology Group, which advises on core-vendor selection, points out that community banks often change cores when a relationship between a provider and a bank becomes toxic.

“If your biggest pain point is you’re a small fish in a big pond and you don’t feel like you’re being heard, you’re being nickeled and dimed—in that situation, we see banks moving,” he says. “If the relationship is painful, it makes it a much easier decision to go out and find somebody to replace your current core.”

Q: For better operations today and in the future, what core functionalities should a community bank look for?

A: David Albertazzi, director, retail banking and payments, for Datos Insights, notes that banks undertaking a core change are typically looking for a smooth user experience and ease of implementation. Popular features include the ability to onboard new customers and offer online account‑opening solutions.

Quick Stat


Estimated percentage of banks that change their cores in a given year

He’s also seeing an appetite for a wider breadth of payment capabilities, as well as more insights into customers. Older systems, he explains, were built around the transaction, but today’s bankers want “a 360-degree view of the customer.” Finally, he sees bankers who are searching for a more open platform that can integrate with third parties and use APIs.

For smaller banks, Albertazzi is seeing a preference for “low-code to no-code solutions,” or products configured to meet a bank’s needs with a minimum of custom coding.

Potts emphasizes that the latest features may sound appealing, but the decision to switch ought to be a solidly strategic one.

“You better have the most strategic objective in mind before you even contemplate making a core change,” says Potts. “This isn’t like lining up a new piece of word-processing software. This is a potentially life‑altering move on the part of a bank, especially a community bank.”

Genesys’s Saylor agrees, noting that a bank should carefully consider its own strategy as well as the strategy of core providers under consideration. For many banks, a critical question is how much a core provider is investing in a cloud core, or in moving away from legacy-based systems and creating a solid roadmap for new technologies once regulators give the green light.

Q: How do you assess the stability of core providers under consideration?

A: Saylor estimates that most banks use large, well-established companies. But what about some of the next-gen entrants to the space?

Before selecting a shiny new vendor, a community bank should take a long, hard look at the business’s stability. For brand new vendors, Albertazzi recommends researching the company’s annual revenues and determining whether its balance sheet is healthy or overburdened with debt. Other considerations include the number of employees and even office presence.

“No bank,” he says, “wants to partner with a core vendor that’s not going to be around tomorrow.”

Q: What aspects of service should you consider when choosing a new core provider?

A: The best gauge of service is almost always existing customers, says Cornerstone’s Smith, who urges 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.”

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.”

Sidecar cores: pros and cons

Instead of switching to a whole new core provider, some mid-sized 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.