Pub. 12 2021 Issue 1


Core Processing: Tips for Selecting Your Next Vendor


This story appears in the
West Virginia Banker Magazine
Pub. 12 2021 Issue 1

Core processing and the associated fintech ancillary systems remains one of the top three costs within most banks. Core evaluations no longer involve the natural progression of rubber-stamping the incumbent vendor’s renewal contract every five to seven years. When implementing “best of breed” ancillary solutions, organizations can become overwhelmed with these software decisions.

The complexity and far-reaching effects of signing a core processing vendor contract often lead to a great deal of internal stress. Many important buying strategies are often neglected or forgotten in the heat of the decision-making process. We have seen these areas overlooked even by multibillion-dollar institutions and the best-educated negotiators.

The following core negotiation strategies will help your bank negotiate the best price and ensure the best service.

Detail your Company’s Requirements

As in any evaluation process, you must first start by documenting your requirements and workflow. It is imperative that the core processing vendor clearly understand your expectations, processing windows, volumes, specifications, etc. If the vendor does not precisely understand your requirements, this could lead to higher-than-expected prices and unattainable service levels. This first step of writing down your specifications will also act as the building block for your request for proposal (RFP).

Set a Realistic Decision Time Frame

As the old saying goes, “If you fail to plan, you plan to fail.” We have observed multibillion-dollar institutions fail to set up a strict decision time frame. Organizations that randomly start and stop core processing evaluations waste significant resources and can cause other negative outcomes that include:

  • The project can drag on for 12 to 18 months with
    little accomplished.
  • Technology will change and thus cause the evaluation to start again from or near the beginning.
  • After picking up and putting down the project information, the evaluation team will become either utterly confused about product features and functionality or waste time by continually re-educating themselves.

The best way to plan for a final decision date is to work backward from your desired live date. Daily distractions, “fires,” vacation and sick time will arise during the decision period. The key to success here is to build flexibility into your evaluation cycle but choose a decision date and stick to it.

Realistic time frames for processing decisions will vary amongst different organizations, depending on project dollar value, application, institution urgency level, reliability of existing core processing solution, etc. Ideally, the vendor selection process should allow your staff enough time to become educated on the technology industry’s viable market alternatives.

Establish Decision Criteria

In the beginning, project goals and criteria should be established and refined throughout the evaluation cycle. These objectives are the foundation of your vendor selection and give the project direction. Some of the more common criteria are tied to the following:

  • Software functionality and capabilities
  • Price
  • Projected organizational growth
  • Cost justification or business case
  • Existing and projected customer base
  • Future product offerings
  • Vendor service reputation, onsite parts or guaranteed response times
  • Industry trends and how they match your criteria


There are over 70 different core processing options. The best advice here is to shop around. You can start the process by sending out an RFI (request for information) to seven or eight core processing vendors. By conducting preliminary core vendor presentations and obtaining some initial pricing, you can begin to narrow the field of core processing alternatives to the best four or five vendors that make sense for your organization.

Furthermore, if the core processing salespeople know that several viable competitors are involved in the selection process, they are more likely to offer additional services at a more competitive rate.


In both the RFP and proposal presentation process, the keys to success are questions, questions, questions. “If you don’t ask for it, you won’t get it.” This phrase holds true for the core processing industry. We usually advise our clients to draft an RFP to answer many of these questions because the written word is much more binding than the spoken promise. When drafting an RFP, it is imperative to keep it short and to the point. Many qualified core processing vendors may have neither the time nor the staff to respond to a lengthy RFP.

The list of questions to ask are many and may include anywhere from 300 to 3,000 questions. In the RFP and proposal process, the following general areas should be addressed: experience, financial stability, workflow, turnaround, error rates and price per item.

Site Visit and Reference Call Questions

Once you have selected your final two vendors, we strongly recommend that our clients call and visit bank sites similar in size and customer base. When calling or visiting the sites pay careful attention to the following points:

  • Observe day-to-day department operations
  • Develop a list of specific deposit, data warehouse and lending questions
  • What were the bank’s core decision criteria?
  • Why did they select their core or ancillary system vendor?
  • Is the system user-friendly?
  • Is the vendor open to interfacing to third party products rather than just forcing you into one of their products?
  • Did the vendor interface to all your third-party software? If not, which?
  • Did the vendor thoroughly test the third-party software interfaces?
  • Did any of your third party vendors have any issues with the way the vendor wanted them to interface with their core?
  • Has it ever been necessary for the vendor to implement their disaster plan?
  • How long did your conversion take? Was this in line with their stated expectations?
  • Describe what you liked best about the conversion process.
    Describe any major issues you encountered during the conversion process.
  • How did the vendor respond to these major issues that came up?
  • Were you satisfied with the vendor’s training before conversion?
  • Describe the training methodology and materials provided by the vendor.
  • Did you receive post-conversion vendor support?

Negotiating Price

Price negotiation tends to be the most emotional part of the decision cycle for both buyer and seller. There are several important points to remember in this stage:

  • Prices are rarely etched in stone and are usually negotiable. If you position your company from the beginning with an organized plan, you can secure the best price.
  • Core processing salespeople are judged, promoted and often paid by the profit level that they can generate on a sale. Motivation is high to “close the deal.” You can use this emotion in your favor.
  • It is best to follow a logical process and keep your emotions at bay during the negotiation.
  • “The large type giveth and the small print taketh away.” Third-party interfaces can be very expensive during the negotiation and after implementation if there are workarounds, separate excel spreadsheets, labor-intensive processing and manual reports.

The Final Core Processing Agreement

Once there is an agreement on the final prices, a few last important points are considered. The length of the contract is very important as related to your organizations’ long-term goals. For a longer-term contract, vendors will frequently offer lower prices with small annual inflationary caps. To protect your organization, you should attempt to put at least 40 to 50 additional terms and conditions, often with financial penalties, in the final contract. These contractual terms are imperative but often difficult to negotiate.