Monday, June 12, 2023

Toward Smarter Growth

 Toward Smarter Growth: Doing More with Existing Customers

If you've heard me speak in recent years, one of the things I consistently point out is the value of organic growth, specifically from existing customers.  Doing more business with existing customers is a low cost, high value way of growing your bank.  From such an effort, we see growth in several areas.  First, an increase in account balances through deposit growth.  Next, an expansion of services provided when existing customers take advantage of products and services they haven't used before.  

Another important gain here is customers concentrating more business with you.  One of the assumptions I want you to operate from is that you never have all of a customer's business.  Today's financial services environment practically bombards consumers (and businesses) with offers of all types of services, from many different places. I daresay that other financial entities are doing more marketing to your customers than you are. Unless you are constantly reminding customers about the products and services you offer, they may be tempted to select financial products and services from other sources. Each time this happens, your relationship is weakened. 

A key reason you are in such a situation is a failure to look at the whole picture of a customer. Instead, banks tend to focus on the task at hand (I call this being transactionally focused.) The preferred approach is that each time a new or prospective customer walks in the bank, or accesses one of your on-line channels, you should begin profiling them for future services.  That young couple opening their first checking account? Think mortgage, car loan, home equity, credit card, and ultimately wealth management. Training your staff to think and act in this manner will greatly increase your chances for broader, stronger relationships with new and existing customers.

The more products and services a customer has with you, the stronger their loyalty should be.  This is true even for remote delivery channels like mobile banking, debit cards, and remote deposit capture.  I coined the phrase "invisible loyalty" to emphasize that you can still create and nurture loyalty and profitability among customers that mainly use remote delivery channels.

Here are three ideas to help you change staff approaches to customer interactions:

Listening: remind your staff that customer contact is always an opportunity to learn more about that customer's needs, interests, and opportunities. Make sure your employees know the right channels to hand that information off to.

Create a Theme: for a given month, emphasize one aspect of customer contact, such as listening for customer plans or upcoming events that might require a lending situation OR gathering email addresses or cell phone numbers. When you call a local utility, they will often ask for this information as a way of "updating their records" but it's really a ploy to make sure they have current contact information. Customers won't object to your doing the same.

Third, don't forget about your remote channels: While you can't directly engage those customers in conversation, you can analyze their activity and look for patterns that will give you clues to their current financial situation and their needs. Lots of attention these days to data analytics. Here's your chance to leverage data you collect to improve customer service and internal efficiency.  When you make a call or send an email to a primarily remote customer suggesting banking products or services they may need, it will come as a welcome surprise to them.

One conflict we always have in the banking world is around "cross selling." Seldom has a term been more misused.  Bank employees, because of bad experiences in the retail world, tend to think that customers don't want to be cross sold.  But bank customers consistently tell us in surveys that they expect bank employees to tell them about new products and services.  Help your employees to understand the difference.  Suggesting a bank product or service is not like a certain national pharmacy brand trying to sell you a new credit card or a red foam nose.

As always, I stand ready to assist you in these or other matters. Please write, text, message, call, or send a telegram and I'll be glad to have a discussion with you.

Trent Fleming

Recent and Upcoming Speaking Engagements

May 2023:
  • 5: Tennessee Bankers Association: Tech Conference, Murfreesboro
July 2023:
  • 26: Pennsylvania Bankers: Advanced Banking School, Penn State University
August 2023:
  • 11: Florida Bankers: Banking School, University of Florida
  • 16: Missouri Bankers Association: Directors Symposium, Columbia

Friday, March 3, 2023

Considering Your Next Core Banking Solution

Core Banking: 

Considering How Your Next Core Solution Should Look


Banking, especially customer facing components, has changed dramatically since the mid 1970s when ATMs were widely introduced.  Prior to that time, for centuries, customers actually went to their bank to access their accounts (yes, it is true!).  In the decades following the introduction of ATMs, technology has progressed steadily to provide additional methods of remote access.  In turn, customers have embraced this technology and used it extensively.


What remains largely unchanged, however, is the "back-end" piece of banking technology.  The so-called "core" systems that process and store transactions and provide reporting ranging from statements to remote customer inquiries.  One of the reasons these systems have not changed is that they work.  Reliably and consistently.  Much of the focus has been on the customer facing solutions, including Internet Banking, Mobile Banking, and debit/credit card solutions.  As these transaction types have exploded, the pressure to process and reflect those transactions in real time has increased, moving many vendors to develop their own digital and payment solutions, or to tightly integrate their systems with third parties.


Beginning in the late 1990s, we have seen a wave of consolidation in the bank software industry, which mirrored the consolidation we saw among banks.  Today, a handful of vendors control virtually all the core processing systems that are available.  Technically, we call this an oligopoly - a market whereby a handful of firms control a majority of the business.  In recent years (and see my article from 2015 for more background) there has been a lot of discussion about “new core” solutions.  I continue to believe that the existing core providers can and will be the core providers of the future.  That doesn’t mean they shouldn’t change – and they will.  But in a shrinking industry, where existing software meets much of our functional needs, the opportunity for new entries into the market remains low.  In economics we call this a high barrier to entry.



Vendors who operate in the community bank space are not typically building software for specific segments.  Instead, they are focused on scalability, allowing institutions to use more features and functions as they grow and need them, along with a hardware platform that is not restrained by growth.


Banking at the core level continues to be about accurately posting and reporting transactions.  Each of the products manages to do that well, and for this reason, it is difficult to consider a core vendor change, due to the tremendous impact on both employees and customers.  Change is difficult and there are many moving parts in today's environment that require attention during a core conversion. Interestingly, many banks that make such a change do so for service and support issues, rather than software functionality.


The Future of Core

Rather than re-inventing or changing core, banks to be successful must provide an improved customer experience across all delivery channels.  Digital banking (nee Internet) leads the way here, with EFT (debit cards and digital wallets) a close second.  Finding superior solutions that interface well to your core solution is critical.  


However, it is appropriate to consider what your next core system will look like.  Ideally, your current core provider's development efforts will provide this for you, allowing you to migrate along the way rather than convert to a completely different system.  Here are key factors that I believe you should consider for your "next" core system:



Providing a secure environment that provides stable and scalable processing.  This will likely be "outsourced" so that your primary core solutions are hosted by your vendor.  Potentially a "cloud based" solution but more on that in a bit.



An environment that provides secure, but easy access to your systems for both employees and customers is also needed.  Leveraging new remote access technologies, your core solution should provide full access to the bank's systems so that business can be done at the most convenient time and place.


Data Driven

Your next core should be built with an eye toward aggregating, managing, and providing dashboard-like access to real time information as well as historical reporting.  The ability to access bank and customer information in a useable context will be increasingly important to all banks.


Real Time / Straight Thru Processing - individual transactions are evaluated, posted, or rejected in real time across all channels.  Beyond memo-posting, this is a process that provides for final posting of accurate transactions as soon as they are presented.  Inaccurate transactions will continue to flow through exception channels.  Such an environment will greatly improve customer service and internal efficiency.


Seamless Integration 

Interacting with customer facing applications (digital, debit, platform) and continuing evolution (for example, begin using the same platform for on-line applications and branch applications) are examples of matters you should look to your vendor to provide.  Expect robust interaction with third parties through secure, standardized channels.

Finally, a word about cloud computing.  Most outsourcing providers have already moved to a cloud environment, often called a private cloud, meaning they reserve their systems only for their customers.  Technically, they moved from hosted to cloud environments when they began to consolidate both program and customer data across their hardware environment.  


Individual banks were not processed on components reserved just for them, but rather processed together.  Public cloud means sharing resources in a similar way, but with a variety of non-related entities, requiring more attention to security and control.  However, the larger the cloud environment, the lower the costs.  The concept of shared cloud resources to improve per unit cost, and improve backup/recovery capabilities is extremely important, whether public or private.  All that to say, the next iteration of your core will very likely be outsourced to a cloud environment.


My work around core vendors includes reviewing and renegotiating existing relationships, as well as assisting banks in evaluating other core systems.  Please text, call, or email to discuss how I can assist you.

Trent Fleming

Trent Fleming Consulting

Wednesday, August 5, 2020

Managing Commercial Loan Risk in a Pandemic

Addressing Commercial Real Estate Exposure

Last issue, I talked about the importance of fully engaging in a digital delivery channel strategy for your bank.  Identifying gaps, making additional investments, and training employees to assist customers as they make the move to more digital services.  Here’s a link to that article if you missed it: 

This time, I’m going to deviate from my normal focus on the strategic application of technology, and talk to you about potential asset quality issues related to the COVID-19 situation.

Last August, Barron’s commented on the trend toward smaller banks holding more and more of the commercial real estate (CRE) loans in our country. By their account, banks under 20 billion in assets held over half of the CRE loans in this country.  In 2008 through 2010, as the economy began to cool, we saw regulators encourage banks to reserve against loans that were currently performing, because they feared changes in performance as things got worse.  So that we learn from history, I want to point out the potential for similar treatment in coming months and years, based on the impacts on various segments.

The fallout from our country’s reaction to the pandemic have been felt in many sectors.  Some of these sectors may return to “normal” once the virus threat is neutralized, but I suspect that many will not.  Two or three segments come to mind: 

First, office space.  Working from home has been a thing for many years, in selected cases.  Still, many companies held back on full implementation of work from home, for a number of reasons, ranging from technology to management styles. The COVID quarantine has forced the hand of many businesses, and investment in the necessary technologies has created an efficient, workable remote employee situation.  No doubt many companies are rethinking their need for office space.  Those who have invested in buildings will have a longer path to reducing these overhead costs, but those who are leasing space will no doubt begin to investigate ways to shrink their requirements.  In addition, remaining spaces will likely change radically, as they morph into shared offices and areas designed to facilitate in-person meetings or other small group gatherings. The office of the future will be smaller, both individually and corporately.

Walk-in retail is also a concern.  Ordering on line for home delivery, buying online and picking up curbside at the store, and even local delivery options have impacted businesses from hardware stores to grocery to department stores.

We’ve seen a wide variety of responses from the restaurant sector.  Some are thriving, others struggling, a few have closed, probably permanently.  In talking to these customers, you will want to see that they have made efforts to improve and modernize their order taking and delivery infrastructure while striving to maintain an adequate volume of business.  

What Can You Do Now?

Identify current commercial real estate credits with exposure to potentially challenging business types.  Discuss these in detail and try to get a feel for the ones you are concerned about, prioritizing by size of credit, and of course by any that may already be struggling to perform.  

Meet with loan customers to discuss their perception of the exposure, understand lease/rental terms and timing, and generally open a line of discussion to help you evaluate latent exposure.  For retailers and restaurants, you will also want to ask about occupancy, but also about their efforts to make it easier for customers to choose curbside or home delivery, order online, and generally do business in a more convenient, low contact environment.  This may include deals with third party personal shopper and delivery services.  Bottom line is that you need to know they have a plan for the future.

Document your work as evidence to regulators, your board and your auditors that you are attempting to stay ahead of any potential issues.  In some cases, based on the results of your work, consider adjustments to loan loss reserves in anticipation of significant changes in currently performing loans.

Tuesday, August 4, 2020

Director Education in a Quarantine

During the stay at home phase of the quarantine, many of you have successfully introduced video conferencing or conference calls for your board meetings.   I want to leverage your success in that area by offering timely, quick-hitting director education programs that give your directors updated information in a format that can be customized to your needs.  Rather than recording a generic session, I want to offer some key topics with a twist: customization to your needs via a conversation with you prior to the meeting, allowing me to incorporate elements of your strategic goals into my presentation.  

Attending live during your board meeting also allows me to answer questions and otherwise follow up my comments with key insights. 

Such a presentation can be done in 30-45 minutes, providing timely, fast paced information to your directors as they seek to lead your bank forward.

Here are some topics that you will want to take advantage of:

Ø  Integrating Technology with Your Enterprise Strategy

Ø  Managing a Remote Work Force for the Long Term

Ø  CyberSecurity Takes a Seat in the Boardroom

Ø  Leveraging your Digital Platform: Embracing your Virtual Bank

Ø  Preparing for the Branch of the Future

Ø  A Vision for Your Bank: Key Components of your Next Strategic Plan

Ø  Managing Your Core Vendor Relationship: What the Board Needs to Know

Ø  Custom Topics on Demand

Finally, I remain available to meet with your board face to face for such presentations, and of course to conduct full scope enterprise strategic planning when you are ready. 

Contact me to discuss your needs.  I look forward to the opportunity to be of service.

Trent Fleming

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Monday, July 20, 2020

Trent Fleming Quoted in Core Conversion Article from American Banker /CUJ

Core conversions go virtual amid pandemic | Credit Union Journal
Core conversions go virtual amid pandemic
By Jackie Stewart
July 14, 2020, 5:00 a.m. EDT
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 forged ahead with plans to switch technology vendors even after the coronavirus became widespread earlier this year. 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 due to the pandemic. The Global Business Travel Association, a business travel trade organization, surveyed its members earlier this year, and found that half of the respondents said that all domestic trips had been canceled. Forty-two percent said most had been called off, according to a survey, which was released in April.

The pandemic has also shut down nearly the entire credit union conference circuit for the year, 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 prior to 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.
page2image24479616 page2image24480192 page2image24480384page2image26603504 2/13
7/14/2020 Core conversions go virtual amid pandemic | Credit Union Journal

Symitar, a unit of Jack Henry that provides technology solutions to credit unions, usually sends between 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%.

Prior to 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., initially 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 expired 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 CEO 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 board room, you were picking up a phone and dialing into the virtual conference room and talking to whatever resource you needed,” said Kevin Thomas, chief information officer at SAFE."

Going forward, Jack Henry is likely to give its clients a choice regarding getting help in-person versus virtually, McLachlan said. He expects many may 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."

Jackie Stewart Managing Editor, Credit Union Journal

Tuesday, June 2, 2020

Back to Normal? Thoughts on Digital Platforms

During the spring, I’ve been publishing my newsletter much more frequently than normal, in order to provide you with some ideas and guidance during the quarantine period.  Depending on the situation in your region of the company, you are likely in various stages of reopening, and I think we’ve covered that in good detail so far.    I’m available if you want to talk about specific situations.

This issue, however, will be a bit more “normal” to help you begin addressing your digital strategy in more detail.  I’m focused on two things: 
1) embrace and reinforce customer behavior that has changed. Because your lobbies have been closed, at least some of your customers have begun using your digital channels more consistently.  We want to preserve that behavior, and benefit from it.  Remember, anytime a customer uses self-service, they are happier, and you save money versus an in-person visit or a phone call.

2) Apply lessons learned to be better prepared for future events that might also result in temporary reductions of service and identify gaps in the services you offer now in order to provide a more attractive and complete digital offering.

Here are the key digital platform tools that I feel you must have:

Online account opening - a lot of the reaction I get here is either driven by compliance concerns (we can’t legally do this) or by misconceptions about control over applications.  My main focus with on-line account opening is to allow your existing customers to easily do more business with you.  If you choose to open it up to new customers, you will find that most vendors can easily help you limit the area (zip codes, counties, states) that you will even accept applications from.  As to compliance, there are plenty of good ways to address KYC, Patriot Act, and funding questions to ensure that you are legal.  Hundreds of thousands of new bank and brokerage accounts are opened on-line each year.  You can do it too.

Online loan applications (as a start, later you should consider approvals and funding for certain simple loans) Customer expectations are high in this area, fueled by offers of “30 second decisions” on credit cards.  In order to remain competitive with both consumer and small business lending opportunities, some level of automation is needed.

Esign technology for any and all customer documents.  Here again, the industry may have passed you by.  Customers are used to such technology on insurance documents, mortgages, and many other financially focused matters. Time to catch up.

Remote deposit, both mobile and desktop

Contactless Payments
    a. Cards
    b. Smart Wallets

Once a customer has successfully used a technology for the first time, you are well on your way to converting them to a primarily digital user.

A key to success in driving customer use of your digital platform is employee use of those same platforms.   Employees should be “endorsing users” of the technology: confident and enthusiastic.  For example, if a customer approaches a teller to make a check deposit with a smart phone in their hand, we would expect that teller to engage the customer in a discussion of how quick and easy mobile deposit is - along with a personal story.  

You also need your employees to use all available payment services in your community, as a way of identifying and improving the merchant experience.  Offering Apple Pay, Google Pay, or contactless debit card technology is meaningless if local merchants aren’t set up for it - or clerks aren’t trained in how to use it.  You’ve no doubt experienced a situation where you’ve tried to use Apple Pay, and have been told by a clerk “oh, that never works” or “I don’t know how you do that.”  Contactless payments are especially important with all the fears for contact transmission of disease - and I really had a disappointing experience of trying to use such a method and finding it didn’t work at that particular register, complete with the clerk announcing that my card was declined!  I put away my smart phone, inserted my chip card, (the same card tied to Apple Pay) and completed the transaction.  As a consumer, what is my incentive to keep trying in these situations?

Sending your employees into the community with the mission of using new bank payment capabilities will help pave the way for your customers to use them without incident.  While the above described scenario was not embarrassing to me, it understandably would be to your average consumer.

Basically, you have two tasks here.  First, get to work to ensure that you have no gaps in your digital offerings, and second, take this opportunity to capitalize on the increased use by customers and solidify their use of digital channels.  Your costs will go down, and customer satisfaction will go up!

As always, let me know how I can help you achieve these goals.

About Trent Fleming
I’ve had a number of new subscribers in recent weeks as a result of my regular COVID-19 updates, so I thought I’d take a minute to let you know more about me.  For more than 35 years, I have helped community banks make good decisions about technology, strategy, and management.  I speak extensively at state banking association events and teach at graduate banking schools at Penn State and Wisconsin.  My consulting work includes significant experience with core vendor evaluation, selection, and negotiations, as well as strategic planning and director education, and of course, “other duties as assigned.”  More information at 

Upcoming Speaking Engagements

June 2 - Mississippi Bankers Web Conference “Integrating Technology into your Enterprise Strategy”

June 3 - Mississippi Bankers Web Conference “Managing a Distributed Workforce”

June 11 - Western Bankers Web Conference 
                > Integrating Technology into your Enterprise Strategy
                > Managing your Core Vendor Relationship

Please call, text, or email if I can help you in any way.

Trent Fleming