The technology behind lending systems has advanced significantly in recent years, and commercial banks are keen to take advantage of those advances and improve their processes to unlock the value that modern systems can provide. Over the past five years, a majority of large banks have either replaced their servicing system or are considering an upgrade. But implementing a new system can feel like a risky proposition, which causes some banking leaders to put off upgrades and modernization and leaves them with outdated legacy systems. 

In this series, I’m joined by Rick Bare, CEO and President of AFS, a provider of integrated banking solutions and platforms. Accenture has been working with AFS for over 20 years as they help to meet the needs of banks with the latest technology solutions. Rick and I discussed the implementation of new banking technology, including how to both manage the risks and ensure the bank’s culture contributes to maximizing the value of that technology. This post looks closely at risk mitigation, and our next post will focus on the culture that should surround and support the implementation, which is the key that unlocks that added value. 

“Our clients are singularly focused on making sure that implementation risk is managed properly—not only that it doesn’t go wrong and there are no cost overruns, but also making sure that no customers are adversely impacted.”

Rick Bare, AFS

Minimizing risk during implementation 

“Implementation risk” is a phrase that conjures up a lot of troubling thoughts—thoughts of ballooning budgets or, even worse, service interruptions. When we guide banks through this type of transition, it helps to break down the risks and address them one by one. Instead of one overwhelming worry, we can look at the risks as a series of manageable issues. Let’s look at some of the areas that banks should focus on proactively. 

Operational risk 

Before implementing a new system, it’s essential to understand your current processes and the pain points you’re hoping to solve. A thorough review of your operations will identify what processes are likely to be affected by the new technology and how. Identifying your target operating model right from the start helps you to focus on your end goals and make the right choices throughout the implementation.  

Replacing a system is an expensive undertaking, so you want to ensure that your operations will get the maximum benefit from that implementation. Setting up a new system that works flawlessly but does not improve your business processes would not be a successful implementation. To optimize the benefits, consider the following questions: 

  • Where do our processes still involve manual data input? 
  • What outdated legacy processes can we eliminate entirely instead of trying to reproduce or improve them in the new system? 
  • Where are we using multiple platforms that could be consolidated under the new system? 
  • What tasks are taking valuable employee time that could be replaced by automated processes? 
  • Who will need to be reskilled in their roles to help them benefit from the new system?  

Rick Bare says, “When we’re implementing AFSVision for a client, we want them to take advantage of all the innovation that’s available to them through integration, real-time processing, using data for better customer service, and so on. The implementation should be about much more than a new user interface—it should transform the way the business works.” A thorough assessment of the client’s operational risk is therefore a key step early in the process to ensure that the full benefits of the implementation will be realized. 

Vendor risk 

Most banks will use third-party solutions for some or all of their lending systems. Choosing a vendor is a big leap of faith. Will their solution produce the results you’re hoping for? Will the vendor offer the support you need? Will they even be around in 10 years?  You need a vendor that aligns with your bank’s vision, goals and budget. Getting sound, professional advice on which vendors are a match for your needs is a crucial first step to mitigating risk. 

Implementing a system from a third-party vendor is the beginning of a long-term relationship. The system will need to be monitored, supported, debugged, upgraded, and perhaps replaced after a number of years. 

Choosing a vendor should not simply be a matter of selecting the product you like best, although that is certainly central. You should also consider these factors: 

  • Level of customer support 
  • Experience and availability 
  • Pricing model (one-time charges and monthly or annual charges) 
  • Long-term vision and investment roadmap for the product 
  • Understanding of your business and goals 
  • Alignment of your vision and the vendor’s. 

Timeline risk 

It’s trite to say “time is money,” but the longer your implementation drags on, the more the costs will keep piling up. There are several actions banks can take to mitigate the risk of timeline overruns: 

  • Dedicate the necessary in-house resources to the implementation project. Decision makers can cause a bottleneck if they are trying to manage the implementation on top of their regular responsibilities. If you need to hire additional resources, start this process well before the implementation is set to begin so that they can be involved from the start.  
  • Decide on your method of implementation before you begin. Will it be waterfall (launch the whole project at once) or agile (have several smaller launches)? Your timeline will need to be planned with the right method in mind. 
  • Avoid “scope creep,” where the project becomes larger as you go and stick to your agreed plan. Starting with out-of-the-box solutions will allow you to launch faster, and you can add more functionality once you’re up and running. 
  • Be realistic about costs rather than trying to downplay them by budgeting for the best-case scenario. Ensure that your budget can cover the entire timeline and inevitable setbacks. 
  • Focus on going live with the minimum viable product. Launching the basic system, which the vendor knows very well, is far less likely to disrupt your timeline than trying to launch with a complex, customized package. 

Downstream systems risk 

Today’s banking systems are highly integrated, with a large number of dependencies. In other words, when you change one thing, there can be both expected and unexpected “domino” effects through different parts of your systems. Avoid undertaking other large technological or process-driven initiatives while you’re implementing your new system. This could add complications that you had not foreseen by introducing additional dependencies to an already complex process. 

In a recent implementation, AFS had to plan for over 50 systems directly integrating with their AFSVision system, and hundreds of additional systems consuming the AFSVision data for downstream business intelligence. Without proper implementation planning, there can be unintended results in far-flung corners of the bank’s data architecture. This is why it’s crucial to work with experienced partners on any systems or software implementation.  

Go-live risk 

It’s the moment of truth—your bank’s reputation can be severely damaged if there is a major problem when you “flip the switch” and go live with your new system. Managing that moment obviously starts much earlier, and involves a cross-functional team from both your bank and the vendor. The go-live moment isn’t just about the technology coming online, though. The deployment has to coordinate the bank’s people, processes and policies in tandem with the new technology. To ensure that all of the pieces fit together and your launch goes smoothly, you need an oversight team that coordinates the development, testing, conversion, training, change management, data/reporting and infrastructure teams. Once the solution is up and running, banks need to have processes and people in place to support it on both a technical and a functional level. 

The vendor’s role in mitigating risk 

For banks, it can be difficult to picture how an implementation looks from the vendor’s perspective. Rick Bare outlined a few of the strategies that AFS uses to reduce risk when they implement solutions for a new client, or upgrade the systems for an existing client. Understanding their approach is helpful for banks trying to thoroughly assess and plan for implementation risk. 

Build strong partnerships 

Vendors benefit from partnering with companies that have expertise in different areas. For example, AFS and Accenture have been partnering to help banks for 20 years, because each company brings a different type of expertise to the table. By building these relationships, the organizations know what to expect, understand each other’s processes, and are able to work together cohesively in the best interests of the bank. 

Draw on experience 

Banks have no interest in being treated like an experiment. Vendors with substantial experience with similar implementations have established methodologies, tools and documentation that can produce a clear roadmap for design and conversion. They already know where the pain points are likely to emerge, and have developed solutions for them. While every implementation is different, there’s no doubt that a well-established vendor can substantially reduce risk by drawing on their previous experience.  

Minimize customization and optimize configuration 

Minimizing the amount of customization of the vendor’s product is one way to mitigate risk. However, as Rick says, “Some customers are willing to balance a slightly increased level of risk with getting the customizations they want. In the end, what’s important is being able to ensure that everything goes to plan, and that the platform goes live smoothly and causes no disruption for the client.” A vendor knows its product well, and should spend time up front going through the customization options (and what has worked for other banks) with the client to help them decide what to customize.  

In addition, a clear plan for future innovations and upgrades of the vendor’s system will lay out a roadmap for the client, so they know what to expect going forward. This may help the bank to confidently launch a more straightforward implementation of the system to begin with, knowing what new features are in the pipeline and when they are expected to be ready. 

Focus on data 

Designing the new system to effectively use the bank’s data is key to a successful implementation. The vendor should be data-focused from the functional design stage of the implementation plan. What does the bank need its data to do? How will the system accomplish this? Clear designs for the conversion will help the bank to see how the systems will perform these functions to optimize data use while minimizing risk. 

Preparing the bank for change 

Leadership must establish clear goals for the implementation of any new system. It’s not just about introducing a new set of tools; it’s about how the entire business is transformed. In the next post, Rick and I will focus on why a supportive culture is necessary to successfully implement a major new system at a bank. A smooth build and rollout of the software is only one piece of the puzzle. 

To learn more about how Accenture partners with experienced vendors like AFS to smooth the transition to a new system, contact me here. 

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