Switching Core Systems? Leave Data Conversion to the Pros

If your credit union is considering a switch to a new core system, chances are you're probably wondering how to get all of your data out of the old image and data archives and into the new.

Naturally, the first place most credit unions turn is their core provider. But did you know that enlisting the core provider to handle data transfer can end up costing you – and in terms of more than just money?

Recommended For You

Consider this: Data management is not the core provider's key competency. While the provider may be more familiar with your system front-end than anyone else, they're likely not as experienced in handling the transfer of mass quantities of data between systems. Not only that, neither the legacy nor incoming system provider will be familiar with the data and image archive formats of any system but their own, often drawing out and introducing error to the process.

So just what are the true costs of hiring the core provider to handle data conversion?

Money

Perhaps the most obvious cost of directing data management to the core provider is the hard monetary cost. The data conversion project itself usually averages anywhere from $20,000 to $250,000 and can often be pricey for even a small volume of data.

These costs are also compounded by thousands of dollars in storage and research fees, which are necessary to provide continued access to the credit union's historical data throughout the project. As the legacy provider may be unfamiliar with the incoming system and has a business interest to keep the credit union on its own system for as long as possible, data transfer projects can often become drawn out, requiring the institution to shoulder these costs for the long term.

If that wasn't steep enough, credit unions will also likely run into intangible costs as a result of the disruption caused by the project. While hard to quantify, these costs generally average anywhere from $5,000 to $75,000.

Risk

When hiring the core provider to handle the data transfer, credit unions also open themselves up to increased compliance risk. The consequences of breached or lost data can potentially lead to further monetary costs as well as far-reaching reputational damage.

That's because these projects take place outside of the credit union's internal, secure network. Data is extracted from the legacy system and shipped back to the vendor, who then uploads it to a server that many times also stores data from other financial institution members. This process not only introduces human error, but also the possibility of data from various institutions being comingled. It's possible that the core provider could even send the wrong set of data back to the credit union for ingestion into the new system. It's hard to imagine, but it happens!

Furthermore, this process requires the credit union to do a significant amount of legwork. The organization must map every piece of data (likely comprising thousands of data points) from the old system to the new, and each piece must match the new system perfectly. Given that this is a highly technical undertaking, it's more than likely that not all data will be mapped correctly, which takes time to go back and adjust. This not only increases risk, but further exacerbates disruption and drives up associated costs.

Even worse, lost, corrupted or even temporarily inaccessible data can greatly affect the credit union's ability to serve members, both on the frontline and in regard to the retrieval of historical documents. Not only does this negatively impact the members' perception of the institution, but in the very worst cases, it can lead to lawsuits and other penalties.

Disruption

As touched on previously, working with the core provider to complete data transfer between core systems usually takes much longer than other methods.

Along with the general unfamiliarity with data transfer projects and the specific formats of the legacy system, the incoming core provider could also require that all data be converted to production in the new system, as a higher volume of data may correspond to higher storage fees. As such, this process can take anywhere from three to nine months and sometimes longer. Since data will be inaccessible at points, this will naturally affect the credit union's ability to provide services to members and may require after-hours or weekend work by credit union staff.

Alternative Solutions

The biggest complication of working with the core provider comes down to the heavy emphasis on conversion to provide access to legacy data. In most cases, however, it is unnecessary for the credit union to transfer the full set of historical data into the new core system. In fact, about 90% of this data will never need to be used again once it reaches 18 months.

However, credit unions will still need to hold onto much of this legacy data to meet regulations. The key to cutting costs, project time, compliance errors and disruption is surprisingly simple: Migration. This process entails transferring legacy data in its original format into a commercial search tool, forgoing the need to format and map the data to the new core system.

Commercial search tools enable the credit union to easily search across different systems and data formats and are much cheaper to maintain than the legacy core system. Credit unions can also usually get up and running in a matter of days.

Conversion Vs. Migration

Your credit union is now likely wondering: Which data do we convert? The answer requires some strategy.

First, start by categorizing legacy data, beginning with general type (check statements, open loan documentation, closed account data, etc.) and then breaking it down further by date. The importance of each piece of data can be further determined by sensitivity, who will require access and whether or not the data is mission critical.

Once data has been categorized, it can be split into three main groups:

1. Mission-critical data

2. Compliance-critical data

3. Non-essential data

Since group one will need to be used regularly, it makes sense for the credit union to convert and transfer it into the incoming core system. Organizations can minimize cost, risk and disruption by outsourcing data conversion to a third-party consultant. Not only are these professionals specialized in data conversion projects and experienced working with multiple system formats, but they also have the tools to run the conversion remotely so that the credit union's data will never leave the security of its operating environment.

The second group, data only required to meet regulations, can be migrated as-is into a commercial search tool. That way, this data can quickly be retrieved in the case the credit union needs it, but the institution won't face the cost and disruption of converting data that will rarely be accessed. The third group can simply be moved to external storage.

If your credit union is moving into a new core system, fear not! You don't have to worry about a long, expensive and arduous data transfer process. Instead, consider practicing a strategic approach that mixes conversion with migration into a commercial search tool. And if you need an ally in conversion, you can always turn to a third-party provider.