Time and again, financial institutions find themselves with the wrong core banking system. What should be a strategic investment capable of enabling growth, efficiency, flexibility and better service for members can instead become a costly and frustrating experience.In many cases, the problem with the procurement process itself.
One of the most common mistakes is allowing a consultant to become the originator of the institution’s requirements. Consultants should guide the process, but the financial institution must define what it actually needs. User requirements should emerge from the institution’s business strategy, operational challenges, regulatory environment, growth plans and future ambitions. This distinction matters because generic or recycled requirements can result in institutions paying for functionality they do not need, while potentially overlooking capabilities that are genuinely critical to their operations.
Buy for the business, not for the brochure
That leads to another common trap: confusing impressive features with business value.Core banking systems can offer an extensive range of functionality, but not every feature demonstrated by a vendor is necessary. Institutions should distinguish between what is essential and what is merely desirable, prioritising capabilities that directly support their strategy, member experience, reporting, compliance, risk management and growth.
The same discipline should apply to price. Choosing the lowest bidder does not necessarily mean choosing the lowest-cost solution. A seemingly attractive quotation may exclude integrations, customisation, implementation, training, data migration, support or other costs that emerge later. The more meaningful question is therefore not, “What is the purchase price?” but “What is the total cost of ownership?”
Know who you are partnering with
Vendor due diligence is equally important. Selecting a core banking system is effectively selecting a long-term technology partner.Institutions should examine the vendor’s implementation record, financial and organisational stability, customer references, support capability, product roadmap, implementation resources, integration experience and contractual arrangements. Staff turnover deserves particular attention. If key implementation personnel leave midway through a project, institutional knowledge can disappear, responsibilities can shift and timelines can stretch.A strong product is therefore only part of the equation. The institution must also be confident in the organisation standing behind it.
A demonstration is not an implementation
The procurement team must also resist the temptation to evaluate a core banking system through attractive demonstrations alone. A short presentation can show what a system appears capable of doing; it does not necessarily demonstrate how it works.
Vendors should be given sufficient time to demonstrate real, end-to-end business processes — including transaction processing, accounting entries, balances, reporting and downstream processes.
There is a significant difference between demonstrating a screen and demonstrating a functioning system. Failure to make that distinction can result in institutions selecting functionality that later requires significant development, adding cost and extending implementation timelines.
Flexibility is a long-term requirement
Flexibility is another critical test.Financial institutions operate in an environment where products, regulations, customers’ expectations and business models continually change. Institutions should ask whether they can configure products, modify workflows, introduce new products, adapt to regulatory changes and integrate new digital channels without depending on the vendor for every adjustment.
A system that requires vendor intervention for every meaningful change can gradually become expensive and restrictive. The same scrutiny should apply to reporting and data. Institutions need management, operational, regulatory, financial, audit and increasingly sophisticated analytics capabilities. If staff cannot create or modify reports without vendor intervention, even simple requirements can become costly and time-consuming.
Implementation is an institutional responsibility
Perhaps the most underestimated issue is implementation itself.A core banking implementation is not simply an IT project. It affects virtually every part of an organisation; from operations and finance to customer service, reporting and data management.
Data migration, integrations, internal resources, acceptance criteria, milestones, deliverables and post-implementation support should all be clearly defined before contracts are signed. Institutions should also be cautious about overly optimistic implementation timelines and ensure that responsibilities are clearly assigned on both sides.The project should not be considered complete simply because the system has gone live. The institution needs clearly defined acceptance criteria and adequate post-implementation support.
Governance must come before convenience
There is also a governance dimension that cannot be ignored. Personal interests must never override institutional interests. Technology procurement should be transparent, objective and based on documented criteria, with the board, management, business users, IT, finance and operations teams appropriately involved.
Institutions should also be cautious about becoming early adopters of unproven systems without adequate reference checks and evidence of stability. Innovation should be encouraged, but not at the expense of operational resilience.
Finally, the contract itself requires scrutiny. Licensing, support, upgrades, data ownership, portability, service levels, warranties, termination and exit arrangements can determine whether an institution retains strategic freedom or becomes locked into an underperforming relationship.
The question should be bigger than price
The fundamental lesson is straightforward. A core banking system is not simply an IT purchase. It is a long-term business decision.The wrong system can create years of unnecessary maintenance costs, vendor dependency, operational disruption and missed opportunities. The right procurement process, by contrast, begins with a clear understanding of the institution’s own needs and evaluates technology against the organisation’s long-term strategy.
The question should therefore not simply be which system is cheapest. It should be: Which system best fits the institution today, gives it the flexibility to evolve tomorrow and provides sustainable value throughout its lifecycle? That is the question that should drive procurement from the very beginning.
The writer is the Senior Business Development Manager, Neptune Software Group, a leading firm in delivering mission-critical core systems to the financial sector. It offers innovative solutions to microfinance banks and institutions as well as Saccos.
