![]() Depending on the urgency, several responses are possible, ranging from small tactical changes to large-scale re-architecture. What interventions are possible to stave off a full transformation?Ĭontrary to popular opinion, a “rip-and-replace” is not the only possible intervention-and often it is often actually not the right choice. It is common for core banking projects to take two to three years to complete, so the assessment should be made considering a medium-term horizon. If a bank believes that there are no problems now, but there could be in the future, then preparing for an intervention now may make sense. This does not mean taking a myopic view of the problem. ![]() ![]() It is important to carry out this exercise dispassionately and in a business-risk focused manner. Affirmative answers to more than two of the questions indicate a potential problem and merit further intervention. What are the core elements of a good business case for such a transformation ?ĭoes our legacy core banking system require intervention?Īnother set of simple questions can give decision-makers a sense of the urgency of their core system problem (Exhibit 1).If a core banking replacement is needed, what are the options?.What interventions are possible to stave off a full transformation?.Does our legacy core banking system require intervention?.The best place to begin this effort is by answering five questions: And as banking continues to be disrupted, the traditional core architecture may not be able to deliver for incumbent banks and given the long lead times required for transitioning to a new core, they need to set their strategies in motion now. Most banking leaders are aware of the significance of their core banking system, but many do not have explicit strategies tied to the core. More importantly, they claim not to compromise on the core tenet of faultless transaction processing. Some of these systems are also pushing the envelope in customer experience and offering innovative and reasonable pricing schemes for core banking replacements. They are, or will be, cloud-ready and open-banking compliant, and, in some cases, have very advanced architectures that make frequent feature releases easier. In response to these issues, a new breed of core banking systems has emerged in the last few years. These problems vary from bank to bank, but include a dwindling engineering talent pool, excessive undocumented customization leading to a complex code base that can be difficult and risky to change, and various vendor-support issues. In addition to the existential issues listed above, banks endure some tactical day-to-day pain points with legacy core banking systems. Older core banking systems- usually designed for reliability rather than open architecture-may need to respond to this new requirement, which, to their credit, many are doing with alacrity. Banks are now expected to process transactions in real time, be able to stitch together partnerships with fintech companies in a matter of weeks, release new features frequently, be able to scale (up and down) their infrastructure needs at will, and even execute on M&A quickly. However, with the advent of digital banking, cloud, and APIs, banks have seen a significant shift in the way banking products and partnerships are constructed. Failures are rare, with some banks going without an outage for months, if not years. Legacy core banking systems have traditionally succeeded in terms of reliability. Core banking systems handle a high volume of transactions and are expected to function without interruption-prolonged outages can invite regulatory scrutiny, customer opprobrium, and significant loss of revenue. In this article we look at the forces that are raising the core banking profile, and at the alternatives available to banking leaders as they consider their technology roadmap.īanks all over the world spend millions of dollars each on maintaining their core banking systems, which usually interface with tens or hundreds of systems. This topic seems to have suddenly gained visibility in the US and the rest of the world Many small and midcap banks in the US and Latin America are known to be shopping around for new cores. There have been a few instances in the US of these partnerships as well. Some of the major global banks have announced partnerships with new cloud-based core banking systems providers. May 4, 2020Core transaction processing engines for banks-or “core banking systems”-have been making news in the world of banking technology of late.
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