BACK OFFICE SYSTEMS IBS Journal February 2018 25
Keeping the ball rolling: how banks modernise their systems in the most efficient and seamless way
We speak with three of the largest core banking systems suppliers – Temenos, Fiserv and FIS – to find out what motivates banks to make the move to a new system. More importantly, these transformations incur great risks – what’s the best way to mitigate them?
Junior Reporter Henry Vilar
T
he time of core banking system transformation has come, and although for many it may signify the termination of many issues around compatibility
and flexibility, for bank CIOs and other executives these are exhausting times. The pressure put on by new digital alternatives, cybersecurity threats and regulatory demands means that banks cannot rely on hot-wiring their ageing legacy systems anymore, but they need to pick and deploy modern core infrastructure capable of meeting all these demands. In this particular piece, we examine a very specific type of challenge: large-scale transformations.
Many of the transformations that were being performed ten or 15 years ago went awry, so many banks became afraid. Plus, the payout time was just too long, so it was hard to see whether they produced a positive return on investment. Mark Gunning, global business solutions director at Temenos, points to a couple of factors that are tipping the scale towards making banks more determined to modernise: real-world evidence of successful transformations, which shows a decreased risk in going through with them; and the need to innovate based on digital and Open Banking models.
Gunning explains: “The main reason why [risk and payout time] is not a problem anymore is that vendors and banks have learnt and understood how to manage these large-scale transformation projects.
“Banks are starting to see significant successful rollouts; in the case of Temenos, we have seen 126 go-lives in the past year, and we are leading with our flagship transformation in the US,
Commerce Bank, and Nordea in Europe – which show proof of how risk has considerably gone down. There has also been a change in attitude and models – people have realised that now the risk and cost of not modernising is higher than that of transformation.”
Teamwork makes the dream work
There is another factor in play: PSD2 and Open Banking. New systems need to be able to accommodate APIs and other apps to sit on top of the central architecture.
IBS Journal spoke to Andrew Steadman, VP, product management and marketing, international group at Fiserv, who explains how the ‘spaghetti bowl’ systems – many interconnected legacy systems – would not only reduce IT costs but would also not be able to handle the increasing load and shortened upgrade cycles.
“PSD2 and Open Banking are forcing banks to rethink how their product offerings work. They have now started thinking about taking the API route, and that’s when they come to us,” Steadman states. “Our recent acquisition of FINkit, part of Monitise, is a good example of how we have designed our products to accommodate a new layer of fintechs.” Steadman also highlights the importance of data sharing, and how it works under PSD and Open Banking – systems need to be prepared.
Gunning says: “Banks need new modern systems to keep up with a digital offering for their customers based in Open Banking. Banks are only a part of the wider customer financial experience, and only now are they getting to grips with the idea.”
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