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With a Cloud-native environment, you’re able to ramp up resources much more easily and rapidly. It just increases the agility of resources
“
considerably, although it takes much longer to execute. This is a type of controlled migration often undertaken by larger banks. Depending on the bank in question, these transformations can either be carried out by verticals or horizontals, meaning that the gradual migration can be divided by branch and/or products, or from the back-end to the front (or vice versa).
Gunning mentions a few examples in each case: the Bank of Shanghai migrated its systems based on customer segments; Nordea is basing it on location and legacy solutions; and JP Morgan tackled it from the perspective customer areas. Fiserv’s Steadman tells us that while many banks had been hesitant to transform their systems, this second strategy is changing minds and steering institutions away from the rip-and-replace notion of core banking transformations. “[Banks and other financial institutions] have started seeing these transformations as a journey, guided by suppliers, instead of an immediate and transactional procedure,” he says.
The very last option is ‘build and migrate’, a sort of hybrid of the two previous strategies. This method consists of constructing a completely new bank, front to end, under a different brand and marketed differently, which launches in parallel with the original bank. This way, new systems can be tried and tested with a smaller number of customers. Gradually, systems in the old bank will be moved to the new tested architecture. An example by Temenos is Pepper Bank, in Israel, a bank designed for millennials that is the testing ground for Bank Leumi’s new architecture.
An alternative view
IBS Journal also spoke to Andrew Beatty, SVP, global banking solutions at FIS, who told us about the different approaches FIS takes when helping a financial institution transform. Unsurprisingly, they are similar to the strategies mentioned above, but instead of adopting a perspective on the types of transformation processes, Beatty explains it from the perspective of the product and client.
The first type is FIS’ Service Bureau. The supplier will directly manage all administrative tasks and on-boarding requirements for the bank. The client, in this case, would be a smaller bank, and the offering is a one-size-fits-all type of product. By offering this, bank connectivity and communications are simplified and supported as a managed service, allowing its smaller clients to outsource some of the more demanding operations.
Andrew Beatty: FIS takes a number of different approaches to helping financial institutions transform
Alternatively, larger institutions would steer towards FIS’ suite of components, which allows them to pick and choose the different systems for the various services and products they offer. All these elements are connected to FIS Enterprise Customer, a customer-centric model that connects every API and component with the core system, managing customer data in a unified platform. This way, duplication is avoided, as data comes from this one centre, and each component is exclusively dedicated to its own function.
With the head in the Clouds
Lastly, it is important to highlight the importance that Cloud-based systems are having nowadays. A lot of these transformations aim for more flexible and agile capabilities, and Cloud helps solve many of these issues at once. “With a Cloud- native environment, you’re able to ramp up resources much more easily and rapidly,” says Beatty. “It just increases the agility of resources.”
Not only do we see financial institutions become more and more interested in transformations, but they’re more and more motivated to take the step into Cloud, says Andrew Steadman. For large consumer entities, this leap seems like a necessary move. In contrast, just under six months ago, Stella Clarke, CMO at Murex, was reiterating the ubiquity of Cloud-based systems when it comes to TCM systems.
It would seem like reality is only now catching up with the hype, and we are seeing Cloud implementations these days, sometime after Cloud gave executives similar goosebumps to the ones that blockchain causes. Perhaps in few years, blockchain will be taken for granted in just the same way.
www.ibsintelligence.com | © IBS Intelligence 2018
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