wrong system was selected. Project management is a major cause of failures and delay; aspects such as data migration are consistently under-estimated; user resistance is another common cause (particularly if the users have not been adequately involved in the selection phase or where systems are being foisted on previously strong autonomous banks following a merger or acquisition). We carry lots of coverage of implementations – good, bad and everything in between – in our monthly IBS Journal as well as taking a closer look at the experiences, best practices and the lessons in our How to Select and Implement a Universal Banking System report. Where there are specialised system selection that need to be done, for example in the Islamic Banking systems, a 4D approach to selection has been explored in detail– including defining the needs, determining the short-list, deep-dive evaluation and delving into the contractual and commercial details.
A common question down the years has been, when are tier one and two banks going to address their core systems? The vast bulk of package sales are still to the tier three and tier four players, with this seen again in 2015. Where the bigger banks do buy packages, it tends to be for niche or overseas operations. Notably, when larger banks have set up direct banking offshoots, they have just about all gone for building brand new infrastructures, perhaps seeking a ‘bank in a box’ approach, rather than trying to tack the new entities onto their existing systems.
The reasons for the inability of the larger banks to address
their domestic cores are well known. Each bank has one of those sprawling systems diagrams showing the legacy and the ‘spaghetti’ that ties it together. An often home-grown set of core systems is surrounded by a mass of others, with point-to-point connections. The rallying cry for a few years now has been Service Oriented Architecture (SOA). Can the legacy be wrapped? Can functionality be provided as web services? Is this finally the way forward? Some banks, such as Wachovia (pre- crisis), have been taking an in-house build route with SOA; others, such as Credit Suisse, have been seeking over some time to put in an SOA framework ahead of what is meant to be a gradual replacement of their mainframe legacy.
The changing trends in the banking technology space are
best reflected in the topics of discussion in a typical conversation with the CIO or a CTO of a bank. While 10 years ago this used to be more focused on the core banking and back office systems that need to be overhauled, the shift became more towards service oriented architecture (SOA) and leveraging outsourcing models to drive cost structures down in the not so distant past. Talk to any technology head in the banking industry today, and it would be impossible to have missed the buzzwords of digital, cloud, analytics, mobility and
8
big-data.Banks have increasingly started to see the architecture driven by an 8 layer architecture : the channel layer that interfaces with the customer, the services / front-office, risk/middle-officeand core/back-office layers of the core systems, the analytics & reporting layer dealing with the business intelligence, the support layer that helps with the back-end functions, the external layer that includes inter-bank and payments and the inevitable middleware layer that stitches them all together In India, all of the large banks have set about overhauling their decent ralised domestic infrastructures in the last decade or so, with State Bank of India leading the way in terms of showing what can be achieved. The India Post experience has been more of a recent addition to the learnings. Deutsche Postbank in Germany also made strides for its large, albeit narrow, retail banking operations, as well as innovating in the area of payments, where it gained in sourcing mandates from three of the other large German banks. With Post bank’s acquisition by Deutsche Bank, the latter is seeking to adopt the former’s SAP set of systems.
A number of banks, such as Standard Bank in South Africa,
have been embroiled in ‘enterprise-widetransformation’ projects. During 2007 and 2008, two mid-tier UK banks came out with decisions for their core retail operations – Nationwide and Co-operative Financial Services, turning to SAP and Infosys respectively (Nationwide pressed on and had some cut-overs in 2012 and 2013 but the Co-op, for a variety of reasons, gave up, with a £151 million IT systems write-off ). In the Netherlands, F van Lanschot sought a fairly radical overhaul, so too KAS Bank (there was a major down-sizing as pectto this latter project). In Iceland, Kaup thing Bank had sought to transform its operations and Glitnir was seeking to do the same with its One- G project.
It looked as though in the new-look post-crisis financial
services market there would be are turn to traditional values and ways of competing, with the emphasis back on things like operational efficiency in transaction banking (payments has been a focus), customer service, rich and flexible channel delivery, time to market for products, ability to cross-sell, liquidity and risk management and control. To a degree, the experiences of the last few years should have emphasised this – for instance, those banks that could take savings over the internet benefited from the high degree of churn of funds as the crisis set in. The pressure to stand out from other banks will not go away and, indeed, should become more intense. There does seem to be a pick-up in urgency in at least the analysis being done by some of those banks that have been left intact, even if this isn’t equating to large numbers of strategic decisions at present.
The landscape of change, driven by the advent of digital and Market Dynamics Report 2017 |
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