its implications to the technology architecture, could perhaps be summarized across four broad trends that are observed, in some shape or form, across global, regional and local banks. Even for those who have not ad opted these as yet, the currents are felt to be quite strong that will indeed propel the investments and management focus in the direction of these:
1. Driving the channel and touch point integration 2. Leveraging data and analytics driven architecture
3. Improving the payments engine with the digital emphasis
4. And of course, the central, core banking engine And when it comes to core banking systems, based on how
old the platform is, and how much it lends itself to the demands of the new age, the options that banks have vary between upgrading to a later version and simply having it replaced.
Market Drivers and Trends in core banking technology systems
What drove the core banking system market this year? Who is dominating the market right now and will they continue to dominate? What is the geographic focus for technology suppliers? Are there set patterns that one gets to see when it comes to the types of adoption that banks are looking to adopt?
Competition in banks
Challenger banks and fintech startups have started to eat into the traditional bank’s market share, pushing the incumbents to banks pushing them to equip themselves with advance systems to remain competitive. Global banks are planning substantial increases in technology spends to keep pace with the digitization trend and evolving customer expectation. The challenge for most large banks is the decision to overhaul its entire legacy system or build customer facing front office systems and channels on top of its legacy core.
Suppliers have also realized this and many have changing their core banking system based on modular architecture, where they can go to banks with plug and play type solutions. This gives banks the flexibility to pick and choose the modules that they want to install or deploy the entire core banking solution.
Regulation
In a highly regulated environment such as that in the banking industry, regulations can also play a major part in driving
# 1 2 3 4 5 6 7 8 9
10
Region Africa
Western Europe C. & S.E. Asia Asia Pacific
C. & S. America Middle East
North America C. & E. Europe Australasia
Multi-country Grand Total
49 48 43 40 27 29 32 9 5
282
technology spending by banks. Regulators themselves can enforce core systems change – there have been instances of this in the last few years in Ethiopia, Vietnam, India (initially within the large banks, with attention now on the small ones) and Belarus. Sometimes, the regulators brandish a stick, forcing banks to put their houses in order. Sometimes, it is a carrot, with a relaxation allowing financial institutions to broaden their activities, thereby driving the need for new systems (this happened in Malaysia, for instance, where a number of securities houses made selections a few years ago). In 2016, a distinct tend involving higher number of deals in treasury, private banking and lending systems were observed in Europe, which most likely were driven by the strict BASEL III norms and stringent regulatory reporting enforced on European banks and financial institutions. This is reflected in the large number of system sales in western Europe and Africa. Regulatory driven sale of universal banking systems were mostly seen in Africa, which continued to account for the largest share of the pie in the last 5 years. 258 of the 1383 deals, accounting for a 19% share of global conventional back office deals.
Conventional Back office deals | Region-wise split (Years 2012-2016) 2012 2013
44 46 30 27 30 22 12 5
10 2
228
52 47 30 25 29 21 22 9 2
58 39 37 45 27 24 18 14 7 5
60 73 65 38 39 34 34 13 4 2
2014 2015 2016 Grand Total 263 253 205 175 152 130 118 50 28 9
237 274 362 1,383
Africa has also seen an increasing trend over the last 3 years, where the deals have moved from 52 in 2014 (44 in 2013) to 55 deals last year. Kenyan and Nigerian banks have made 7 investments each, followed by Angola and RSA with 4 each. Regulations, and keeping with the market place can clearly be seen as a primary driver in pushing this adoption, especially in this market.
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