Three Critical Aspects For Core Banking Transformation

Digitalisation is sweeping across all sectors of a functioning economy and while rapid changes are taking place in some industries, others are just embarking on their own transformation journey. Fintech is when technology and innovation plays a central role in financial services. It aims to disrupt traditional financial methods and uses digitalisation to improve activities.

Banks internationally and locally have awaken to the emerging trend and are investing millions into their own transformation. According to IDC Financial Insights research, the next five years will see at least six archetypes of core banking transformation. New Digital Banks: The early wave of core banking investments in 2021-2023 was largely into new digital banks. Up to 100 new challenger banks will emerge in the Asia/Pacific, and their projects will be characterized by use of new agile methodologies. They will set benchmarks for microservices- based and API-enabled core banking system architectures.

  • Channel and Engagement: The focus on one’s channel strategy and levels of engagement will be strong, especially for the first few years of the new wave, providing digital ‘hygiene’ at the edge, using proprietary channel APIs and a digital wrapper. This approach provides near-term benefits but continues to build technical debt and limit agility. Iterative Replacements: There will be continued momentum in the iterative replacement approach as banks use adoptive architectures for core banking systems, taking advantage of maturing technologies. In the future, banks will be able to improve core banking as new technologies of cloud, identity, and product masters emerge. In the interim, they will use a digital wrapper while continuing to mature.
  • Ambitious Overhauls: These projects are radical, risky, and undertaken simply because banks might not have a choice. The executive team is ‘betting the bank’ on a prolonged, single initiative at the expense of not doing much else during core transformation. Board and executive leadership as well as staff must be aligned financially and technically to succeed. Cost-efficiency Seekers: Banks looking to drive cost-efficiencies will redistribute core workloads to cloud or cloud-native platforms, consolidate legacy platforms, and be driven to shed technical debt while building out new digital capabilities. The drive to being ultra-lean potentially comes at the near-term expense of limiting agility. Future Process Masters: They are expected to be agile, especially for business processes that have customer and operational impact. Processes and decision points are automated and dependent on high-quality data, providing a near-term benefit of increased efficiency and improved user experience.

According to IDC, 40 percent of core banking transformations fail because of factors such as incomplete delivery, loss of confidence, significant budget overruns, decreased operational efficiencies, and customer frustrations. These can be due to both technical and people/project reasons.

However, the research goes on to illustrate, how with the right technology partner, advances in banking transformation can be successful – through the ‘3Es’ – Experience, Expertise and Execution.

Commenting on the research, Andrew Tan, Group Managing Director, Silverlake Axis said, “The pandemic has clearly accelerated core banking transformation in the region. This is an ideal time for the industry to evaluate their existing core banking systems, reshape business models to future-proof their growth and to sustain competitive advantage. Banks in the region are at different stages in their journey to provide an agile, dynamic and connected banking experience. As highlighted in the report, it is mission-critical that they focus on the ‘3Es’ to drive a successful transformation. This is where Silverlake Axis brings value at speed to the industry. We have been in the business for over the last 30 years, have deep domain knowledge of the financial services sector and our ability to execute complex transformative projects and mitigate risks is unparalleled.”

“Almost every bank we spoke with, had a plan to digitalise their customer journeys, create ecosystems and automate processes, both internal and external, in the attempt to be future-ready. To achieve this, their number one success factor would be their dependency and partnership with their core banking solution provider. It’s imperative for them to choose someone with a very, very, long standing history of CBS in Asia; someone that has the on-prem as well as cloud-native experience, and, someone that has the implementation expertise. As the saying goes – ‘Solutions don’t fail, processes and implementations do’. Look for Experience, Expertise and Execution and it’s bound to be a successful CBS refresh or replacement”, said Cyrus Daruwala, Managing Director, Financial Services and Fintech, IDC.

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