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Banks Should Replace Core Banking Systems to Stay Competitive

A changing economy and increased regulatory requirements have put increased pressure on banks and their core banking systems. However, according to the 2008 Core Banking Systems Survey from Capgemini, almost all of the top retail banks globally are still using legacy systems dating from the 1960s and 1970s in domestic markets; despite the growth of packaged banking solutions in international operations over the last three decades.

According to Capgemini, to sustain growth under recent banking pressures and continued regulatory requirements, it is essential for banks to have the right core banking systems in place. While a large bulk of package sales are still within Tier 3 and 4 banks, signs of larger, more strategic decisions are emerging with select Tier 1 and 2 banks that require sophisticated transaction processing software capable of handling large transaction volumes and giving banks the ability to gain Ďa single view of the customerí in terms of their product usage.

Beyond the financial drivers, IT globalization, increasing compliance and industry consolidation, are some of the other key motivators for core banking system replacement. As a result, the primary drivers for system replacement are shifting from cost reduction to growth. For example, regulations like SEPA (Single Euro Payments Area) have accelerated the payments industry transformation.

To be among the major players in the new SEPA environment a bank must process at least five billion payment transactions a year. Tremendous industry consolidation, increased customer transaction demands and data management has led banks to feel increasingly limited by the capabilities of their core banking systems, and more than 90 per cent of banks interviewed are now willing to have a common architecture and a modular applications suite globally.

Note from Capgemini:
Tier 1 banks: assets greater than 400bln euros;
Tier 2 banks: assets between 100-400bln euros;
Tier 3 and Tier 4 banks: assets less than 100 bln euros

Banknet's "Fourth Annual CXO-CTO Summit" on 15th May, 2008 will discuss CORE BANKING, Risk Management, Basel II, Credit Management and related issues. Banknet will also release the findings of "Financial Systems Survey 2008" at the Summit. ... Click for more


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