Rotten to the Banks’ Core

- Mr. Bank, is your core rotten? Do you suffer with manual entries, tickets anyone? Are your internal IT support costs going through the roof? Shut out of the latest Fintech products? Looking like last century? Digital banks blowing you out of the water?

At the center of every bank is its core banking system. The core system runs the bank and provides the system of record for every transaction. The core system is the accounting, general ledger and is connected to all banking products. From onboarding to loans, from trade finance to foreign exchange, to compliance and regulation, the core system is everything.

With the importance of the core system to the bank, it’s a wonder that serious attention is not given to changing and updating legacy cores. Most banks today have a core system based on old technology, which is inflexible, without API ability and with no contact with their vendor except for the bill. This was not acceptable yesterday, no good today, and does not work for the future.

Is this you? For the vast majority of banks, the answer is yes.

Many of these banks will not survive without strong leadership that results in dramatic internal change. No longer can any bank be held hostage by a core provider that limits the bank on the products they can offer. No longer can vendors charge exorbitant prices to grant the bank permission to have the tools needed to service their customers.

The big and well-known core software providers often act as if they have a gun to the head of the bank. This must end and end now.

Banks need a path of change away from paying the very people that hold them back. Old time core vendors are giving the FinTechs the opportunity to compete for the banks’ business.

Yes, does this path of change have risks…

…and risks are not comfortable for any bank’s management. Banks are very good at managing risks. Senior management at banks are risk adverse. Individually, why would they risk changing their core and endanger the final point of their career. Tradition dictates that you pass this decision to the next top executive once you leave with everything that you can get. The problem is most bankers are afraid and the ones that show life to lead change are typically squashed by those who fear change.

The world is well into one of the biggest technology deliver transformations ever. Cloud delivery and Software-as-a-Service (SaaS) deployments have taken over from on-premise installations in every business vertical. Banks have been the laggards in embracing this change.

Big banks will continue with on-premise solutions and will add specific SaaS products as needed. Banks like JP Morgan, Citi, HSBC, Santander, UniCredit, and the others that have bigger IT departments then IBM and Microsoft. Their IT investment dictates that they continue with on-premise solutions. Banks without that immense IT infrastructure will benefit greatly through SaaS deployments.

What great benefits do SaaS deployments provide? There are many: time-to-market; performance gains; new products; latest functionality; modern feel; faster ROI; flexibility, and reduced costs - to name a few. These are great reasons and must be considered by every bank.

Moving to the cloud with a SaaS deployment not only reduces IT costs. More importantly, it gives the bank the agility and ability to provide clients with a consistent product experience regardless of whose product it is. This is done by doing API integration through “snap-on” and “plug-in” tools that give secure access to tools that benefit the client. This in turn gives faster access to new products and valuable data. With the newfound agility of SaaS and Banking as a Service, any bank can increase the speed of delivery to improve their customer’s experience.

That is the essence of Open Banking.