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The Business case for Core Banking Transformation

What is that a bank will be looking for in a core banking transformation programme?  Is it only improvement in productivity, efficiency, compliance or something more?  This is the question that requires a solid unwavering answer at the very beginning of the project; the business, IT and the management groups must have a clear consistent view.  This view must be etched in stone and remain there forever till the project is complete despite the changing business and economic conditions; a key KPI for the success of the programme.  A weak definition will guillotine any transformation programme.  

Let us now apply some thought to answering the question, what is that a bank must be looking for in a core banking transformation programme?  The answer is Product Innovation and Business Innovation.  

Product Innovation:

What is product innovation? In the industry where products are intangible attributes such as simplicity, easy to operate, differentiated customer experience and quick to market will give the competitive edge, increase market share, improve revenues etc.  In choosing the vendor it is very important for a bank to assess the product innovation capability. A full-fledged assessment by the business leaders of the bank with the vendor product strategy experts will expose the solution’s capability.  This must continue In the course of the project (assessment on the product innovation) to ensure full realization. In more operational terms, analyse an existing product, design and implement leveraging the new solution’s innovative capabilities.   

I have sat through the vendor selection process.  The ‘requirements’ fulfillment is given a high priority; at the end of the project the same old stuff is getting done in a new solution.  The vendors go the entire length talking about scalability, flexibility, interoperability. These are all hygiene and ’must haves’ and to say the least distractors. The primary is the product innovation capability. 

Business Innovation:

What is business innovation?  The distribution and sale of products in a way that is different from what it is currently. Multichannel strategy is a good example for business innovation. A core banking vendor on selection must be viewed as a business partner.  A bank’s business strategy henceforth will be defined in conjunction with the new business partner.  It will be the responsibility of this business partner to guide the bank in business innovation.  It will not be too far-fetched for me to say that the bank must insist on having a full time representative from the core banking solution provider on the board of the bank.

A core banking transformation is a strategic investment.  The investments are in hundreds of million dollars spread over 3 to 5 years implementation time frame.  A strong business case and business partner approach with the vendor will give the programme the credibility and better accountability.


Comments: (2)

Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 19 June, 2012, 13:44Be the first to give this comment the thumbs up 0 likes

When it comes to CBS or ERP or any large-scale enterprise transformation program, I agree that "Product Innovation" must form an integral part of the program scope. However, even in an otherwise fast changing industry like IT, some things don't seem to change and I expect "Product Innovation" to continue to be brushed under the carpet as a "nice to have" soon after presales is over and implementation starts.

As for "Business Innovation", a CBS / ERP vendor is only one - albeit the most key - of the various players involved in large-scale transformation programs. Other key players being owners for existing systems (which never totally go away), end-to-end testing, new addon systems (e.g. datawarehousing), and so on. Therefore, companies might not be able to justify the elevation of only the CBS vendor representative to its Board. Having said that, in a few such programs I've been exposed to, the program manager, who has overall technocommercial responsibility for the program, does report to the company's Board / Member of Board or one level below.

A Finextra member
A Finextra member 19 June, 2012, 17:13Be the first to give this comment the thumbs up 0 likes

I very much appreciate your views.  My intent was to delineate the importance of having the vendors executing critical projects to be involved in the business decision making process. If not actively, at the least they can comment if the strategic decisions made by the senior management is in the right direction.  

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This post is from a series of posts in the group:

Innovation in Financial Services

A discussion of trends in innovation management within financial institutions, and the key processes, technology and cultural shifts driving innovation.

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