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M. Arthur Gillis


M. Arthur Gillis - Computer Based Solutions, Inc.

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Core System Conversion for Large Banks, Not Worth the Risk

04 April 2014  |  6806 views  |  0

(This blog is the second in a series of Core Systems Transformation.)

Unlike beauty, which is in the eye of the beholder, large bank CIOs have a much tougher job of making assessments of their technology.  First, one organ (the eye) won't do it.  And second, if CIOs are wrong, the entire bank goes down the toilet.  Beauty, on the other hand, gets a "so what" if an observer's critique of a museum painting gets a thumbs down.

This is about the Big Four U.S. banks and how they must feel about running on 1960's core systems infrastructures.  These opinions are based on my experiences, and no one from the four banks participated in this blog.  Why would they?


Citi will not convert to a new core system in its lifetime unless a Chinese or Japanese bank buys it.  The reason is simple.  Citi has already converted to a new core system for North America.  Their rationale was to make N.A. compatible with every other global unit of Citi which were using a very good system (Systematics) invented in 1968.  To convert again would be like doing by-pass surgery every time a heart patient gets a chest pain.  Citi has been a class act in innovation back in their glory decades of 60s, 70s, 80s and 90s.  But now their priorities are much different, and modern technology ranks lower on their scale than, for example, leapfrogging BofA and Chase to the #1 U.S. bank in size.  Further, Citi no longer has the dream team management it had when Citi was the industry's leader.


With a CEO who once had an affinity for technology back at Bank One, one would think that doing the transformation for the largest U.S. bank would earn the swan song award of the century.  But because of other very ugly public appearances of things such as whales, it hardly seems worth the risk for Chase's CEO to win an award now for lion of technology.  And while the recent departure of Chase's worthy CIO seemed like a setback, bringing in a new CIO from BP doesn't create the kind of confidence the public and the regulators need to make sure Chase is on the right track.  You remember BP.  That's the company that couldn't find the right stopper to plug a devastating oil leak in the Gulf of Mexico.  I don't believe Jamie is looking for risk of any kind these days.  He went from "tempest in a teapot" to "put a lid on it" when anyone talks about core transformation.


BofA had earned an excellent reputation for technology which was enhanced with the merger of NationsBank.  Selecting the best of two greats was a tough task but it was successful.  After that, all other acquisitions, including Fleet, were given lip service, but BofA always won as the application of choice even after the analysts of acquired banks argued the merits of their proprietary systems.  With systems customization created internally that has paid off for decades, it would appear that a new infrastructure is not what BofA needs most.  BofA has functionality.  And in today's diverse styles of banking, insurance, payments, asset management and investment banking, three things rank highest in the IT world - functionality, functionality and functionality.  BofA will stick with their proprietary system and 60 million plus customers will be happy.

Wells Fargo

The only thing I know first-hand about Wells Fargo is Norwest, and in its day, that was pretty good.  There are still traces of Norwest in Wells Fargo's IT management.  If any of the Big Four were to embark on a transformation, I would bet on Wells Fargo.  But if Wells Fargo did not do the deed, I'd invest my money in WFC.  IT management represents longevity, soundness, control, strategic relevance to the bank's mission, responsiveness to customer shifts, and above all, safety.

This is how I see the Big Four.  It may not sound glamorous but who ever said banking had to be glamorous?  These are the banks that process trillions of transactions every day and get the job done.  That's enough risk for anyone to handle, and there should be a regulation forbidding more risk, especially the one where the Chief Systems Architect announces "We'll be down for a few days."    


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