Core banking systems vendors could be on the verge of a bonanza in license fee sales, as top tier institutions look to replace their ageing legacy systems with new modular packaged applications, says international consultancy CapGemini.
In a new research report into the core banking marketplace, CapGemini observes that the vast majority of top retail banks globally are still using legacy core banking systems dating from the 1960s and 1970s in their domestic markets, despite rolling out packaged banking systems for international operations over the last three decades.
The firm - which surveyed 16 core banking vendors - says its study shows that a changing economy and increased regulatory requirements have put increased pressure on banks and core banking systems.
IT globalisation, increasing compliance and regulations - such as Sepa - and industry consolidation, are some of the key motivators for core banking system replacement, says CapGemini. As a result the primary drivers for system replacement are shifting from "cost reduction to growth".
"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" of banks interviewed are now willing to have a common architecture and a modular applications suite globally," says CapGemini.
"To react to these trends, a bank's key support systems need to be transformed," says Gert Jan van Dorsten, principal consultant, Capgemini Netherland, financial services.
Whilst most package sales are still within tier three and four banks there are signs of larger, more strategic decisions by tier one and two institutions. These large banks are looking for sophisticated transaction processing software capable of handling large volumes and the ability to gain 'a single view of the customer' in terms of product usage.
"Banks willing to tackle planning and governance challenges can derive significant benefits by driving the replacement of outdated core banking systems, including meeting compliance demands, control over data management issues and a single view of their customer base," adds Van Dorsten.