Legacy core tech hampering banks - Callatay & Wouters
25 October 2010 | 3506 views | 0
Source: Callatay & Wouters
European banks' reliance on legacy technology is hampering flexibility and increasing costs, according to Callataÿ & Wouters research.
· 66% agree that the events of the past two years in the finance industry have increased the importance of core banking systems to the business
· 69% are operating with a core banking infrastructure that is 11-30 years old
· 89% agree that legacy technology has reduced flexibility and 88% say is has increased costs
Sibos, Amsterdam, 25th October 2010 - Callataÿ & Wouters, a provider of core banking and multi-channel distribution solutions, today releases the findings from research into how IT decision makers in banks across the UK, France and Germany are approaching their investment in core banking systems following the financial crisis. The majority - 66 per cent - agree that the events of the past two years in the finance industry have increased the importance of core banking systems to the business, but 69 per cent are still operating with a core banking infrastructure that is 11-30 years old. A further 11 per cent admit that their systems are from the 1980s or before.
As a result, 57 per cent agree that 'banks have had to adapt their business around legacy technology rather than using flexible technology which adapts to banks' needs', which in turn has led to reduced flexibility (89 per cent) and increased costs (88 per cent), according to the respondents. Current core banking systems are failing to support the business due to the siloed nature of systems (70 per cent) and the absence of a direct link between systems and the bank's business objectives (62 per cent).
Given the growing importance of core banking systems to the business, 44 per cent of respondents plan to increase spend on their systems over the next two years, despite the current economic climate. The most popular way of approaching investment is by business line (59 per cent) with accounts, capital markets and payment & cards being the top priorities for investment. Increasing competitiveness is the main business driver for investing in core banking systeankinganking systems oveoverall, followed by meeting regulatory initiatives and risk management.
In terms of country trends, core banking strategies and investments vary significantly between the UK, France and Germany. Overall, German CIOs seem the most progressive, while French respondents appear more reticent to invest in their core banking systems; the UK sits somewhere in the middle.
In France, banks are typically working with older systems with only 7 per cent having conducted a major refresh of their core banking infrastructure in the last five years, compared to 54 per cent in Germany and 14 per cent in the UK. The French are also more likely to run all of their systems in-house (60 per cent in France compared to 22 per cent across Europe as a whole) and they plan to invest the least in their core banking over the coming years. One reason for this trend could be that most French banks surveyed have not undergone a Merger & Acquisition recently (87 per cent) compared to 48 per cent of banks in Germany who have been involved in M&A activity and 36 per cent in the UK.
Commenting on the findings, Diederik Van Der Linden, EMEA Strategy Director, Callataÿ & Wouters, said: "Core banking systems are becoming ever more important for banks as they deal with the aftermath of the financial crisis which has brought increased competitiveness and regulation, a greater focus on risk management and a more demanding customer. Flexibility is seen as key to dealing with these challenges with nearly two-thirds of respondents planning to increase the flexibility of their core banking system over the next two years. In this changed environment, we expect to see Europe's banks increasingly implementing flexible technology that can adapt to institutions' needs rather than banks having to adapt their business around legacy technology which has characterised and hampered many institutions to date."