Core Banking Systems
Core Banking Systems Survey Conclusions
The conclusions of the IBM survey (see 1.2. Survey References) indicated that Private Banks should focus on processes of value creation and determine partnering and outsourcing solutions to enable operational agility.
Given the continuing high cost income ratios of a significant number of players, there is still, for many, an urgent need to rethink their business model and to create more flexible options.
These options may involve more sharing with the parent, outsourcing to a third party provider or combination of both. As the products and services providers become more developed and open standards become the norm, the move to more network type models will allow private banks to better and more quickly respond to shifting market demands.
A key challenge for private banks will be to stop driving incremental improvement across all areas of their business. Instead, they will need to focus the enterprise on those areas which really drive value creation and consider partnering for the remaining non core processes. The historical integrated model will give way to more teaming with the parent organisation and external partners to create more integrated collaborative value networks that offer stronger and more agile operating models.
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Already, leading private banks with value oriented models are increasing the pressure on their less innovative competitors to transform to be lower cost, more agile and responsive. The IBM survey observed the emergence of more flexible component based models which can deliver greater value at lower cost. Also driving this process is greater automation of key processes which facilitate a better level of internal and external collaboration.
To succeed, the IBM survey recommended the following:
- Keeping up with peers is now about ensuring that a robust platform for innovation and growth is in place. This will form the basis to keep up with peers as the industry shifts to greater competition for revenue growth.
- Finally, breaking away from the rest of the industry to become a leader will require a private bank to implement integrated end to end business processes across the enterprise. This new business model will link partners, suppliers and clients in a network type model. It will be more agile and also able to respond with flexibility and speed to changing client demands, market opportunities and regulatory challenges.
As can be seen from the many complaints, the existing core banking systems are unable to cope with current and future business needs. A more robust and cost-efficient architecture and operating solution is needed. The challenge is to find and implement a suitable solution from a vendor with the appropriate expertise. It is unlikely that most banks would have the necessary expertise, investment and resources to create an in-house solution. In view of the shortage of suitable ground-breaking solutions currently on offer, one can expect significant new offerings in the market place in the short to medium term.
– I. Stanton.
