BST Digital Issue 04 2010
Transcript of BST Digital Issue 04 2010
-
8/3/2019 BST Digital Issue 04 2010
1/15
More and more banks are finding that their legacy systems cant keep upwith consumer demands.Fortunately, a core replacement can give a bankthe flexibility it needs to compete now and in the future. p.12
Table of Contents p.2
CORE SYSTEMS MODERNIZATION:
AFresh
Start
New Branches in60 Minutes p.10
3 Reasons the Time IsRight for Change p.18
Core TransformationBest Practices p.22
April 2010
-
8/3/2019 BST Digital Issue 04 2010
2/15
COVER STORY
An Agile Core
To meet consumersdemands
for real-time transactions,
and to adapt quickly as those
expectations change,many
banks finally are modernizing
their core systems.
COMPETITIVE DRIVERS 183 Reasons the Time IsRight
Sweeping competitive
changes are forcing banks
to rethink legacy systems
and core upgrades.
6 EXECUTIVE Q&AKen Case
y,EVP,ATBFinancial ATBs executive VP of
major initiatives has plenty of advice for banks
looking to replace their core systems.
10 CASE STUDYNew Branches in 60 Minutes A new core system
transforms a Vietnam-based bank into an agile
institution built for expansion.
22 PERSPECTIVESModern CoreThinkingOur panel of experts
examines the factors that can make or break
a core banking system replacement.
4 FROM THE EDITOR
26 EDITORIAL AND BUSINESS CONTACTS
12
April 2010
This is the first of four
all-digital issues that
Bank Systems & Technology
will be publishing in 2010.
2 April 2010 www.banktech.com
Next >>
-
8/3/2019 BST Digital Issue 04 2010
3/15
Next >>
To succeed in this complex global market, you must leverage a growing array of vital technologiesand services. FIS stands apart as the source that can truly deliver the best of it all.
As your trusted partner, FIS infuses unmatched knowledge and experience into financial and paymentsolutions, business consulting and technical services all integrated to fit your unique requirements. Theresult is a complete, tailored solution suite to help you tackle every strategic challenge along the way.
How is it possible to get everything from a single source, without having to settle? Its simple: the activeingredient in this powerful mix is our people 34,000 strong who make all the pieces fit together toassure your success.
The essential piecesto build your future and the expertiseto make it all fit.
Never Compromise.
2009-2010 Fidelity National Information Services, Inc. and its subsidiaries.
fisglobal.com
FINANCIAL SOLUTIONS PAYMENT SOLUTIONS BUSINESS CONSULTING TECHNOLOGY SERVICES
Visit our new Web siteLearn about our industry-leadingproducts, services and solutions.
Go to fisglobal.com
n my dual role as an editor for Bank Systems & Technology
sibling brand Insurance & Technology, on more than one
occasion I declared that insurance companies needed to
update their online capabilities to keep up with evolving
customer expectations which were being driven, in part,by the
higher level of online service provided by banks.And yet, in the
cover story for this special digital issue of Bank Systems &
Technology, I find myself suggesting that banks need to modern-
ize their core systems in order to develop better online capabili-
ties to keep up with customer expectations which are being
driven, in part, by the higher level of online service provided by Internet powerhouses
such as Amazon and PayPal (see Core Agility,page 12).
Especially in an online environment,capabilities and customer expectations evolve so
quickly that standing still means falling behind.There will always be another industry or
another competitor doing something newer or better.And sooner than you t hink
that exceptional level of service becomes the new standard.
The best a bank (or an insurance carrier or any other company) can do is acquire
enough flexibility to react to these changes as quickly as possible.Perhaps that is why
banks now seem to be more willing,at the very least, to consider replacing their legacy
core banking platforms than at any time in the past.
The risk associated with an outdated core system isnt that it lacks any given set of online
capabilities; rather, its that an old core system lacks the flexibility needed to even bolt on
those capabilities.It s one thing for a bank to say,We dont have that.Its another for a bankto say,We cant have that.And as youll read in the many core transformation success sto-
ries that follow,fewer and fewer banks are willing to concede that competitive advantage.
The Never-Ending Story
I
Nathan Conz,Senior Editor [email protected]
mailto:%[email protected]:%[email protected]:%[email protected]:%[email protected] -
8/3/2019 BST Digital Issue 04 2010
4/15
Next >>
www.banktech.com April 2010 7
GoingEnd to End
more...
f
in
SHARE
From a management point of view,the driver was
growth.It was the ability to be competitive in the mar-
ketplace with products and services that could be
[developed] quickly and economically.With the older platform,that was increas-ingly difficult. At some point there would have been a cap on growth.On the
employee level,the driver was usability and a focus on customer activities.
The reason now was a good time and we started before the recession
[planning started four years ago and implementation began in 2008] was
that the risks were significant enough that something had to be done and
also that the next generation of banking technology made it viable. In the
past,it was difficult to actually fin d a solution that could take us end to end.
BS&T:What were you looking for from vendor solutions that you found
this time around?
Casey: It was the flexibility of the solutions. Many of the products could be
built through parameters, rather than through code.In other words, it was
the ability to create a product in a certain field,such as savings accounts,and
then take that one product and,through configuration, create many. In our
current environment and in many solutions over the years, that flexibility
wasnt there.Much of what you built had to be built over again each time.
This flexibility helped us create new products economically and also quite
distinctly.[ We can develop] products aimed at certain segments of the popu-
lation different demographic or economic groups.As the costs of product
development are less,they can be much more tar-
geted.Whatalso factored in for us was the ability to
build reusable services for our multiple channels.
BS&T:Arethere things you know now that you
wish you had known when you first started
the project?
Casey:There always are.It is more complex than
BS&T:What are the basic components of your core system replacement
project,and how far along are you?
Casey: Ours is a complete end-to-end banking platform, so it is quite a bit
broader than other [core systems projects]. Were replacing our entire trans-
actional banking suite payments, analytics and the [general ledger],
pretty much everything with an SOA-based architectural stack.
Its fairly complex,but we are nearing the end of the build phase. Well go
into a full integration test phase that,given the breadth of the program,will
take a good seven to eight months.That takes us to a go live in early 2011.
BS&T: Why was now the right time to modernize? What are the drivers
behind the project?
Casey:The drivers on a very strategic,shareholder or board level wererisk of the aging environment causing a potential service disruption and also
the potential information security [issues] that could arise with a fairly com-
plex distributed environment of aging technology.The third driver from that
point of view was compliance with the new regulatory regime....
ATB Financial ($26.5 billion in assets) is in the midst
of an end-to-end core system replacement that lever-
ages the SAP for Banking software suite. Ken Casey,
ATBs EVP of major initiatives, discusses with BS&T Senior Editor Nathan Conz
([email protected]) the business drivers behind the project and how the
Calgary, Alberta-based bank intends to realize a return on its major investment.
NewBranches in 60 Minutes p. 10
An Agile Corefor Uncertain Times p.123 Reasons toReplace Your CoreNow p.18
CoreReplacement Best Pactices p.22
Table of Contents p.2
In This Issue
Were replacing ourentire transactionalbanking suite ...with an SOA-basedarchitectural stack.
KEN CASEY, EVP, ATB FINANCIAL
mailto:%[email protected]:%[email protected]:%[email protected]:%[email protected] -
8/3/2019 BST Digital Issue 04 2010
5/15
we had originally envisioned it to be the dependencies are higher.The
building of services in the SOA stack the number of them and the num-
ber of channels is more complex than we thought.
The maturity of configuring products for the North American market is
taking a little longer to do than originally thought.Most of these next-gen-eration banking platforms have been implemented in Europe and in Asia,
but were one of the early adopters in the North American market. In some
instances,there are different products with different characteristics [in North
America] that really havent been done before [on a core system such as this].
Were doing some of that for the first time, and I think were doing an end-
to-end integration for the first time as well.
BS&T: Who are your key tech partners on the core systems project?
Casey: We contract with SAP (Walldorf,Germany) and Accenture (Chicago).
SAP is really the software provider and Accentures role is about data migra-
tion for technology architecture,testing and program management.There
also is in-house development, to the extent that when youre running a
program that goes two-and-a-half to three years in duration, keeping the
bank [running] is an important piece of that.
BS&T: What are some of the projects expected benefits?
Casey: On one hand,youre replacing infrastructure that is at the end of its
life and youre replacing risk. On the other hand,there is an opportunity to
drive benefits from the investment.Those hard cost benefits ranged from
creating new products and new services for our
customers for revenue growth in our lines of busi-
ness to the reduction of back-office costs.
The total cost of ownership of our IT environ-ment was another area where we found savings.
So in our business case,we did manage to offset
the costs [of the core banking implementation]
over an eight- to 10-year period.I
Next >>
-
8/3/2019 BST Digital Issue 04 2010
6/15
Next >>
www.banktech.com April 2010 11
servers, an HP StorageWorks SAN and Oracles (Redwood
Shores, Calif.) Database 10g.
The new hardware was installed from December 2008
through February 2009,and T24 was deployed on a test system.To save time,we tested T24 and developed a migration tool
in parallel with other tasks, explains Dung.We planned to
migrate data ...from Microsoft [Redmond,Wash.] SQL and jBASE to Oracle XML
while ensuring smooth banking operations throughout the go-live period.
User acceptance testing and training for approximately 5,000 employees
began in March 2009. After a successful test migration, more than 3 million
accounts were systematically moved to T24 from June through the projects
completion in September 2009.Our original project time frame was one year,
but we completed the project a month ahead of schedule,Dung notes.Strong
support from our board of directors and board of managers was critical.
Got an Hour?
The overhaul has proven transformative.Today setting up a new branch in
our core systems only requires an hour or two,Dung reports.We opened
70 new branches in 2009, and we expect to reach our goal of 400 branches
by year-end.Most important,customer transac-
tions are completed within an average of three
to five minutes, which has significantly
improved customer satisfaction.
Now Sacombank is leveraging T24 to imple-
ment other technologies such as data ware-
housing, CRM, risk management and workflow
management, according to Dung.Were alsolaunching new products and services,he adds.
For example, were expanding our Web pres-
ence from inquiry-only to include transactions
and payments.I
mid a rapidly developing country, Vietnams Sacombank
expanded over the years to become the countrys second-largest
commercial institution,with 240 branches.Yet the bank continued
to rely on the same core banking systems from its founding in
1991.Our original system was provided by a local IT company,explains CIO
Bui Van Dung.It couldnt scale out any fur ther.
A cross-functional project team evaluated solutions from global vendors
in April 2008. According to Dung,Sacombank (US$3.65 billion in total assets)
selected Temenos(G eneva) T24 for its flexible,stable architecture.
T24 was a proven solution, deployed in Vietnam and around the world,
remarks Dung.In addition, Temenos familiarity with our culture, under-
standing of our regulatory environment and investment in local support staff
demonstrated its long-term commitment to our market.
Temenos devoted about a dozen onsite technicians to the project as well
as an offsite team.Approximately 100 full-time
and 50 part-time bank employees were dedi-
cated to the project,including about 50 from ITs
total head count of 115. Following Temenoshardware requirements, in October 2008
Sacombank invested in IBM (Armonk, N.Y.)
System p servers running the AiX operating sys-
tem, HP (Palo Alto, Calif.) 9000 Unix database
By Anne Rawland Gabriel [email protected]
Live in 60 Minutes
Setting up anew branchin our coresystems onlyrequires anhour or two.Van Dung BuiSacombank
A
Sacombanks core systems rip-and-replace transforms the Vietnam-based bank into an agile institution built for rapid expansion.
RIP AND REPLACE
INSTITUTION: Sacombank(Ho Chi Minh City,Vietnam).
ASSETS: US$3.65 billion.
BUSINESS CHALLENGE: Replacelegacy systems with modern coresystem to improve service andenable growth.
SOLUTION: Temenos (Geneva) T24core banking platform.
SNAPSHOT
Q&A With ATB Financial EVP Ken Casey p.6
An Agile Core for Uncertain T imes p.123 Reasons to Replace Your Core Now p.18
Core Replacement Best Pactices p.22
Table of Contents p.2
In This Issue
mailto:%[email protected]:%[email protected]:%[email protected] -
8/3/2019 BST Digital Issue 04 2010
7/15
Next >>
www.banktech.com April 2010 13
sumers conduct transactions in real time,or at least close to it.
Many bankscore systems, however,cant offer
that same convenience. There are a lot
more interactions on the Internet,so a coresystem is going to have to handle a lot
more requests and traffic.
Its also going to have to
respond with greater
speed,contends Erich
Litch,SVP and GM,con-
sumer services, at Fiserv
(Brookfield,Wis.) Electronic
Banking Services.
A user doesnt want to wait 10 sec-
onds for a balance request, he continues.
Some core systems,given the workload,just
arent able to handle that kind of continuous
access and requests for information.
Customers online expectations are influencing their demands
across channels, notes Chris Tattersall, a London-based managing director
with SMART Business Advisory and Consultin g.You have a situation where
a client calls you and asks you,through your call center,to do something,
he says.When he gets to his office and looks into his online banking system,
he expects to see the results of what he did when he was on the phone call.
The multichannel system requires the core banking system to update imme-
diately so the client can see immediately whats going on.
Jim Sizemore,CIO,bank solutions, Fiserv,adds,A customers expectationis that they have a consistent experience regardless of the channel.That
means when they go to a teller,ATM, branch,Web site or mobile device,they
see the same results.
But consumer preferences can change quickly, meaning many banks
Were ableto come upwith moreideas andto tweak
things.Chris Plescia,Nationwide Bank
more...
f
in
SHARE
n the introductionto a recently released Forrester Research report on
core banking technology, report author Jost Hoppermann,VP, princi-
pal analyst,argues that bank tech executives involved in delivering their
firms banking platforms will need to have, among other things,a
sound perspective on how the future of banking and the related applications
systems will play out.Fortunately banks do have
some insight into their future,and more specifi-
cally,the future expectations of their customers.
As consumers from every demographic growincreasingly comfortable conducting business on
the Web,new standards are emerging regarding
the customer experience. When dealing with
Internet giants such as Amazon and PayPal,con-
I
By Nathan Conz [email protected]
The need to meet consumersreal-time service demands,and to adapt quickly as thoseexpectations change, is drivingmany banks to replace their aging
legacy systems with modern, flexible cores.
COREAgility
FLEXIBLE SYSTEMS
Q&A With ATB Financial EVP Ken Casey p.6
New Branches in 60 Minutes p.103 Reasons to Replace Your Core Now p.18
Core Replacement Best Pactices p.22
Table of Contents p.2
In This Issue
mailto:%[email protected]:%[email protected] -
8/3/2019 BST Digital Issue 04 2010
8/15
aging core systems limit their ability to adjust.A lot of the core systems that
banks have are [built on a] very, very old architecture, observes SMARTs
Tattersall. As they modernize for example, when they start to create
more online capabilities they will struggle to integrate those into the old
architecture on which the core system was originally built.
A Flexible Future
In order to be prepared for wherever consumer tastes may go,as well as for
an equally uncertain regulatory environment,flexibility has emerged as a key
driver behind many banks legacy system replacement initiatives.Columbus,
Ohio-based Nationwide Bank certainly placed a premium on flexibility when
it implemented the Profile core banking system from FIS (Jacksonville,Fla.).
As a de novo bank, Nationwide Bank
wasnt shackled by a 20-year-old legacy
core system,but it needed a platform that
could grow along with the bank, notes
Chris Plescia, the Nationwides CIO.We
didnt have a core system,he points out.
We had a trust company at Nationwide
[the insurance company], and the deci-
sion was made and a charter was signed
to become a bank.As par t of the process, we had to pick a core system.
Nationwide,which has just two physical branches,is primarily an Internet
bank. As such, secure and easy online access, online bill pay and money
movement capabilities, and online financial
tools were all necessary components, Plescia
relates.Thats table stakes in the online banking
world,he says.So solutions that offered thosecapabilities that were tolerable out of the
box but quickly customizable were some of
the criteria we looked at.
The bank was given just seven months to
Next >>
www.banktech.com April 2010 15
install a core system and integrate it with other best-of-breed
solutions to build out its end-to-end platform, Plescia recalls.
Implementation started in May 2007 and the FIS core system,
which is operated under an outsourced model,was up and running
before the end of that year,according to Plescia.We didnt have time to build out a whole [custom] Web
banking front end. We had to take what was there [for
now],he says.One of our rules was to customize as little
as possible so that down the road we could have flexibility
in other areas and be able to make upgrades.
That flexibility has helped the company build $3.2 billion in assets in less
than three years. Since the initial rollout of the core system in December
2007,Nationwide Bank h as made numerous updates to its customer-facing
capabilities, Plescia explains.For example, the bank launched a credit card
origination system featuring real-time decision making and instant issuance
and enhanced fraud-detection and security measures.
In addition,after nearly 12 months in operation,the institution discov-
ered that only 11 percent of consumers who began deposit applications
online were completing them.By September 2009,Nation wide had rewrit-
ten the origination component of the application and saw its throughput
numbers jump to more than 54 percent.
The nice thing about [a modern core system] is that it is real-time and its
more flexible than its mainframe competitors. Were able to come up with
more ideas and to tweak things. You have to take the time and you have to
pay to build them,but you have the flexibility to do that,Plescia comments.
Three for All
That same agility was a driving factor behind Richmond MutualBancorporations (Richmond,Ind.;$881 million in assets) decision in fall 2008
to implement the Metavante (acquired by FIS in April 2009) IBS core banking
solution in each of its three subsidiaries First Bank Richmond,
AmericanTrust Federal Savings Bank and Mutual Federal Savings Bank. Firstmore...
f
in
SHARE
FLEXIBLE SYSTEMS
We would havecustomers ask for
something that wecouldnt just implementright away.John Rusie, First Bank Richmond
Q&A With ATB Financial EVP Ken Casey p.6
New Branches in 60 Minutes p.103 Reasons to Replace Your Core Now p.18
Core Replacement Best Pactices p.22
Table of Contents p.2
In This Issue
-
8/3/2019 BST Digital Issue 04 2010
9/15
Bank Richmond,the holding companys lead bank,was the
last to go live on the new platform,in October 2009.
According to First Bank Richmond SVP of operations and
COO John Rusie, each of the three banks were previously
using outsourced core systems that were near th e end oftheir contracts.The company looked at the situation as an
opportunity to standardize.
With an assist from Scottsdale, Ariz.-based Cornerstone
Advisors,We gave some consideration to each of the exist-
ing core systems that each bank had,Rusie recalls.In our analy-
sis, we felt that none of them would really carry us into the future the
way we needed to.
That future includes surprise enhanced online capabilities.All three
banks currently offer online banking, but customer expectations, coupled
with competitive pressures, are driving the banks efforts to expand their
online offerings,Rusie acknowledges.
First Bank Richmonds business model has evolved to serve more commer-
cial small business needs, but those online services were difficult to launch
on the old core,Rusie says.We would have customers ask for something that
we couldnt just implement right away.Some of that was in cash manage-
ment capabilities the ability to have several different accounts and have
funds flow back and forth between an account and a line of credit, he
relates.Under the new system we have the capability to add those types of
functionality without it being a manual process behind the scenes for [IT].
In addition to expanding online banking
capabilities including security improvements
and online bill pay reporting features for com-
mercial clients Richmond Mutual also lever-aged its modern core system to standardize its
own infrastructure.It has given us the ability to
take advantage of the holding company to
provide services at the holding company level
Next >>
www.banktech.com April 2010 17
that we probably werent able to do before,esp ecially
behind the scenes from an accounting standpoint,
Rusie explains.
Patience Is a VirtueBut there is an adjustment period required before cus-
tomers appreciate the enhancements that are enabled
by the new core, Rusie notes.Early on, you get some
pushback from customers that dont like change.Thats
not a negative to the system youre going to get that
regardless,he says.
Nationwide Banks Plescia estimates, based on his
own experience as well as conversations with peers and
competitors, that there is usually a nine- to 15-month
adjustment period for the company to work out any
kinks and for customers to appreciate the enhance-
ments a new system can deliver.
In particular,Nationwide experienced some difficulty converting its exist-
ing credit union business onto the new platform,Plescia reveals.It was bumpy
at first, especially the conversion of the credit union onto the banking plat-
form.[ There were] a lot of the things that we could have tested for a million
years and never thought of,he relates.It took about nine months to shake
that out.Once we got it smoothed out,its been running really solid.
SMARTs Tattersall stresses that deploying a new core system is difficult
and fraught with risk.Its a nightmare because youre replacing something
that, almost inevitably,is built on a really old architecture with something
that is relatively new.Theres still enormous resistance to the level of change
that it requires and the complexity of the management to do it,he explains.On the other hand, there is an increasing need to do it,Tattersall adds.
If you compare the situation three or four years ago with now, there are
probably more banks doing it now than there were then.I suspect the num-
ber over the next two years will increase further. Imore...
f
in
SHARE
FLEXIBLE SYSTEMS
Q&A With ATB Financial EVP Ken Casey p.6
New Branches in 60 Minutes p.103 Reasons to Replace Your Core Now p.18
Core Replacement Best Pactices p.22
Table of Contents p.2
In This Issue
Implementinga new coresystem isa nightmare.Chris Tattersall,SMART Business
Advisory and Consulting
-
8/3/2019 BST Digital Issue 04 2010
10/15
Next >>
www.banktech.com April 2010 19
pressed to achieve these goals,however,unless they start
laying down the core infrastructure that can support
operating model changes.
The recent interest among banks in core platformtransformation is being driven by three primary factors:
1. Emerging Foreign Competitors. Financial institutions from foreign
countries particularly Spain, Japan and Canada pose an increasing
competitive threat to U.S. banks. Some of the leading foreign banks have
achieved impressive cost-income ratios through core platform transforma-
tion,and they are bringing those competitive advantages to the U.S.market.
U.S.bankscost-income ratios generally range between 55 percent and 60
percent,while the best-run foreign institutions are in the 35 percent to 45
percent range.With the savings from their highly efficient operations,these
foreign banks have the ability to competitively price their products,there-
by gaining market share in the race for deposits.
In addition,their platforms allow them to bundle products and tailor offers
for specific segments based on key customer demographics and attributes.
With technology that enables a customer-centric operating model, these
banks will be formidable players in the U.S. in the next two to three years.
2.Direct Banks. Non-traditional banks,such as those selling through the
Internet,also are a rising threat.An estimated one-half of financial product
searches now begin on Google,a figure that is likely to grow exponentially
with the explosion of mobile devices and mobile banking.
With few,if any,retail branches, direct banks are seeking to differentiate
themselves based on pricing by running low-cost,agile operations that facil-
itate the introduction of new products.Traditional brick-and-mortar banks
should understand that direct banks are not just trying to capture deposits,but customer wallet share as well by offering a diversity of products.
3. Merger and Acquisition Activity.In light of ongoing economic weak-
ness that limits opportunities for organic growth, merger and acquisition
activity will likely accelerate this year, particularly among small and midti-
Pouring moneyinto outdatedcore systemsis a losing
proposition.
ost-crisis, banks are awaking to a new world order marked by a
regulatory wave requiring greater transparency, self-sufficient
customers with rising expectations,and greater competition from
traditional and non-traditional players.Yet most banks ability to
respond to these forces is highly constrained.
The processes, procedures and IT that form the foundation of their oper-
ations are expensive to maintain and lack the flexibility to meet industry
changes.A maze of legacy systems inhibits a single customer view, timely
introduction of new products, improved cus-
tomer service and,ultimately,growth.
According toa recent Accenture survey of bank
executives and private equity firms,the winners infinancial services by 2012 will be those organiza-
tions thatimprove the customer experience,reduce
non-strategic costs,optimize their pricing and over-
come vulnerabilities to risk.Banks will be hard
P
Sweeping changes in the banking land-
scape are causing many banks to reassess
with good reason whether they can
remain competitive with their existing
technology platforms, report Accentures
Steven Reiter and Fiaz Sindhu.
Competition SpursCore Changes
more...
f
in
SHARE
COMPETITIVE DRIVERS
Q&A With ATB Financial EVP Ken Casey p.6
New Branches in 60 Minutes p.10An Agile Core For Uncertain Times p.12
Core Replacement Best Pactices p.22
Table of Contents p.2
In This Issue
-
8/3/2019 BST Digital Issue 04 2010
11/15
New
Beginnings
Gain access to the resources and intellectual capital you need tohelp lead your organization into a new era ofgrowth.
October 3-6, 2010 The Grand Del Mar, San Diego
Please note that attendance at this Bank Systems & Technologyevent is
limited to executives from banks/financial institutions. Event producer
reserves the right to qualify and deny any interested party.
www.banktech.com/summit2010www.banktech.com/summit2010Register Today!
Summit Highlights:
Multi-Channel on Steroids: Reinventing Customer Experience
Analytics for Growth The Holy Grail
Payments: The Innovation Crucible?
Strategic Issues Workshops
Bank Systems & Technologys 2010 Elite 8 Awards
Opposites Attract? An Elite 8 and Technology Company Point/Counterpoint
The Bank Systems & TechnologyExecutive Summit is an exclusive, invitation-only networkingevent that will provide focused networking and educational opportunities to bank CIOs/CTOs/line-of-business heads and other senior-level IT decision makers, in an unmatched resortenvironment. The Executive Summit agenda combines conference/seminar presentations,face-to-face business meetings, scheduled recreation and social events.
Sponsors
er U.S. banks. Acquiring banks must be careful,
however, to avoid falling into the trap of simply
patching the acquired bankssystems onto their
own, thereby adding complexity and reducingefficiency.
It isnt unusual for a banks asset size to balloon
by as much as one-third or more with just a sin-
gle acquisition. As they enter markets outside
their home base,sometimes taking on new lines of business as well,acquir-
ing banks must take a hard look at how their technology platforms can
best support their expanded operations.
Pushing Ahead
Banks should start the transformation process by assessing the benefits and
savings that can be derived from their core architecture determining,for
example,how they can lay the infrastructure to enable the selling of bundled
products and otherwise increase share of market and share of wallet.
Banks also need a well-defined release strategy that balances speed of
implementation with delivery risk and cost. Some organizations opt for the
big bangapproach, in which they effectively cut over to all new systems
at once.Others find it more appropriate to break up the effort into manage-
able releases to reduce operational and delivery risk.
Continuing to pour money into outdated core systems is a losing propo-
sition. To fend off growing competition, banks
tech platforms must enable them to have a sin-
gle view of their customers so that they can inter-
act with them more efficiently and profitably. I
Steven Reiter is the bank technology lead executive
at Accenture.Fiaz Sindhu is a core banking expert
in the firms North America banking practice.
Next >>
1. Emerging foreign competitors.2. Competition from direct banks.3. Merger and acquisition activity.
3 DRIVERS OFCORE SYSTEMS
TRANSFORMATION
COMPETITIVE DRIVERS
Q&A With ATB Financial EVP Ken Casey p.6
New Branches in 60 Minutes p.10An Agile Core For Uncertain Times p.12
Core Replacement Best Pactices p.22
Table of Contents p.2
In This Issue
-
8/3/2019 BST Digital Issue 04 2010
12/15
Its important not to make the mistake of thinking a different core sys-
tem will solve all the problems in a bank.Understand,quantify and doc-
ument the benefit of changing, including the opportunity cost of deferring
other initiatives until the replacement is complete.There often is very lit-
tle return on investment with a new core system enhancements to an
existing core system often yield better results and are not as disruptive.
Create a comprehensive and well-thought-out plan. Involve both the
new system vendor and your old provider in the process.Map the data from
your old system to the new one. Clean up your data before you convert.
Stage and complete a mock conversion and a conversion readiness check.
The key success measure of a core system modernization is that every-
thing works as expected.Customers dont choose to bank with you because
of the core system you use. Minimize customer impact.Make all the decisions before you begin.Manage risk and avoid last-minute
heroics.Train and let employees practice on the new system before conversion.
Limit the scope and be clear on what is included and what is not.Consider
the amount of customization to your existing core system and how much
Think Before You Act
Lynn CraneCIO andChief SecurityOfficer
Mutual ofOmaha Bank(Omaha,Neb.)
Next >>
ment must be viewed as an enterprise project
(rather than an IT project) in which every execu-
tive has a sponsorship of one sort or another.
North Shore CU puts a premium on customerrelationships,so the new banking system needed to fit within that strategy.We
were also looking for better data management.We segment quite a bit with
our business intelligence strategy,and our banking engine contains a lot of
behavioral data.We must be able to get information out across multiple chan-
nels and be able to act upon it.Business alignment was a critical factor as well;
fundamentally, this system is a business driver and not a technology driver.
ather than derail banks core systems replacement and upgrade
projects,the financial crisis has served to reinforce the need for
modern platforms that provide the agility to keep up with mar-
ket changes and support operational efficiency.What are the key
technologies and success factors of a core systems modernization initiative?
How can banks maximize the return on their investments while minimizing
both the downtime and the risk associated with a core transformation?
R
By Peggy Bresnick Kendler [email protected]
Modern Thinking
www.banktech.com April 2010 23
North Shore Credit Union is currently in the final phase of implement-
ing a new core banking system.When planning for the conversion, we
had to examine our risk tolerance, since risk aversion affects the way a
company approaches a project of this magnitude.
First,we had to determine if this was a tactical or strategic change.Is
it more of the same, or were we trying to do something that will bring
more value to the organization? At the end of the day, a banking system
is really a product/service engine,and banks must determine if the new
system will fit into the overall corporate strategy.
Its important to look at the potential impact of a core system replace-ment. Is it an opportunity to clean up the mess youve had for the past 30
years? Is it an opportunity to refresh your offering in the eyes of your cus-
tomers? The complete conversion will take a lot of time,and a company must
be prepared for changes of enormous magnitude.A core systems replace-
Driving Business
BEST PRACTICES
Fred CookCIO
North ShoreCredit Union(Vancouver)
Q&A With ATB Financial EVP Ken Casey p.6
New Branches in 60 Minutes p.10
An Agile Core For Uncertain Times p.12
3 Reasons to Replace Your Core Now p.18
Table of Contents p.2
In This Issue
mailto:%[email protected]:%[email protected] -
8/3/2019 BST Digital Issue 04 2010
13/15
retrofitting will need to occur with the new system. Do not make product
changes or introduce new products as part of the change.Narrow the scope
as much as possible by resisting the temptation to simultaneously upgrade
other systems.Identify areas of risk and include mitigants in the execution plan.
There is no perfect system, but there are some great ones available.Youcan find a close fit if you know your requirements well.And remember:You
are selecting a new vendor as well as a new system.
Next >>
www.banktech.com April 2010 25
and retraining bank personnel to adapt to the new interfaces and processes.
Overall, project success depends on clear business goals.Without a long-
term perspective, a bank would find it difficult to manage its IT systems and
align them with the organizations business processes in the future.
more...
f
in
SHARE
BEST PRACTICES
Banks need to approach core systems modernization from a top-down
perspective with a view toward their end-state architecture.A well-defined
implementation should look at extending and integrating current prod-
ucts,with a vision to facilitate flexible integration of future products. For
example, centralized customer data can give the bank a standardized
database for seamless integration of other products to the core process-
ing system.An implementation based on industry standards and frame-
works would set a base for third-party products and solutions.
A successful modernization initiative should aim to achieve reduced
transaction processing time, increase the amount of straight-through pro-
cessing,and provide more standardized operational and business processes.The
downtime during implementation depends on a number of factors,including
the size of the bank,the magnitude of the implementation and the functional-
ities being installed.Phased implementation,either
by regions or business verticals,has been the most
accepted methodology for medium to big banks.
Migration of data and data mapping form acritical part of the transformation,ensuring zero
data loss and complete alignment to the new sys-
tem.Other important aspects to reduce risk are a
well-thought-out change management process
Keep Everything in PerspectiveTo successfully implementcore systems,banks must have a clear business
strategy and the C-level sponsorship required to commit to a high-impact
change program.These banks tend to have a jointly managed operations
and technology group with a proven track record in delivering solutions.
There are two common scenarios.Banks needing to simplify and mod-
ernize complex and aging infrastructure usually have opportunities to
first standardize and integrate channel, product and database systems,
and then to selectively modernize their core systems. Banks with plat-
forms that cannot scale up or functionally support the business would
tend to benefit from a more transformational approach.
An important factor is proper service provider management. A bank
should insist that the vendor satisfy competitive business processes script-
ed by the bank.Reference checks can separate hype from reality in promised
capabilities.And the bank should contractually obligate the vendor to pro-
vide ongoing visibility into its product road map and R&D investment.
Ongoing engagement from senior business leaders is a requirement,as is
independent and experienced program oversight.Leveraging industry stan-
dards for business requirements,architecture and the development approach
is critical for the implementation to go well and satisfy business needs.
But U.S. banks would benefit from the availability of additional solutionoptions.While current options are adequate,vendor consolidation and the lack
of domestic implementations from international providers constrain the com-
petitiveness of the market. International providers,therefore,have an oppor-
tunity to break into the U.S.market through partnerships and acquisitions.I
A Global Disadvantage?
PaulSussmanVice President
FirstManhattanConsulting
Group(New York)Rajesh MR
Analyst
Celent(Boston)
Q&A With ATB Financial EVP Ken Casey p.6
New Branches in 60 Minutes p.10An Agile Core For Uncertain Times p.12
3 Reasons to Replace Your Core Now p.18
Table of Contents p.2
In This Issue
-
8/3/2019 BST Digital Issue 04 2010
14/15
VP/GROUP PUBLISHERJohn [email protected] 212-600-3097
EDITORIAL
Editorial Director Katherine [email protected] 212-600-3062
Executive Editor Penny [email protected] 212-600-3320
Group Content Manager Les [email protected] 212-600-3024
Senior Editor/Associate Managing EditorNathan [email protected] 212-600-3140
ART
Igor Jovicic
Jim Lawyer
Kristen Terrana
BigYellowTaxi.com212-375-9490
INFORMATIONWEEKFINANCIAL SERVICES
TechWeb CEO Tony L. [email protected]
VP/Group Publisher John [email protected]
Editorial Director Greg [email protected]
Group Content Manager Les [email protected]
VP, Group Sales Martha [email protected]
Webmaster Vitali [email protected]
Director of Sales Felissa [email protected]
Event Director Jennifer [email protected]
Event Manager Mitzi [email protected]
Director of Marketing Sherbrooke [email protected]
Director,Program Management,Vertical Markets Michelle [email protected]
Associate Business Manager
READER SERVICES
Electronic Newsletters banktech.com/newsletter/subscribe
Digital Edition banktech.com/digital-edition
Issues Archive banktech.com/issues
Editorial Calendar banktech.com/editorial-calendar
Contact Us banktech.com/contact
Print Subscriptions banktechsubscriptions.com
ReprintsWrights ReprintsBrian Kolb 1-877-625-5295E-mail:[email protected]: wrightsreprints.com/reprints/?magid=2198
List Rental
MeritDirectAnthony Carraturo 914-368-1083E-mail: [email protected]
Back IssuesE-mail: [email protected] (U.S.): 8886643332(Outside U.S.): 8477639588
Next >>
www.banktech.com April 2010 27
Q&A With ATB Financial EVP Ken Casey p.6New Branches in 60 Minutes p.10
An Agile CoreFor Uncertain Times p.12
3 Reasons to Replace Your Core Nowp.18
Table of Contents p.2
In This Issue
mailto:[email protected]:[email protected]:[email protected]:[email protected]:%[email protected]:%[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:%[email protected]:%[email protected]:%[email protected]:%[email protected]:%[email protected]:%[email protected]:%[email protected]:%[email protected]:%[email protected]:%[email protected]:%[email protected]:%[email protected]:%[email protected]:%[email protected]:%[email protected]:%[email protected]:%[email protected]:%[email protected]:%[email protected]:%[email protected]:%[email protected]:%[email protected]:%[email protected]:%[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:%[email protected]:%[email protected]:%[email protected]:%[email protected]:%[email protected]:%[email protected]:%[email protected]:%[email protected]:[email protected]:[email protected]:[email protected]:%[email protected] -
8/3/2019 BST Digital Issue 04 2010
15/15