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Banks should replace core banking systems to stay competitive 3/25 Businesswire A changing economy & increased regulatory requirements have put increased pressure on banks & their core banking systems. However, according to the 2008 Core Banking Systems Survey from Capgemini, almost all of the top retail banks globally are still using legacy systems dating from the 1960s & 1970s in domestic markets; despite the growth of packaged banking solutions in international operations over the last 3 decades. To sustain growth under recent banking pressures & continued regulatory requirements, it is essential for banks to have the right core banking systems in place. While a large bulk of package sales are still within Tier 3 & 4 banks, signs of larger, more strategic decisions are emerging with select Tier 1 & 2 banks that require sophisticated transaction processing software capable of handling large transaction volumes & giving banks the ability to gain ‘a single view of the customer’ in terms of their product usage. The survey provides recent trends, in-depth insights into the vendors & package solutions market & offers a guide for selecting & implementing a package solution in a structured, controlled & manageable way. Beyond the financial drivers, IT globalization, increasing compliance & industry consolidation, are some of the other key motivators for core banking system replacement. The primary drivers for system replacement are shifting from cost reduction to growth. For example, regulations like SEPA have accelerated the payments industry transformation. To be among the major players in the new SEPA environment a bank must process at least 5b payment transactions a year. Tremendous industry consolidation, increased customer transaction demands & data management has led banks to feel increasingly limited by the capabilities of their core banking systems, & more than 90% of banks interviewed are now willing to have a common architecture & a modular applications suite globally. ‘To react to these trends, a bank’s key support systems need to be transformed,’ comments Gert Jan van Dorsten, Capgemini, ‘International legislation & regulation necessitate more transparent & understandable products. Higher flexibility, such as adaptable mortgage products is required by some customers,. Changes to pricing structures such as the introduction of risk-based pricing & package-based pricing are required to attract customers. These kinds of changes would enable banks to strengthen their competitive position on the market.’ Some players like Oracle who provide an integrated suite of standards-based, industry-specific applications for banks, insurance companies & capital market firms through their recently formed Global Financial Services Business Unit are leading the way in this market. While others like Misys & Callataÿ & Wouters are making in-roads with their strategic cooperation with SAP. There is a trend towards alignment with the architecture stacks & frameworks of the ERP giants SAP & Oracle in this market, & most independent vendors are aligning themselves to one of these platforms. Gert Jan van Dorsten, Capgemini, concludes, ‘Package solutions have come a long way in terms of functionality, but implementations in tier 1 & 2 banks remain extremely large & complex. Banks willing to tackle planning & governance challenges can derive benefits by driving the replacement of outdated core banking systems, including meeting compliance demands, control over data management issues & a single view of their customer base. Banks should evaluate the packages available & work with technology partners to develop systems that deliver competitive advantage & enable them to prosper in this new environment.’