Considering the core replacements that have been undertaken lately, are there lessons, best practices or mistakes to avoid that you think banks should be aware of?
Wakeman: When you look at pure success factors, who has come in from a global product offering and not been U.S. regulatory-compliant and been successful? That's a risk that needs to have a carefully planned strategy around it. The U.S. banks that are owned by global banks are certainly in different stages with that.
The clear execution of good strategy is important -- taking a look at what can be done incrementally and looking at if the driver is big enough to do a full rip and replace, or if there are components or functions that can be optimized. One of our clients decided not to go forward with a full rip-and-replace core transformation. They were really headed down that path. They just couldn't make a business case work for it. But they do need to reduce some of their cost structure and look for ways to determine how they can optimize, maybe even take some of the function out of the core, and streamline. I would say the trend [right now] is really more around being owned by a global bank -- that the synergies can happen from an interface perspective and the maintenance and development. We're seeing a bigger trend there.
[The New Ecosystem for Mobile: Technology Alliances for M-Payments and M-Banking]
Can you elaborate on why you think larger banks will invest more in core transformation in the next few years?
Wakeman: There are several trends here. For some banks, for example, part of their three- to five-year strategy would be to upgrade their current core system but [with] an upgrade to the newest release from their core vendor. Another thing is the benefit of real time versus batch. I don't think it's a driver to transform -- if you were building a new bank you'd want to start with real time to begin with -- but as checks continue to decline, how will that continue to be at play? And there are fraud benefits that can be realized with real time.
Chung: When a lot of people think about core banking, they think it's about cost savings, but 20% of that is really revenue growth. I think that being able to generate this new income stream is one of the key drivers in terms of a bank considering looking at a business case and evaluating the options behind a core banking transformation.