There's a lot of talk in the banking industry about shifting capital investments from "running the business" (maintenance, operations, etc.) to innovating and "transforming the business." Much of that discussion is focused on core systems, without which there would be no account opening, no bill paying, no lending.
Until recently most of the analysis had to do with whether banks' aging legacy systems were becoming less capable of effectively running these essential parts of the business. At the same time, there continued to be legitimate concerns about replacing or upgrading those systems, since these kinds of expensive and difficult projects can seriously disrupt the business.
But a dramatic shift in expectations is taking place. Increasingly, core systems are being viewed as the foundation of a banking transformation marked by customer-centricity and a nimbler, more flexible business model whereby banks perform less like lumbering behemoths and more like e-businesses. With this redefinition of core systems modernization as a competitive and compliance-related necessity rather than a discretionary risk, the debate has shifted from "Should we or shouldn't we?" to "How should we do it?" This new thinking about the role of core systems and the best ways to modernize them is the subject of the December digital issue of Bank Systems & Technology.
At the recent SAP Financial Services Forum in New York, Andrew Hagger, general manager of transformation and analytics at Commonwealth Bank of Australia, related how a major core systems initiative it's doing with SAP is helping the bank go beyond the rhetoric of customer-centricity. "We all want to be customer-centric, but it's a hard challenge across the world," he acknowledged. "We are leveraging our core to do that." The bank, he said, is "aiming to be more channel-agnostic. Real-time and seven-day banking are critical for us." Raising the stakes, Hagger said, "Our competitors are launching capabilities similar to ours."
[The Case For 'Progressive Renovation': Legacy Systems Are Not Equipped for Today’s Multichannel Banking]
At Commonwealth Bank, the core banking system is known as "the revolution -- it's a whole new way of doing business, a new way of interacting, and the key to us delivering what our customers want and need. … It has galvanized our organization," Hagger said. "Our core banking vision is to build a great client-centric bank whose profitable growth is powered by simplicity."
No one is saying this comes easy, but it's clear that competitive advantage and the ability to innovate productively will be driven and enabled by core systems capabilities. The question for all banks has to be: Is our core making us more competitive, or is it holding us back?