1/22/16, 2:30 PMIBS Intelligence - Blog: Banking is a battlefield
Page 1 of 4http://www.ibsintelligence.blogspot.co.uk/2016/01/banking-is-battlefield.html
IBS Intelligence is the definitive source of news, analysis and thought leadership relating to globalbanking and financial technology markets. We cover what is really going on – the good, the bad, thelessons, the mistakes and the masterstrokes, with no advertorial or marketing hype. IBS IntelligenceBlog is an excellent outlet to voice opinions, views and share ideas about all things fintech, andeditorial contributions are welcome!
Home About us Our team
Friday, 22 January 2016
Banking is a battlefieldFor$anyone$who$wasn’t$around$forthe$80s,$any$karaoke$barexperience$virtually$guaranteesthat$the$Pat$Benatar$tune$'Love$isa$BaAlefield'$comes$to$mind$whenanything$is$called$a$'baAlefield':banking$included.
Sad$thing$is,$when$it$comes$to$corebanking$systems,$legacy$status$means
any$claim$of$'we$are$young,$we$are$strong,$no$one$can$tell$us$we’re$wrong'$islaughable$at$best,$an$uAer$lie$at$worst.
My$recent$post$in$American$Banker’s$BankThink$argues$that$a$legacy$is$somethingone$leaves$behind.$And$here,$I$assert$that$cleaving$anKquated$cores$is$the$onlysound$strategy;$keeping$legacy$core$systems$gives$only$a$hollow$and$Pyrrhic$victoryat$best.
Most$banks$are$bound$to$legacy$systems,$where$data$is$siloed$and$moving$databetween$those$silos$obstructed.$Data$sKcks$together$like$any$good$baAalion,$andbanks$have$built$layers$upon$layers$onto$those$legacy$cores$to$support$mobile$anddigital$channels,$but$that$data$sKll$remains$rank$and$file,$bound$by$business$linesilos.$Result:$no$full$view$of$customer$needs,$poor$customer$experiences,$nochampions$for$customer$hearts$and$wallet$share.
TAKING'AIM'AT'INFLEXIBLE'LEGACY'SYSTEMS
Guerrilla$style$market$wars,$though,$are$quickly$becoming$the$norm.$Going$upagainst$new$challenger$banks$like$Starling,$Atom,$Fidor,Monese,$Mondo$and$Secco$requires$a$nimbleness$on$the$baAlefield,$and$a$set$oftools$in$the$arsenal$with$names$like$innovaKon,$flexibility,$realRKme,$speedRtoRmarket,$allRdigital.$
Modern$core$systems$are$architected$to$be$open,$flexible,$and$let$data$moveinstantly$and$ubiquitously.$TradiKonally$siloed$business$lines$now$flood$data$thathelp$the$nimble$neobanks$build$connecKons$with$customers$throughpersonalizaKon,$nuanced$pricing,$and$faster$customer$service$resoluKon.
IBS Journal
Visit our website:
ibsintelligence.com
0 More Next Blog» [email protected] Dashboard Sign Out
This site uses cookies from Google to deliver its services, to personalize ads and to analyze traffic. Informationabout your use of this site is shared with Google. By using this site, you agree to its use of cookies.
LEARN MORE GOT IT
1/22/16, 2:30 PMIBS Intelligence - Blog: Banking is a battlefield
Page 2 of 4http://www.ibsintelligence.blogspot.co.uk/2016/01/banking-is-battlefield.html
Legacy$systems$are$fundamentally$incapable$of$keeping$those$tools$sharp,$let$aloneready$to$wield.
RALLYING'THE'BANKING'BATTLE'CRY
To$date,$U.S.$banks$have$had$a$regulatory$moat$protecKng$their$territory,$but$thebaAle$cry$hasn’t$gone$ignored,$and$American$customers$are$also$demanding$beAerservices,$products,$and$experiences$from$their$banks.$Here’s$where$a$good$offenseis$the$best$defense$when$it$comes$to$encroaching$digital$challengers,$and$Americanbanks$should$study$the$U.K.$market$for$clues$to$drawing$up$aAack$plans.
The$basKon$of$legacy$technology$invites$problems:$recent$failuresfrom$Westpac,$HSBC,$NatWest,$and$SunGard$prove$this.$When$the$enKrefoundaKon$of$the$technology$supporKng$the$bank$is$old,$creaking,$prone$to$failure,inhibits$innovaKon$offerings,$and$leaks$revenue,$it’s$Kme$to$stop$debaKng$the$meritof$upgrading$or$enhancing$core$systems;$it’s$Kme$to$act.
The$high$risk$of$a$core$replacement$project$is$well$documented;industry$skepKcism$for$replacement$ROI$is$also$high.$But$new$strategies$haveemerged$that$address$miKgaKng$the$risk$of$a$ripRandRreplace$approach$–$all$ofwhich$first$and$foremost$address$what$the$definiKon$of$a$core$system$ought$to$be.
Reduced$to$its$most$basic$funcKonality,$a$core$system$is$a$record$keeper$fortransacKons,$updater$of$the$General$Ledger,$and$manager$of$balances.$But$industryand$customer$demands$have$put$the$onus$on$core$systems$to$be$all$things$to$allpeople,$and$over$the$last$20$years$core$providers$have$tried,$unsuccessfully,$tomeet$that$demand.$In$a$recent$post,$banking$systems$analyst$MarKnWhybrow$predicted$that$core$soluKons$that$componenKse$their$systems$will$seethose$component$markets$invaded$by$new$niche$suppliers,$because$a$single$corepanacea$offering$is,$well,$rather$mindRbogglingly$complex$and$unlikely.
One$core$upgrade$risk$miKgaKon$strategy$is$to$layer$nonRcore$API$funcKonality$ontothe$base$core.$The$Open$Bank$Project$and$even$regulaKon$such$as$PSD2$havesupported$the$adopKon$of$alternaKves$to$hardRcoded$(limited)$core$funcKonality,especially$when$those$products$and$applicaKons$are$in$such$demand$by$the$endcustomer.
Challenger$banks’$core$systems$are$architected$from$scratch$to$componenKsefuncKonality$outside$of$the$tradiKonal$core$system:$no$longer$is$every$productmanaged$and$priced$from$the$core$where$any$product$change$requires$a$team$ofcoders$to$make$updates$in$mulKple$systems$before$the$new$aAribute,$term,$orprice$can$go$into$effect.$Private$comments$from$banks$confirm$the$lengthycampaign:$500$days$to$make$a$single$price$change.
Due$to$the$absence$of$silos,$the$magnified$data$aggregaKon$also$translates$into$asharpened$pricing.$Pricing$opKmisaKon$becomes$a$rapier$weapon,$and$miKgatesthe$downward$pressure$on$margins,$both$from$diminishing$fee$returns$(the$newcap$on$interchange$fees$for$card$payments$in$Europe$being$the$most$recentexample,$and$in$the$US$conKnued$pressure$to$revisit$DoddRFrank,$and$repeal$theDurbin$amendment),$and$compeKKve$offerings$from$new$entrants.
This$componenKsed$funcKonality$means$the$core$does$what$it$does$best:$it$creditsor$debits$the$general$ledger$(GL).$The$components$do$what$they$do$best:$manageproducts,$facilitate$pricing$opKmisaKon,$aggregate$business$intelligence,$facilitateanalyKcs,$process$payments,$and$support$digital$channels.$It$also$means$theoperaKonal,$KmeRconsuming$burden$of$perpetual$core$updates$is$eliminated.$Thecore$baAalion$remains$strong,$but$guerilla$groups$are$responsive,$flexible,$nimble.Response$to$customer$demand$can$be$swic.$CompeKKve$relevance$is$restored.
Core$modernisaKon$does$not$necessarily$dictate$a$replacement,$but$it$doesdemand$extracKng$funcKonality$–$like$pricing$–$outside$of$the$legacy$core.$Even$infullRfledged$core$replacements,$American$banks$can$approach$a$system$overhaul$bycreaKng$that$external$funcKonality$as$the$first$step$in$a$core$migraKon$path,$gainingflexibility$right$from$the$start.
The$industry$has$recognised$that$the$old$definiKon$of$a$core$system$should$be$justthat:$a$legacy$lec$behind.$By$reRscoping$and$redefining$what$a$bank$core$systemcan$and$should$be,$harnessing$technology$as$modern$tools$–$even$as$weapons$inthe$baAle$for$wallet$share$and$customer$loyalty$–$banks$can$shed$the$mantel$ofanKquated,$strengthen$their$services,$and$head$in$the$right$direcKon.$It’s$abaAlefield$out$there.$It’s$Kme$to$revamp$the$arsenal.
#ICYMI @Barclays is selling off its Iberian credit card operations: ibsintelligence.com/ibs-journal/ib… #fintech #Barclays
IBS Intelligence @IBSIntelligence
Show Summary
.@ProvenirGlobal signed up by @OakamLtd for Risk Decisioning Platform: ibsintelligence.com/ibs-journal/ib… #fintech #ICYMI
IBS Intelligence @IBSIntelligence
Show Summary
If you're on a quest for questions and answers - IBS Chat is the #fintech forum to help: ibsintelligence.com/ibschat/
IBS Intelligence @IBSIntelligence
Show Summary
A common #banking disease that can lead up to $67bn loss in a year: FRAUD! Our #fintech blog explains more: ibsintelligence.blogspot.co.uk/2016/01/a-comm… #ICYMI
IBS Intelligence @IBSIntelligence
Expand
14m
2h
3h
5h
Tweets FollowFollow
Tweet to @IBSIntelligence
Subscribe to the IBS Blog
▼ 2016 (5)
▼ January (5)
Banking is a battlefield
Cashless society – what’s in it for the UK?
A common banking disease that can lead up to$67bn...
Application lifecycle management: movingfrom trad...
Customer experience in fintech land
► 2015 (33)
► 2014 (38)
Blog Archive
1/22/16, 2:30 PMIBS Intelligence - Blog: Banking is a battlefield
Page 3 of 4http://www.ibsintelligence.blogspot.co.uk/2016/01/banking-is-battlefield.html
Older PostHome
at 01:00
Labels: banking, banking technology, challenger bank, Core banking systems, digital,fintech, legacy systems
By#Ghela#Boskovich,#Director,#Global#Strategic#Business#Development#&#Marke<ng,#ZaifnConnect#with#Ghela#on#LinkedIn
Recommend this on Google
Notify me
Sign out
Enter your comment...
Comment as: annaghela (Google)
PublishPublish
PreviewPreview
No comments:
Post a Comment
IBS Intelligence is a division of Cedar Management Consulting International, LLC
Email: [email protected]
Telephone: +44 (0) 2075 202 630
Visit our website
ibsintelligence.com
Simple template. Powered by Blogger.
1/22/16, 2:30 PMIBS Intelligence - Blog: Banking is a battlefield
Page 4 of 4http://www.ibsintelligence.blogspot.co.uk/2016/01/banking-is-battlefield.html
