If banks do not respond to the changes in their environment, they could find themselves going the way of the dinosaur .
Many organisms survive in their own environment, but few adapt well to new surroundings. For retail banks in western Europe, the environment has proven highly changeable with constantly shifting geographies, and competing to survive has required a good deal of adapting. For example, the move away from a product focus and toward a customer focus in order to compete will need serious internal change occurring in those banks claiming to be converts. Opening another call centre won’t convince anyone, least of all a customer.
At the London Stock Exchange last month, senior bankers and system vendors met at The Banker’s second annual Core Systems Strategy conference and discussed the benefits that a strategy of replacement or renewal can offer. The event was well attended highlighting the increasing interest in the subject from Tier 1 banks.
With research indicating approximately 10% growth in spending on core system licences in western Europe, which in turn accounts for 36% of global core system spend, the economics speak for themselves.
The replacement of core technologies cannot be underestimated in terms of risk and cost, but current maintenance spend – combined with the patchwork of customer focussed and regulatory systems employed by many – demonstrates existing cost and risks of its own.
Banks within emerging markets are taking on new systems that allow the creation of new products in weeks not months, that are designed with a multi-channel strategy in mind. The workflows of these systems facilitate compliance with regulation, such as Know Your Customer. This shift has been slower in Western Europe.
The flexibility demanded by banks to cope with a constantly shifting marketplace can only come with the technological equivalent of a spine – providing support while growing and moving with the bank – as opposed to a shell, giving protection at the cost of restricted growth and movement.
The case studies at the conference show that modern core systems provide this flexibility, suggesting the late adopters are likely to find themselves left behind in this evolutionary race, still dragging themselves from the ocean when others are coming down from the trees.
