Banks worldwide are growing increasingly dissatisfied with their aging core banking systems and plan to update their core technology architecture to remain competitive, according to a global survey by Accenture and SAP.
The survey found that 70pc of bank executives believe flexibility was the biggest problem hindering the success of their core banking systems with almost half of bank executives citing high maintenance costs and lack of systems integration as areas that could impede their ability to remain competitive.
To address these concerns, a significant number of banks surveyed are planning core banking system replacements within the next five years — 30pc in Europe, more than 35pc in Asia Pacific and more than 20pc in North America.
Almost 1,500 bankers from around the world contributed to the study. Core banking was defined as the sum of all IT components allowing banks to manage basic financial products and services, including data on clients, deposit accounts, loans, mortgages, payment transactions and credit cards.
SAP and Accenture entered into a financial services industry alliance in 2003 and the survey, entitled Redefining Core Banking, aims to examine the current status and transformation needs of banks worldwide.
“Regardless of geography, core banking system maintenance is the albatross in banks’ IT departments,” said Octavio Marenzi, CEO, Celent. “Fierce competitive dynamics and the necessity to keep pace with new products and to strengthen customer relationships will motivate banks to significantly rethink and revamp their IT architecture over the next decade.”
The survey found that core systems issues resonate with branch employees who said they spend nearly 40pc of their days working on customer-related back-office activities rather than on customer-facing activities.
Branch workers also agreed that response time (38pc) and integration of different applications (38pc) ranked highest on the list of areas that currently need improvement.
Some 50pc of branch employees agreed that frequent and unwanted delays were the most common processing issues, followed by inconsistent customer data and not understanding customer needs.
“This survey points to the need for leading banks to simplify their internal operations, equipping themselves with core systems that use flexible, robust, future-oriented IT architecture that is service oriented,” said Jean-Marc Ollagnier, global managing partner of Accenture’s Financial Services Solutions Group.
“This component approach, replacing unnecessarily complex IT systems, can allow for more optimal IT alignment with the business-operating model and can allow for future flexibility in sourcing decisions.”
Another significant finding of the survey was that business executives and IT executives differed in their expectations of the value a core banking system needs to bring to a bank. Some 39pc of business executives want a system focused on product innovation, while 40pc of IT executives primarily want a system that reduces expenses.
By John Kennedy