BST Digital Issue 04 2010

8/3/2019 BST Digital Issue 04 2010

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More and more banks are finding that their legacy systems cant keep upwith consumer demands.Fortunately, a core replacement can give a bankthe flexibility it needs to compete now and in the future. p.12

Table of Contents p.2

CORE SYSTEMS MODERNIZATION:

AFresh

Start

New Branches in60 Minutes p.10

3 Reasons the Time IsRight for Change p.18

Core TransformationBest Practices p.22

April 2010


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COVER STORY

An Agile Core

To meet consumersdemands

for real-time transactions,

and to adapt quickly as those

expectations change,many

banks finally are modernizing

their core systems.

COMPETITIVE DRIVERS 183 Reasons the Time IsRight

Sweeping competitive

changes are forcing banks

to rethink legacy systems

and core upgrades.

6 EXECUTIVE Q&AKen Case

y,EVP,ATBFinancial ATBs executive VP of

major initiatives has plenty of advice for banks

looking to replace their core systems.

10 CASE STUDYNew Branches in 60 Minutes A new core system

transforms a Vietnam-based bank into an agile

institution built for expansion.

22 PERSPECTIVESModern CoreThinkingOur panel of experts

examines the factors that can make or break

a core banking system replacement.

4 FROM THE EDITOR

26 EDITORIAL AND BUSINESS CONTACTS

12

April 2010

This is the first of four

all-digital issues that

Bank Systems & Technology

will be publishing in 2010.

2 April 2010 www.banktech.com

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n my dual role as an editor for Bank Systems & Technology

sibling brand Insurance & Technology, on more than one

occasion I declared that insurance companies needed to

update their online capabilities to keep up with evolving

customer expectations which were being driven, in part,by the

higher level of online service provided by banks.And yet, in the

cover story for this special digital issue of Bank Systems &

Technology, I find myself suggesting that banks need to modern-

ize their core systems in order to develop better online capabili-

ties to keep up with customer expectations which are being

driven, in part, by the higher level of online service provided by Internet powerhouses

such as Amazon and PayPal (see Core Agility,page 12).

Especially in an online environment,capabilities and customer expectations evolve so

quickly that standing still means falling behind.There will always be another industry or

another competitor doing something newer or better.And sooner than you t hink

that exceptional level of service becomes the new standard.

The best a bank (or an insurance carrier or any other company) can do is acquire

enough flexibility to react to these changes as quickly as possible.Perhaps that is why

banks now seem to be more willing,at the very least, to consider replacing their legacy

core banking platforms than at any time in the past.

The risk associated with an outdated core system isnt that it lacks any given set of online

capabilities; rather, its that an old core system lacks the flexibility needed to even bolt on

those capabilities.It s one thing for a bank to say,We dont have that.Its another for a bankto say,We cant have that.And as youll read in the many core transformation success sto-

ries that follow,fewer and fewer banks are willing to concede that competitive advantage.

The Never-Ending Story

I

Nathan Conz,Senior Editor [email protected]
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www.banktech.com April 2010 7

GoingEnd to End

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From a management point of view,the driver was

growth.It was the ability to be competitive in the mar-

ketplace with products and services that could be

[developed] quickly and economically.With the older platform,that was increas-ingly difficult. At some point there would have been a cap on growth.On the

employee level,the driver was usability and a focus on customer activities.

The reason now was a good time and we started before the recession

[planning started four years ago and implementation began in 2008] was

that the risks were significant enough that something had to be done and

also that the next generation of banking technology made it viable. In the

past,it was difficult to actually fin d a solution that could take us end to end.

BS&T:What were you looking for from vendor solutions that you found

this time around?

Casey: It was the flexibility of the solutions. Many of the products could be

built through parameters, rather than through code.In other words, it was

the ability to create a product in a certain field,such as savings accounts,and

then take that one product and,through configuration, create many. In our

current environment and in many solutions over the years, that flexibility

wasnt there.Much of what you built had to be built over again each time.

This flexibility helped us create new products economically and also quite

distinctly.[ We can develop] products aimed at certain segments of the popu-

lation different demographic or economic groups.As the costs of product

development are less,they can be much more tar-

geted.Whatalso factored in for us was the ability to

build reusable services for our multiple channels.

BS&T:Arethere things you know now that you

wish you had known when you first started

the project?

Casey:There always are.It is more complex than

BS&T:What are the basic components of your core system replacement

project,and how far along are you?

Casey: Ours is a complete end-to-end banking platform, so it is quite a bit

broader than other [core systems projects]. Were replacing our entire trans-

actional banking suite payments, analytics and the [general ledger],

pretty much everything with an SOA-based architectural stack.

Its fairly complex,but we are nearing the end of the build phase. Well go

into a full integration test phase that,given the breadth of the program,will

take a good seven to eight months.That takes us to a go live in early 2011.

BS&T: Why was now the right time to modernize? What are the drivers

behind the project?

Casey:The drivers on a very strategic,shareholder or board level wererisk of the aging environment causing a potential service disruption and also

the potential information security [issues] that could arise with a fairly com-

plex distributed environment of aging technology.The third driver from that

point of view was compliance with the new regulatory regime....

ATB Financial ($26.5 billion in assets) is in the midst

of an end-to-end core system replacement that lever-

ages the SAP for Banking software suite. Ken Casey,

ATBs EVP of major initiatives, discusses with BS&T Senior Editor Nathan Conz

([email protected]) the business drivers behind the project and how the

Calgary, Alberta-based bank intends to realize a return on its major investment.

NewBranches in 60 Minutes p. 10

An Agile Corefor Uncertain Times p.123 Reasons toReplace Your CoreNow p.18

CoreReplacement Best Pactices p.22


In This Issue

Were replacing ourentire transactionalbanking suite ...with an SOA-basedarchitectural stack.

KEN CASEY, EVP, ATB FINANCIAL
mailto:%[email protected]:%[email protected]:%[email protected]:%[email protected]


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we had originally envisioned it to be the dependencies are higher.The

building of services in the SOA stack the number of them and the num-

ber of channels is more complex than we thought.

The maturity of configuring products for the North American market is

taking a little longer to do than originally thought.Most of these next-gen-eration banking platforms have been implemented in Europe and in Asia,

but were one of the early adopters in the North American market. In some

instances,there are different products with different characteristics [in North

America] that really havent been done before [on a core system such as this].

Were doing some of that for the first time, and I think were doing an end-

to-end integration for the first time as well.

BS&T: Who are your key tech partners on the core systems project?

Casey: We contract with SAP (Walldorf,Germany) and Accenture (Chicago).

SAP is really the software provider and Accentures role is about data migra-

tion for technology architecture,testing and program management.There

also is in-house development, to the extent that when youre running a

program that goes two-and-a-half to three years in duration, keeping the

bank [running] is an important piece of that.

BS&T: What are some of the projects expected benefits?

Casey: On one hand,youre replacing infrastructure that is at the end of its

life and youre replacing risk. On the other hand,there is an opportunity to

drive benefits from the investment.Those hard cost benefits ranged from

creating new products and new services for our

customers for revenue growth in our lines of busi-

ness to the reduction of back-office costs.

The total cost of ownership of our IT environ-ment was another area where we found savings.

So in our business case,we did manage to offset

the costs [of the core banking implementation]

over an eight- to 10-year period.I

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servers, an HP StorageWorks SAN and Oracles (Redwood

Shores, Calif.) Database 10g.

The new hardware was installed from December 2008

through February 2009,and T24 was deployed on a test system.To save time,we tested T24 and developed a migration tool

in parallel with other tasks, explains Dung.We planned to

migrate data ...from Microsoft [Redmond,Wash.] SQL and jBASE to Oracle XML

while ensuring smooth banking operations throughout the go-live period.

User acceptance testing and training for approximately 5,000 employees

began in March 2009. After a successful test migration, more than 3 million

accounts were systematically moved to T24 from June through the projects

completion in September 2009.Our original project time frame was one year,

but we completed the project a month ahead of schedule,Dung notes.Strong

support from our board of directors and board of managers was critical.

Got an Hour?

The overhaul has proven transformative.Today setting up a new branch in

our core systems only requires an hour or two,Dung reports.We opened

70 new branches in 2009, and we expect to reach our goal of 400 branches

by year-end.Most important,customer transac-

tions are completed within an average of three

to five minutes, which has significantly

improved customer satisfaction.

Now Sacombank is leveraging T24 to imple-

ment other technologies such as data ware-

housing, CRM, risk management and workflow

management, according to Dung.Were alsolaunching new products and services,he adds.

For example, were expanding our Web pres-

ence from inquiry-only to include transactions

and payments.I

mid a rapidly developing country, Vietnams Sacombank

expanded over the years to become the countrys second-largest

commercial institution,with 240 branches.Yet the bank continued

to rely on the same core banking systems from its founding in

1991.Our original system was provided by a local IT company,explains CIO

Bui Van Dung.It couldnt scale out any fur ther.

A cross-functional project team evaluated solutions from global vendors

in April 2008. According to Dung,Sacombank (US$3.65 billion in total assets)

selected Temenos(G eneva) T24 for its flexible,stable architecture.

T24 was a proven solution, deployed in Vietnam and around the world,

remarks Dung.In addition, Temenos familiarity with our culture, under-

standing of our regulatory environment and investment in local support staff

demonstrated its long-term commitment to our market.

Temenos devoted about a dozen onsite technicians to the project as well

as an offsite team.Approximately 100 full-time

and 50 part-time bank employees were dedi-

cated to the project,including about 50 from ITs

total head count of 115. Following Temenoshardware requirements, in October 2008

Sacombank invested in IBM (Armonk, N.Y.)

System p servers running the AiX operating sys-

tem, HP (Palo Alto, Calif.) 9000 Unix database

By Anne Rawland Gabriel [email protected]

Live in 60 Minutes

Setting up anew branchin our coresystems onlyrequires anhour or two.Van Dung BuiSacombank

A

Sacombanks core systems rip-and-replace transforms the Vietnam-based bank into an agile institution built for rapid expansion.

RIP AND REPLACE

INSTITUTION: Sacombank(Ho Chi Minh City,Vietnam).

ASSETS: US$3.65 billion.

BUSINESS CHALLENGE: Replacelegacy systems with modern coresystem to improve service andenable growth.

SOLUTION: Temenos (Geneva) T24core banking platform.

SNAPSHOT

Q&A With ATB Financial EVP Ken Casey p.6

An Agile Core for Uncertain T imes p.123 Reasons to Replace Your Core Now p.18

Core Replacement Best Pactices p.22


In This Issue
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sumers conduct transactions in real time,or at least close to it.

Many bankscore systems, however,cant offer

that same convenience. There are a lot

more interactions on the Internet,so a coresystem is going to have to handle a lot

more requests and traffic.

Its also going to have to

respond with greater

speed,contends Erich

Litch,SVP and GM,con-

sumer services, at Fiserv

(Brookfield,Wis.) Electronic

Banking Services.

A user doesnt want to wait 10 sec-

onds for a balance request, he continues.

Some core systems,given the workload,just

arent able to handle that kind of continuous

access and requests for information.

Customers online expectations are influencing their demands

across channels, notes Chris Tattersall, a London-based managing director

with SMART Business Advisory and Consultin g.You have a situation where

a client calls you and asks you,through your call center,to do something,

he says.When he gets to his office and looks into his online banking system,

he expects to see the results of what he did when he was on the phone call.

The multichannel system requires the core banking system to update imme-

diately so the client can see immediately whats going on.

Jim Sizemore,CIO,bank solutions, Fiserv,adds,A customers expectationis that they have a consistent experience regardless of the channel.That

means when they go to a teller,ATM, branch,Web site or mobile device,they

see the same results.

But consumer preferences can change quickly, meaning many banks

Were ableto come upwith moreideas andto tweak

things.Chris Plescia,Nationwide Bank

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n the introductionto a recently released Forrester Research report on

core banking technology, report author Jost Hoppermann,VP, princi-

pal analyst,argues that bank tech executives involved in delivering their

firms banking platforms will need to have, among other things,a

sound perspective on how the future of banking and the related applications

systems will play out.Fortunately banks do have

some insight into their future,and more specifi-

cally,the future expectations of their customers.

As consumers from every demographic growincreasingly comfortable conducting business on

the Web,new standards are emerging regarding

the customer experience. When dealing with

Internet giants such as Amazon and PayPal,con-

I

By Nathan Conz [email protected]

The need to meet consumersreal-time service demands,and to adapt quickly as thoseexpectations change, is drivingmany banks to replace their aging

legacy systems with modern, flexible cores.

COREAgility

FLEXIBLE SYSTEMS


New Branches in 60 Minutes p.103 Reasons to Replace Your Core Now p.18



In This Issue
mailto:%[email protected]:%[email protected]


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aging core systems limit their ability to adjust.A lot of the core systems that

banks have are [built on a] very, very old architecture, observes SMARTs

Tattersall. As they modernize for example, when they start to create

more online capabilities they will struggle to integrate those into the old

architecture on which the core system was originally built.

A Flexible Future

In order to be prepared for wherever consumer tastes may go,as well as for

an equally uncertain regulatory environment,flexibility has emerged as a key

driver behind many banks legacy system replacement initiatives.Columbus,

Ohio-based Nationwide Bank certainly placed a premium on flexibility when

it implemented the Profile core banking system from FIS (Jacksonville,Fla.).

As a de novo bank, Nationwide Bank

wasnt shackled by a 20-year-old legacy

core system,but it needed a platform that

could grow along with the bank, notes

Chris Plescia, the Nationwides CIO.We

didnt have a core system,he points out.

We had a trust company at Nationwide

[the insurance company], and the deci-

sion was made and a charter was signed

to become a bank.As par t of the process, we had to pick a core system.

Nationwide,which has just two physical branches,is primarily an Internet

bank. As such, secure and easy online access, online bill pay and money

movement capabilities, and online financial

tools were all necessary components, Plescia

relates.Thats table stakes in the online banking

world,he says.So solutions that offered thosecapabilities that were tolerable out of the

box but quickly customizable were some of

the criteria we looked at.

The bank was given just seven months to

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install a core system and integrate it with other best-of-breed

solutions to build out its end-to-end platform, Plescia recalls.

Implementation started in May 2007 and the FIS core system,

which is operated under an outsourced model,was up and running

before the end of that year,according to Plescia.We didnt have time to build out a whole [custom] Web

banking front end. We had to take what was there [for

now],he says.One of our rules was to customize as little

as possible so that down the road we could have flexibility

in other areas and be able to make upgrades.

That flexibility has helped the company build $3.2 billion in assets in less

than three years. Since the initial rollout of the core system in December

2007,Nationwide Bank h as made numerous updates to its customer-facing

capabilities, Plescia explains.For example, the bank launched a credit card

origination system featuring real-time decision making and instant issuance

and enhanced fraud-detection and security measures.

In addition,after nearly 12 months in operation,the institution discov-

ered that only 11 percent of consumers who began deposit applications

online were completing them.By September 2009,Nation wide had rewrit-

ten the origination component of the application and saw its throughput

numbers jump to more than 54 percent.

The nice thing about [a modern core system] is that it is real-time and its

more flexible than its mainframe competitors. Were able to come up with

more ideas and to tweak things. You have to take the time and you have to

pay to build them,but you have the flexibility to do that,Plescia comments.

Three for All

That same agility was a driving factor behind Richmond MutualBancorporations (Richmond,Ind.;$881 million in assets) decision in fall 2008

to implement the Metavante (acquired by FIS in April 2009) IBS core banking

solution in each of its three subsidiaries First Bank Richmond,

AmericanTrust Federal Savings Bank and Mutual Federal Savings Bank. Firstmore...

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FLEXIBLE SYSTEMS

We would havecustomers ask for

something that wecouldnt just implementright away.John Rusie, First Bank Richmond





In This Issue


9/15

Bank Richmond,the holding companys lead bank,was the

last to go live on the new platform,in October 2009.

According to First Bank Richmond SVP of operations and

COO John Rusie, each of the three banks were previously

using outsourced core systems that were near th e end oftheir contracts.The company looked at the situation as an

opportunity to standardize.

With an assist from Scottsdale, Ariz.-based Cornerstone

Advisors,We gave some consideration to each of the exist-

ing core systems that each bank had,Rusie recalls.In our analy-

sis, we felt that none of them would really carry us into the future the

way we needed to.

That future includes surprise enhanced online capabilities.All three

banks currently offer online banking, but customer expectations, coupled

with competitive pressures, are driving the banks efforts to expand their

online offerings,Rusie acknowledges.

First Bank Richmonds business model has evolved to serve more commer-

cial small business needs, but those online services were difficult to launch

on the old core,Rusie says.We would have customers ask for something that

we couldnt just implement right away.Some of that was in cash manage-

ment capabilities the ability to have several different accounts and have

funds flow back and forth between an account and a line of credit, he

relates.Under the new system we have the capability to add those types of

functionality without it being a manual process behind the scenes for [IT].

In addition to expanding online banking

capabilities including security improvements

and online bill pay reporting features for com-

mercial clients Richmond Mutual also lever-aged its modern core system to standardize its

own infrastructure.It has given us the ability to

take advantage of the holding company to

provide services at the holding company level

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that we probably werent able to do before,esp ecially

behind the scenes from an accounting standpoint,

Rusie explains.

Patience Is a VirtueBut there is an adjustment period required before cus-

tomers appreciate the enhancements that are enabled

by the new core, Rusie notes.Early on, you get some

pushback from customers that dont like change.Thats

not a negative to the system youre going to get that

regardless,he says.

Nationwide Banks Plescia estimates, based on his

own experience as well as conversations with peers and

competitors, that there is usually a nine- to 15-month

adjustment period for the company to work out any

kinks and for customers to appreciate the enhance-

ments a new system can deliver.

In particular,Nationwide experienced some difficulty converting its exist-

ing credit union business onto the new platform,Plescia reveals.It was bumpy

at first, especially the conversion of the credit union onto the banking plat-

form.[ There were] a lot of the things that we could have tested for a million

years and never thought of,he relates.It took about nine months to shake

that out.Once we got it smoothed out,its been running really solid.

SMARTs Tattersall stresses that deploying a new core system is difficult

and fraught with risk.Its a nightmare because youre replacing something

that, almost inevitably,is built on a really old architecture with something

that is relatively new.Theres still enormous resistance to the level of change

that it requires and the complexity of the management to do it,he explains.On the other hand, there is an increasing need to do it,Tattersall adds.

If you compare the situation three or four years ago with now, there are

probably more banks doing it now than there were then.I suspect the num-

ber over the next two years will increase further. Imore...

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FLEXIBLE SYSTEMS





In This Issue

Implementinga new coresystem isa nightmare.Chris Tattersall,SMART Business

Advisory and Consulting


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pressed to achieve these goals,however,unless they start

laying down the core infrastructure that can support

operating model changes.

The recent interest among banks in core platformtransformation is being driven by three primary factors:

1. Emerging Foreign Competitors. Financial institutions from foreign

countries particularly Spain, Japan and Canada pose an increasing

competitive threat to U.S. banks. Some of the leading foreign banks have

achieved impressive cost-income ratios through core platform transforma-

tion,and they are bringing those competitive advantages to the U.S.market.

U.S.bankscost-income ratios generally range between 55 percent and 60

percent,while the best-run foreign institutions are in the 35 percent to 45

percent range.With the savings from their highly efficient operations,these

foreign banks have the ability to competitively price their products,there-

by gaining market share in the race for deposits.

In addition,their platforms allow them to bundle products and tailor offers

for specific segments based on key customer demographics and attributes.

With technology that enables a customer-centric operating model, these

banks will be formidable players in the U.S. in the next two to three years.

2.Direct Banks. Non-traditional banks,such as those selling through the

Internet,also are a rising threat.An estimated one-half of financial product

searches now begin on Google,a figure that is likely to grow exponentially

with the explosion of mobile devices and mobile banking.

With few,if any,retail branches, direct banks are seeking to differentiate

themselves based on pricing by running low-cost,agile operations that facil-

itate the introduction of new products.Traditional brick-and-mortar banks

should understand that direct banks are not just trying to capture deposits,but customer wallet share as well by offering a diversity of products.

3. Merger and Acquisition Activity.In light of ongoing economic weak-

ness that limits opportunities for organic growth, merger and acquisition

activity will likely accelerate this year, particularly among small and midti-

Pouring moneyinto outdatedcore systemsis a losing

proposition.

ost-crisis, banks are awaking to a new world order marked by a

regulatory wave requiring greater transparency, self-sufficient

customers with rising expectations,and greater competition from

traditional and non-traditional players.Yet most banks ability to

respond to these forces is highly constrained.

The processes, procedures and IT that form the foundation of their oper-

ations are expensive to maintain and lack the flexibility to meet industry

changes.A maze of legacy systems inhibits a single customer view, timely

introduction of new products, improved cus-

tomer service and,ultimately,growth.

According toa recent Accenture survey of bank

executives and private equity firms,the winners infinancial services by 2012 will be those organiza-

tions thatimprove the customer experience,reduce

non-strategic costs,optimize their pricing and over-

come vulnerabilities to risk.Banks will be hard

P

Sweeping changes in the banking land-

scape are causing many banks to reassess

with good reason whether they can

remain competitive with their existing

technology platforms, report Accentures

Steven Reiter and Fiaz Sindhu.

Competition SpursCore Changes

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COMPETITIVE DRIVERS


New Branches in 60 Minutes p.10An Agile Core For Uncertain Times p.12



In This Issue


11/15

New

Beginnings

Gain access to the resources and intellectual capital you need tohelp lead your organization into a new era ofgrowth.

October 3-6, 2010 The Grand Del Mar, San Diego

Please note that attendance at this Bank Systems & Technologyevent is

limited to executives from banks/financial institutions. Event producer

reserves the right to qualify and deny any interested party.

www.banktech.com/summit2010www.banktech.com/summit2010Register Today!

Summit Highlights:

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The Bank Systems & TechnologyExecutive Summit is an exclusive, invitation-only networkingevent that will provide focused networking and educational opportunities to bank CIOs/CTOs/line-of-business heads and other senior-level IT decision makers, in an unmatched resortenvironment. The Executive Summit agenda combines conference/seminar presentations,face-to-face business meetings, scheduled recreation and social events.

Sponsors

er U.S. banks. Acquiring banks must be careful,

however, to avoid falling into the trap of simply

patching the acquired bankssystems onto their

own, thereby adding complexity and reducingefficiency.

It isnt unusual for a banks asset size to balloon

by as much as one-third or more with just a sin-

gle acquisition. As they enter markets outside

their home base,sometimes taking on new lines of business as well,acquir-

ing banks must take a hard look at how their technology platforms can

best support their expanded operations.

Pushing Ahead

Banks should start the transformation process by assessing the benefits and

savings that can be derived from their core architecture determining,for

example,how they can lay the infrastructure to enable the selling of bundled

products and otherwise increase share of market and share of wallet.

Banks also need a well-defined release strategy that balances speed of

implementation with delivery risk and cost. Some organizations opt for the

big bangapproach, in which they effectively cut over to all new systems

at once.Others find it more appropriate to break up the effort into manage-

able releases to reduce operational and delivery risk.

Continuing to pour money into outdated core systems is a losing propo-

sition. To fend off growing competition, banks

tech platforms must enable them to have a sin-

gle view of their customers so that they can inter-

act with them more efficiently and profitably. I

Steven Reiter is the bank technology lead executive

at Accenture.Fiaz Sindhu is a core banking expert

in the firms North America banking practice.

Next >>

1. Emerging foreign competitors.2. Competition from direct banks.3. Merger and acquisition activity.

3 DRIVERS OFCORE SYSTEMS

TRANSFORMATION

COMPETITIVE DRIVERS





In This Issue


12/15

Its important not to make the mistake of thinking a different core sys-

tem will solve all the problems in a bank.Understand,quantify and doc-

ument the benefit of changing, including the opportunity cost of deferring

other initiatives until the replacement is complete.There often is very lit-

tle return on investment with a new core system enhancements to an

existing core system often yield better results and are not as disruptive.

Create a comprehensive and well-thought-out plan. Involve both the

new system vendor and your old provider in the process.Map the data from

your old system to the new one. Clean up your data before you convert.

Stage and complete a mock conversion and a conversion readiness check.

The key success measure of a core system modernization is that every-

thing works as expected.Customers dont choose to bank with you because

of the core system you use. Minimize customer impact.Make all the decisions before you begin.Manage risk and avoid last-minute

heroics.Train and let employees practice on the new system before conversion.

Limit the scope and be clear on what is included and what is not.Consider

the amount of customization to your existing core system and how much

Think Before You Act

Lynn CraneCIO andChief SecurityOfficer

Mutual ofOmaha Bank(Omaha,Neb.)

Next >>

ment must be viewed as an enterprise project

(rather than an IT project) in which every execu-

tive has a sponsorship of one sort or another.

North Shore CU puts a premium on customerrelationships,so the new banking system needed to fit within that strategy.We

were also looking for better data management.We segment quite a bit with

our business intelligence strategy,and our banking engine contains a lot of

behavioral data.We must be able to get information out across multiple chan-

nels and be able to act upon it.Business alignment was a critical factor as well;

fundamentally, this system is a business driver and not a technology driver.

ather than derail banks core systems replacement and upgrade

projects,the financial crisis has served to reinforce the need for

modern platforms that provide the agility to keep up with mar-

ket changes and support operational efficiency.What are the key

technologies and success factors of a core systems modernization initiative?

How can banks maximize the return on their investments while minimizing

both the downtime and the risk associated with a core transformation?

R

By Peggy Bresnick Kendler [email protected]

Modern Thinking


North Shore Credit Union is currently in the final phase of implement-

ing a new core banking system.When planning for the conversion, we

had to examine our risk tolerance, since risk aversion affects the way a

company approaches a project of this magnitude.

First,we had to determine if this was a tactical or strategic change.Is

it more of the same, or were we trying to do something that will bring

more value to the organization? At the end of the day, a banking system

is really a product/service engine,and banks must determine if the new

system will fit into the overall corporate strategy.

Its important to look at the potential impact of a core system replace-ment. Is it an opportunity to clean up the mess youve had for the past 30

years? Is it an opportunity to refresh your offering in the eyes of your cus-

tomers? The complete conversion will take a lot of time,and a company must

be prepared for changes of enormous magnitude.A core systems replace-

Driving Business

BEST PRACTICES

Fred CookCIO

North ShoreCredit Union(Vancouver)


New Branches in 60 Minutes p.10

An Agile Core For Uncertain Times p.12

3 Reasons to Replace Your Core Now p.18


In This Issue
mailto:%[email protected]:%[email protected]


13/15

retrofitting will need to occur with the new system. Do not make product

changes or introduce new products as part of the change.Narrow the scope

as much as possible by resisting the temptation to simultaneously upgrade

other systems.Identify areas of risk and include mitigants in the execution plan.

There is no perfect system, but there are some great ones available.Youcan find a close fit if you know your requirements well.And remember:You

are selecting a new vendor as well as a new system.

Next >>


and retraining bank personnel to adapt to the new interfaces and processes.

Overall, project success depends on clear business goals.Without a long-

term perspective, a bank would find it difficult to manage its IT systems and

align them with the organizations business processes in the future.

more...

f

in

SHARE

BEST PRACTICES

Banks need to approach core systems modernization from a top-down

perspective with a view toward their end-state architecture.A well-defined

implementation should look at extending and integrating current prod-

ucts,with a vision to facilitate flexible integration of future products. For

example, centralized customer data can give the bank a standardized

database for seamless integration of other products to the core process-

ing system.An implementation based on industry standards and frame-

works would set a base for third-party products and solutions.

A successful modernization initiative should aim to achieve reduced

transaction processing time, increase the amount of straight-through pro-

cessing,and provide more standardized operational and business processes.The

downtime during implementation depends on a number of factors,including

the size of the bank,the magnitude of the implementation and the functional-

ities being installed.Phased implementation,either

by regions or business verticals,has been the most

accepted methodology for medium to big banks.

Migration of data and data mapping form acritical part of the transformation,ensuring zero

data loss and complete alignment to the new sys-

tem.Other important aspects to reduce risk are a

well-thought-out change management process

Keep Everything in PerspectiveTo successfully implementcore systems,banks must have a clear business

strategy and the C-level sponsorship required to commit to a high-impact

change program.These banks tend to have a jointly managed operations

and technology group with a proven track record in delivering solutions.

There are two common scenarios.Banks needing to simplify and mod-

ernize complex and aging infrastructure usually have opportunities to

first standardize and integrate channel, product and database systems,

and then to selectively modernize their core systems. Banks with plat-

forms that cannot scale up or functionally support the business would

tend to benefit from a more transformational approach.

An important factor is proper service provider management. A bank

should insist that the vendor satisfy competitive business processes script-

ed by the bank.Reference checks can separate hype from reality in promised

capabilities.And the bank should contractually obligate the vendor to pro-

vide ongoing visibility into its product road map and R&D investment.

Ongoing engagement from senior business leaders is a requirement,as is

independent and experienced program oversight.Leveraging industry stan-

dards for business requirements,architecture and the development approach

is critical for the implementation to go well and satisfy business needs.

But U.S. banks would benefit from the availability of additional solutionoptions.While current options are adequate,vendor consolidation and the lack

of domestic implementations from international providers constrain the com-

petitiveness of the market. International providers,therefore,have an oppor-

tunity to break into the U.S.market through partnerships and acquisitions.I

A Global Disadvantage?

PaulSussmanVice President

FirstManhattanConsulting

Group(New York)Rajesh MR

Analyst

Celent(Boston)



3 Reasons to Replace Your Core Now p.18


In This Issue


14/15

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Q&A With ATB Financial EVP Ken Casey p.6New Branches in 60 Minutes p.10

An Agile CoreFor Uncertain Times p.12

3 Reasons to Replace Your Core Nowp.18


In This Issue
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