Core Banking Transformation: A Holistic Approach to Modernization

Core banking transformation is a complex process, but it's essential for banks to modernize their systems to stay competitive. This transformation involves a holistic approach, considering both the technical and business aspects of banking.

A key driver of core banking transformation is the need for faster and more agile systems. According to the article, traditional core banking systems can take months to implement changes, while modern systems can do so in a matter of weeks.

Banks that adopt a holistic approach to core banking transformation can expect significant benefits, including improved customer experience and increased operational efficiency. A study cited in the article found that banks that modernized their core systems saw a 25% increase in customer satisfaction.

By taking a holistic approach, banks can ensure that their core banking transformation is successful and sustainable in the long term.

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A well-defined modernization strategy is crucial for a successful core banking transformation. It involves crafting an approach and roadmap to create a simpler, more efficient, and highly flexible core banking system environment.

To start, you'll need to conduct a feasibility study to determine the best course of action for your bank. This will help you evaluate your current system and identify areas for improvement.

A thorough evaluation of platforms is also necessary to select the right one for your bank's needs. This will ensure that your new system is scalable, secure, and meets your business requirements.

The business case and roadmap should be formulated in conjunction with the operating model to ensure a smooth transition. This will help you chart out the necessary steps and allocate resources effectively.

When it comes to customer accounts migration, it's essential to avoid a 'big bang' migration and instead opt for incremental implementations with minimal disruption to BAU operations. This approach will help you migrate accounts gradually, reducing the risk of downtime and minimizing the impact on your customers.

There are two broad approaches to consider: implementing a new system in parallel or using a shared system. You can choose to implement a new system in parallel, with its own channels and interfaces, or use a shared system that leverages existing channels and interfaces.

Here are some possible parameters for incremental migrations:

Navigating interdependencies and complexities of existing systems is crucial for a successful core banking transformation. Understanding how systems interact with each other is essential, as seen in the payments infrastructure example where banks need to consider how their payments infrastructure interacts with their core banking system.

To successfully navigate short-term headwinds, management must invest in long-term value creation. This involves understanding the complexities of existing systems and making necessary changes for a cloud-native core banking solution. Banks need to determine what changes are required to move forward.

Embracing interoperability and composability is key for organizations to evolve with the market. Interoperable architectures enable a hybrid core where legacy and next-gen core systems work seamlessly together and with other systems, de-risking the transformation program and ensuring a fit for purpose approach.

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Navigating interdependencies and complexities of existing systems can be a daunting task. It's essential to understand the complexities of the upstream and downstream systems and how they interact with one another.

Banks, for instance, need to grasp how their payments infrastructure interacts with their core banking system. This understanding is crucial for determining necessary changes when moving to a cloud-native core banking solution.

Understanding these complexities is key to successful navigation. It helps identify potential roadblocks and areas for improvement.

Interdependencies between systems can be intricate, but they can also be managed with the right approach. By taking a thorough and systematic approach, organizations can successfully navigate these complexities.

It's not just about understanding the complexities, but also about being able to adapt and evolve with the changing landscape.

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Interoperability and composability are key for organizations to evolve with the market.

High modularity and readiness for change across business and IT enable organizations to adapt quickly. This is crucial in today's fast-paced market where change is constant.

Interoperable architectures allow legacy and next-gen core systems to work seamlessly together and with other systems. This reduces the risk of transformation programs and ensures a fit for purpose approach.

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Organizations that prioritize interoperability and composability are better equipped to handle macroeconomic forces, competitive shifts, and tech improvements. This is evident in the banking industry, where banks are investing in interoperability frameworks with decoupled engines.

By embracing interoperability and composability, organizations can create a hybrid core where different systems work together in harmony. This leads to a more efficient and effective business operation.

Banks need to think about how they will engage with regulators, including the guidance and input they will request from them.

A robust risk management framework is essential for a core system migration project, and it's crucial to consider what this framework should look like.

Regulators will expect banks to have a solid plan in place for managing risks associated with the transformation.

Banks need to consider what a robust risk management framework should look like for a core system migration project.

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A co-existence core migration strategy is now preferred due to the high risk of failures with the conventional "big bang" strategy. This approach is safer and more suitable for banking migrations, especially with complex legacy core systems.

Advances in cloud and distributed computing have made co-existence more stable and lower risk. One common approach is an active/active configuration, which allows for true co-existence by receiving mirrored requests and calls. This provides greater flexibility and is ideally suited to a test-and-learn migration strategy.

An active/passive configuration, which synchronizes the new core to the legacy core, also affords high visibility and validation. It allows the bank to compare the outputs of the two cores, reducing the risk of regression issues as the migration progresses.

There is no one-size-fits-all approach to modernisation, as every bank's business needs, capabilities, risk appetite, and current technology landscape are different. Key factors that influence the buy vs build approach include the underlying infrastructure and technology currency, the nature of existing systems, the risk appetite of the bank, the technology expertise, and the business strategy and expectations.

A "big bang" migration is generally not recommended due to the risk of downtime and disruption to business-as-usual operations. Instead, consider incremental implementations with minimal disruption to the BAU operations, such as implementing a new system in parallel or using a shared system with incremental migrations of accounts.

The incremental migrations could be based on a number of different parameters, such as business lines (retail, corporate), product types (savings, current accounts, loans), or customer types (high value, low value).

To ensure a smooth migration, banks need to assess their current talent pool and identify gaps in skills and experience. This involves evaluating whether they have the right employees with the necessary expertise to handle the migration process.

Banks should consider seeking expert advice, retraining existing staff, or hiring new talent with the required skills to fill the gaps. For instance, they should ensure their DevOps team has the engineering expertise to update the core platform.

Retraining existing employees is crucial, especially when the expert pool in legacy technology is shrinking. Banks should also attract new hires with modern technology banking talent to efficiently scale their migration efforts.

To overcome challenges in reporting, risk management, and regulatory engagement, banks should establish a proven Transformation Management Office team early on. This will help them navigate the complex process and keep stakeholder buy-in high.

By jointly creating a migration plan with technology and business teams, banks can decide what to migrate and when, considering data and legacy dependencies, protecting the customer experience, and aligning with the product development roadmap.

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A co-existence migration strategy is now preferred by many banks due to the high-profile failures of the conventional "big bang" strategy. This approach is safer and more suitable for banking migrations due to its iterative, test-and-learn method.

The monolithic nature of most traditional core systems makes it challenging to migrate, with numerous dependencies among specific products and systems. Legacy core banking systems often have systems like limit management and collections engines directly integrated, further complicating the migration challenge.

Co-existence allows for true co-existence by receiving mirrored requests and calls, providing greater flexibility and ideal suitability for a test-and-learn migration strategy. This approach enables banks to realize value rapidly by bringing new products online on the new core right after being tested and validated.

An active/active configuration is one common approach to co-existence, allowing for true co-existence and greater flexibility. It's also ideally suited for a test-and-learn migration strategy.

An active/passive configuration synchronizes the new core to the legacy core, affording high visibility and validation. This allows banks to compare the outputs of the two cores, reducing the risk of regression issues as the migration progresses.

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Here are the key benefits of a co-existence migration strategy:

A customer account migration strategy is crucial for minimizing downtime and ensuring a smooth transition. It's essential to consider the impact of migration on customer accounts, as a significant outage can affect a large portion of the customer base.

A 'big bang' migration is generally not recommended, as seen in the case of a retail bank that suffered a significant outage after account migration. Instead, consider incremental implementations with minimal disruption to BAU operations.

There are two broad approaches to consider: implementing a new system in parallel, or using a shared system with incremental migrations of accounts. The choice between these approaches depends on the bank's specific needs and goals.

Incremental migrations can be based on various parameters, such as business lines (retail, corporate), product types (savings, current accounts, loans), or customer types (high value, low value). This allows for a more controlled and manageable migration process.

Here are the two approaches to consider:

Our Solutions play a crucial role in the migration process, as they have the potential to transform core banking systems and enhance operational efficiency.

We've developed cutting-edge solutions that empower banks to streamline their operations and improve customer satisfaction.

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A successful core banking transformation requires careful planning and execution. To achieve this, it's essential to think big and start small, considering the strategic IT target state to guide a gradual transformation roadmap towards the north star.

This approach reduces risks, balances investments, and ensures timely business outcomes. By taking it one step at a time, you can avoid overwhelming your team and stakeholders, making the transformation process more manageable and sustainable.

Thinking big about your core modernization efforts is crucial, but it's equally important to start small. A successful core modernization must first consider the strategic IT target state to guide a gradual transformation roadmap towards the north star.

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This approach reduces risks, balances investments, and ensures timely business outcomes. By taking a strategic approach, you can avoid the pitfalls of a big-bang implementation that can be overwhelming and costly.

Our experience has shown that a gradual transformation roadmap is key to success. By breaking down the transformation into smaller, manageable chunks, you can focus on one area at a time and make steady progress towards your goals.

With over 17,000 reusable banking test cases at our disposal, we can help you validate each step of the transformation process and ensure that everything is working as expected. This means that you can have confidence in the quality of your implementation and make adjustments as needed along the way.

By starting small and taking a gradual approach, you can accelerate your transformation journey and achieve your business outcomes more quickly. In fact, our proven assets and accelerators can help speed up transformations by 20%.

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System Implementation is a crucial step in the implementation and execution process. We help banks implement modern core banking platforms such as Temenos Transact, Oracle FLEXCUBE, FIS Modern Banking Platform, Finacle, and Mambu.

Our team is experienced in upgrading legacy systems with modern core banking technology. This is essential for banks to stay competitive and provide better services to their customers.

We offer a range of services to support system implementation, including development of fully customized solutions and global and multi-site deployments. Integration, testing, and data migration are also key components of our implementation process.

For example, our team has experience with Temenos, and we can provide more information on our core modernization services with this platform.

Here are some of the key services we offer for system implementation:

Enabling Bank Operations is a critical part of any implementation. We conduct training for business and technical support staff to ensure they're equipped to handle new systems and processes.

Our team helps the bank with change management, which is essential for a smooth transition. We create IT ops and SCM approach to streamline operations and improve efficiency.

We also create user guides and operational documents to help staff understand their roles and responsibilities. These documents are crucial for ensuring business-as-usual operations continue uninterrupted.

By doing so, we enable the bank to operate effectively and efficiently, even in the midst of change.

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Modernization and innovation are key drivers of core banking transformation. With the declining costs and timelines of core system componentization and lean deployment, banks can now modernize their core systems without breaking the bank.

The business case for modernization is becoming easier to make, driven by modern delivery methodologies, flexible software deliveries, and adaptable commercial models. This is especially true in Asia, where digital payment adoption continues to grow.

Banks can consider three key elements to help transition to more modern and flexible payments systems: digital transformation, financial services innovation, and harnessing risk. These elements can help banks build a strong business case for modernization.

Here are some key factors that influence the buy vs build approach:

By considering these factors, banks can make an informed decision about whether to buy or build a new core system. This will ultimately help them unlock the future of core banking with innovative solutions that support their modernization strategy.

Core modernization with AI and cloud technologies is a strong business case for banks, driven by macroeconomic forces, competitive shifts, and tech improvements. Macroeconomic forces, competitive shifts, and tech improvements have created a strong business case for banks to transform their core systems.

Banks are looking to invest in interoperability frameworks with decoupled engines; based on cloud, data, and AI; and in productive relationships with industry and technology players. This approach helps banks create a core banking system environment that is simpler and more efficient, highly flexible, and that fosters responsiveness to the dynamic banking environment.

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A complete guide to modernizing bank technology should include a comprehensive look at all of a bank's technological needs. This involves crafting an approach and a roadmap to create a core banking system environment that is simpler and more efficient, highly flexible, and that fosters responsiveness to the dynamic banking environment.

To unlock the legacy code, generative AI offers banks an exciting opportunity to replace their complex legacy COBOL code with simpler, more flexible programs that support their modernization strategy.

Here are the key factors to consider when defining the best approach for modernization:

Banks need to assess whether they have employees with the right skills and experience in sufficient numbers, and consider where to seek expert advice, retrain existing staff, or hire new talent with the necessary skills.

Building key future capabilities requires a modern core system that thinks about how to engage with regulators. This involves considering the guidance and input they will request.

To achieve this, you need to have access to skilled resources who can equip you to generate value in the future. This includes having a deeper understanding of technology, change management, communication, and partnering for rapid results.

A robust risk management framework is also essential for a core system migration project. This will help you navigate any potential risks and ensure a smooth transition.

New skills are required to work with a modern core system, including understanding how to communicate effectively with stakeholders and manage change effectively. This will enable you to generate value and achieve rapid results.

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To achieve a successful core banking transformation, it's essential to have the right partnerships and expertise in place. This involves engaging with permanent bank staff, who are the subject matter experts with depth of knowledge on existing systems.

These experts should be upskilled in required technologies and brought along the transformation journey to promote a growth mindset and remove any resistance to change. This approach ensures that they are invested in the transformation and can provide valuable insights.

The right partners with a vested interest should also be engaged to develop the target architecture and execute the programme, as they can provide the necessary expertise in delivering modern architecture solutions.

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Our partnerships are built on a foundation of industry expertise. We have a deep understanding of the challenges facing banks today.

We've developed cutting-edge solutions to transform core banking systems, as seen with our Core Banking Solutions. This empowers banks to enhance operational efficiency.

Our team of experts has extensive knowledge in this area, allowing us to provide tailored support to our partners.

We collaborate with top technology providers to enable seamless core banking system implementation and modernization.

Our partners, led by the Global Core Banking Lead and Global Core Banking Solution Lead, play a crucial role in enhancing operational efficiency and driving innovation.

These partnerships empower banks to deliver superior customer experiences through advanced core banking technology.

By working together, we're able to bring cutting-edge solutions to the table, making a real difference in the way banks operate and serve their customers.

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Core banking transformation offers valuable results, with modern cloud-enabled core banking solutions providing faster time to market, improved levels of automation and scalability, and lower total cost of infrastructure ownership.

Clear metrics are essential to build a strong case for change, as core banking modernization is a necessity that requires defining risks and impacts to create compelling reasons for change.

Delivering business value throughout the transformation journey is crucial, as executive sponsors are always looking to evaluate Return on Investment, and it's more important than just achieving target outcomes that may take many years to achieve.

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Building a strong case for change with clear metrics is crucial in core banking modernization. A clear definition of risks and impacts creates compelling reasons for change.

By promoting transparency and collaboration, internal awareness is enhanced, making it easier to identify risks and benefits of modernization. This approach helps to create a strong foundation for a successful transformation.

Clear metrics are essential in showcasing the necessity of change. Core banking modernization is an obvious necessity when viewed holistically.

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Faster time to market is one of the valuable results of modern cloud-enabled core banking solutions. This means you can get your new system up and running much quicker than with traditional methods.

Improved levels of automation and scalability are also key benefits of modern core banking solutions. This allows your bank to handle more customers and transactions with ease, without the need for manual intervention.

Lower total cost of infrastructure ownership is another valuable result of modern core banking solutions. This means you'll save money on maintenance, upgrades, and other infrastructure-related costs.

By modernizing your core banking system, you can achieve significant cost savings and improve your overall efficiency.

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Generative AI is already changing work for most employees at most banks, and it's just the beginning.

Banks that modernize their mainframe and core banking systems can enhance operations with AI and cloud tech.

Data on the Cloud Continuum has taken on a new life, growing in importance and attention.

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Decommissioning legacy systems can be a complex task, but it's essential to tackle it head-on to avoid increasing the total cost of ownership and complexity of the IT landscape.

Performing a gap analysis upfront can help create a clear plan of action to address the challenges. This involves understanding the complexities of migrating residual accounts that couldn't be migrated.

Consider write-offs, account closures, and recreations, as well as manual migrations for those residual accounts. If legacy systems are not fully decommissioned, it can restrict the realization of business outcomes.

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Generative AI offers banks a chance to replace complex legacy COBOL code with simpler programs that support their modernization strategy.

Banks are looking to transform their core systems due to macroeconomic forces, competitive shifts, and tech improvements, creating a strong business case for investment in cloud, data, and AI-based systems.

Legacy code can be unlocked with generative AI, allowing for more flexible programs that support banks' modernization goals.

With the means and motivation in place, banks are investing in interoperability frameworks with decoupled engines, based on cloud, data, and AI, and productive relationships with industry and technology players.

This approach enables banks to replace their complex legacy code with simpler, more flexible programs that support their modernization strategy.

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Decommissioning a legacy system is a crucial step in core banking transformation. It involves shutting down outdated systems that are no longer needed.

Performing a gap analysis upfront helps create a clear plan of action to address complex products and functionalities that are harder to migrate. This analysis is essential to understand the challenges and create a plan to overcome them.

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Legacy systems can increase the total cost of ownership and overall complexity of the IT landscape. If not fully decommissioned, it restricts the realization of business outcomes.

Manual migrations are required for residual accounts that could not be migrated. Write-offs, account closures, and recreations also need to be considered during the decommissioning process.

Decommissioning a legacy system is a complex task, but with the right approach, it can be done successfully. Capgemini has the capabilities and expertise to develop a core banking target blueprint and design optimal solutions for transformation.