Preparing the core banking system transformation

Simplifying banking products and processes

Typically, financial institutions spend far more resources on implementing various products, services, applications, and processes than rationalizing, updating, or phasing them out. For this reason, in an organization with a complex product and service portfolio built over 15 to 20 years, it can be extremely useful to review and streamline existing products, services, and related processes, even without a profound transformation of the core banking system.

However, when replacing a core banking system, this rationalization is essential and should be implemented before analyzing the requirements for the new system. This will also allow for significant resource savings during the requirement specifications, the precise definition of any discrepancies identified in the optional GAP analysis, the execution of integration tasks, parameterization, the functional, integrated and end-to-end testing, and migration as well.

During a Core banking system replacement, the most important goal of portfolio simplification is to start the project with the most homogeneous, standard products and services possible from an IT point-of-view.
In addition, organizing the processes with a uniform approach, filling high-level documentation gaps, and improving the organization’s end-to-end process review capabilities significantly supports ensuring the completeness of requirements specification and GAP analysis.

The experts of MINDSPIRE Consulting provide support in identifying product and process lists already existing in the organization. They also contribute to the customization of these during the replacement of the core banking system, to the identification of their appropriate level of detail, and to the collection of some relevant information that may support future simplification decisions.

Selecting the supplier and integrator for the core banking system

There are many aspects to consider when choosing a bank’s account management system, as each solution differs significantly in terms of pricing, capabilities, integration options, required infrastructure, and data storage (cloud, on-premise).

In addition to selecting the right core banking system, the professional integrator also has a significant role in the successful execution of the project.

We have supported the professional selection of systems in several areas (e.g. CBS, card system, document management, credit rating system). We are open to suggest professional selection criteria and the execution method, or implement the methodologies used by our clients during the selection process.

More information on the practical issues of selecting a system vendor can be found in our previous post: Selecting Core Banking Systems.

Defining the implementation and phasing plan of the core banking system transformation

The one phase transitions, which are also called the ‘Big Bang’ approach, often seem too complex and risky for the organizations executing it, so even at the planning stage they opt for a phased implementation. However, in certain cases, they only switch to a staged execution later at the implementation phase, due to the arising challenges.

The main point of the phased approach is that during the intermediate stages, the new core banking system will only take over the service of certain business capabilities, while some functions will still be covered by the previous solution. Usually, after the last phase, according to the plans the role of the bank’s previous account management system ends and the project will be completed. For the phased implementation’s detailed planning, it is necessary to determine how the bank intends to segment the task.

This is not an easy task, because in the age of instant payment solutions and fast digital service channels it is rather difficult to envision a parallel operation, supporting a business function with a live and a shadow solution simultaneously.

The branch and the channel-based segmentations also include many challenges. In these cases, the systems must be prepared for parallel operation, and then all changes induced by legal, business and other conditions have to be tracked in two systems, until the previous solutions can be fully retired. At first glance, this may seem to be twice the cost, but in practice, due to the increase in complexity, the cost of maintenance will usually be even higher.
Therefore, it is worthwhile to identify the steps that simultaneously affect existing and new systems at the fewest possible points in terms of end-to-end processes.

In addition, in order to maintain the momentum of the core banking transformation program, it is worth planning regular go-live events.

MINDSPIRE Consulting’s experts provide professional support in defining the identified main phasing aspects, or based on our previous experience, even in commenting on the aspects defined by the bank. Moreover, we can support the development of specific phasing proposals, taking into account the bank’s specialties and preferences. If required, we can assist our clients in planning the intermediate target architecture for the proposed phases as well.