Retail Banks Must Upgrade Outdated Core Banking Systems To Grow

Implications: "Innovate or die" is a common phrase tossed around IT Departments as they determine how to allocate their budget dollars towards data security, regulatory compliance, customer centric projects and front-office applications. Core banking systems are running 24/7 to support internet banking, global operations and real-time transactions via the ATM, Internet, phone, debit and credit cards and mobile banking. Many large Tier 1 banks with assets greater than $631 billion are running homegrown solutions and taking another look at solutions from vendors as their old systems show the strain of many years of maintenance.  Old tech is slowing the flow of communications between the "core" and other systems, which is making new product development cumbersome.  Tier 1 banks will increase their IT budget by 10% in 2008; Tier 2 banks with assets between $158-$631 billion will make the largest IT investments of 11-30%. Global banks IT spending is projected to surpass $351 billion in 2008.

Analysis: Retail banks must innovate to compete!  Many large Tier 1 banks (assets greater than $631 billion) are running homegrown solutions and taking another look at solutions from vendors as their old systems show the strain of many years of maintenance. Old systems are impediments to achieving optimum operational efficiency as well as new product development. Financial institutions have relied on technologies that are nearly 30 years old or more and realize the competitive advantage of modernizing antiquated core systems. Modern systems offered by global technology vendors such as Accenture, Callatay & Wouters, Delta Informatique, FIS (Fidelity National Information Services, Fiserv, Infosys Technologies, SAP, Sungard, Temenos, TietoEnator, T-Systems Enterprise Services and TCS Financial Solutions are promising the flexibility and agility that come with youth.

1.  Increased pressure on old core systems has many banks exploring alternatives to keep their "core" system running smoothly and to gain a competitive edge

2.  SOA (Service Oriented Architecture) is seen as a critical element in how banks address their IT challenges. Banks are adopting SOAs to help create an enabling infrastructure that is agile and can be maintained effectively and at a lower cost than the more siloed and brittle infrastructures they are replacing

Takeaway:  Global retail banks are seeing efficiencies from emerging SaaS (Software as a Service) solutions. Technology vendors offering SaaS solutions could experience a financial windfall in 2008 and beyond as retail banks build and/or upgrade their portals, make improvements in time to market, real-time processing and a single view of the customer across all lines of business. Technology vendors could benefit from their emphasis on channels integration and customer centricity, as retail banks focus on cutting costs to find efficiencies and to invest in new products and services to gain a competitive edge.