When you talk to bank technologists about core transformation or modernization projects, you will almost certainly be met with instant head shaking and painstaking flashback of projects that took too long, cost too much and delivered unnecessary stress, combined with mixed results. Sound familiar?
In the past, core modernization was reserved for those who could spend millions of dollars investing in projects that spanned multiple years. As a result, banks engaging in core modernization projects experienced grand successes and grand failures. Core modernization projects would, literally, make or break a CIO’s career. The vast majority of these digital transformation projects fell into the latter category, gaining a well-deserved reputation as the Bermuda Triangle of bank technology projects. Cognizant estimatesopens PDF file that 25 percent of core banking modernization projects fail without any results, and over half fall short of meeting their objectives, with implementation costs doubling and tripling versus original estimates.
- Banks experience significant pressure from multiple forces, including:
- Continuously increasing regulatory oversight;
- Evolving customer expectations for relevant, personalized banking experiences;
- Tighter margins
- Technological disruption
- New competitors
As a result, some form of core banking modernization is no longer a technological endeavor for the few, but a business priority for banks of all sizes across all jurisdictions.
Core banking modernization: Key enablers
With core modernization as a must-have versus a nice-to-have, there are a number of key technology enablers that have spawned to de-risk core modernization projects, while accelerating banks’ ability to deliver meaningful new features and functionality to their customers. These include:
- Integration technologies
- Standards for banking science
- Refined architecture for variable agility
- APIs and microservices
While each of the accelerators evolved at different speeds, the culmination of their maturity has become a powerful catalyst for simplifying the process of progressively modernizing the core. The key with each is not just to fix the challenges that lead to core modernization failures, but also to reduce the cost of modernization projects. In this way, budgets are spared, while the probability of error is minimized, so organizations are better positioned to succeed.
Enablers combine to create further acceleration
When two or more technology enablers overlap, they accelerate the ability to externalize key functions, like pricing product, billing and relationship management, without ripping and replacing the bank’s core system.
Consider this: When “APIs & Microservices” combines with “Standards for Services”, you’ve enabled composable services for key functions like interest calculations. By wrapping context around these composable services (e.g. interest calculations for deposits or loans), you can create unique value.
Now, let’s look at the combination of “APIs & Microservices” with “Fintechs”. With the evolution of Fintechs and the ability to integrate these technologies into banks via APIs, product innovation can occur in a far more agile manner. Fintechs are integrating with banks more than ever because they’ve created a unique way to attract younger generations by creatively catering to their needs — something banks have struggled with in the past. Because Fintechs have been successful at customer adoptions, they’ve attracted banks to their offerings.
Dramatically simplified: Core modernization
Think about this scenario, as it is not uncommon among banks. A bank is implementing a new core technology and their previous core had over 900+ products in its catalog. The bank realizes, through project scope, if those products are migrated into the new core, the project will be delayed by a year and a half. So the bank considers cutting its catalog down from 900 to 300 products. Then, the bank discovers that this path will still delay the project by a year, while risking a poor customer experience for those whose products are cut.
It’s a real scenario that banks face, but it doesn’t have to be.
Modernizing your core doesn’t have to be an anxiety-driven process that shaves years and millions from your organization’s books — potentially at the expense of your customers. Zafin is purpose-built to work with core systems by externalizing product, pricing, billing and more to dramatically simplify and easily modernize the core. The core becomes smaller, migrations happen faster and banks gain years back to invest in other projects. Zafin frees the core to do what it does best, rather than focusing on ancillary activities that are better digitized and completed elsewhere.
With the ability to co-exist and perform in the context of any core, Zafin externalizes content and processing capabilities that today are built either into the core or into other systems. Zafin brings them together to deliver product, pricing and offer strategies that are market responsive and customer-centric.
“Core modernization” shouldn’t be words feared and dreaded. Let Zafin help transform your core modernization process into a cost-saving, speed-to-market project that drives results.