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Top 5 Steps to a Successful Core Banking Transformation

Core banking systems are becoming increasingly important to banks for several reasons. One is cost reduction. Maintaining older platforms is expensive, becoming less and less acceptable for FIs focused on their margins.

Also, as banks try to stand out by making new products and expanding their markets, the need for flexibility and scalability in their operations and core banking systems grows. In the meantime, as banks’ IT systems have gotten older, differences between local platforms have stayed the same or even expanded. High maintenance costs, performance problems, and the difficulty of making changes have also stayed the same or worsened.

Now that many banks expect growth again, the need to standardize core banking platforms and replace core systems has become the spotlight.

There are many challenges ahead for CIOs.

Speed to Innovation includes all technologies governing API enablement, big data, machine learning, cloud computing, open service architectures, and machine learning.
CX expectations customers crave a fully integrated digital experience that is personalized and rewards loyalty.
A legacy that comes from Siloed systems This impacts aspects such as time to market, systems integration, and a challenge to provide a customer-centered approach.
Volatile Regulatory Environment includes complex cross-border PSD2 and Open API mandates and Open API and upcoming market reforms.
External Competition. From Fintech companies and Peer-to-peer lenders and the rise of cryptocurrencies, non-banks offer banking services like retail providers and payday lenders.
Financial Pressures a push towards cheaper infrastructure and a more profound shift to more automation reduce operational costs.

How to make a core banking transformation work – 5 steps.

Every core modernization story is different, and clients can protect their investments and save time and money by making the process fit their needs. The playbooks are made with a single client’s current and future architecture landscape in mind. If there are different approaches, then banks must bring pragmatic approaches.

Start with an integrated Road Map.

that increases business capability and digital transformation. An integrated, custom-tailored road map gives the bank new business capabilities aimed at achieving the bank’s business priorities and has the real benefit of refreshing the technical architecture underneath.

Componentization Approach for Targeted Modernization.

There has been a growing trend toward breaking things down into smaller parts in the past few years. Full “big bang” or “rip and replace” deployments are too risky for most banks, especially the biggest ones. This risk kept many banks from replacing their core systems, which they needed to do. Componentized solutions allow FIs to replace things in a less risky, more step-by-step way.

Prioritizing Tactical Modernization Needs.

Reduce the number of strategic investments that can’t be used again in the current scheme of things, especially for core banking systems for the next ten years. Make a list of the tactical changes that need to be made to the current core banking system, but only invest if there is a pressing need.

Maintain High Readiness for Migration.

This step involves keeping clean customer accounts. Much of the success comes from avoiding duplicate, and redundant product portfolios, as also the dormant or inactive accounts.

Build up the organization’s core skills.

Start a core team of cloud experts, data engineers, and product, finance, and operations experts who know much about core banking.

Conclusion. Time to Move

Banks haven’t been able to get the most out of their core banking systems for far too long. During the financial crisis, IT budgets were cut and redirected, and many banks thought that putting core systems in place was too risky and expensive.

Today, most institutions are again considering replacing and changing their core banking systems. The old systems at these banks can’t keep up with how quickly their environments are changing, while new technologies have made core banking implementations less risky and complicated.

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The New Future for T24 Core Banking System for Sustained Businesses

The banking industry is getting more and more competitive. Neo-banks are taking over the market and serving customers for about a third of what traditional banks charge. Fintech companies are going after profitable spots in the value chain. Big tech players are a real threat because they have many customers, and a few invest a lot in new ideas, which puts laggards in the shade.

Today banks offer digital and virtual banking because customers expect fast, on-demand service, and employees expect digital tools to be everywhere. At the same time, there is a massive push for digital solutions, like new digital apps, that need access to core banking data and functions. So, banks need to move faster on their plans to digitize. Digitization has become a big problem for most people, and they often have to find workarounds that cause much data to be duplicated. For banks to go digital quickly and well, they need to update their core banking systems (CBS).

Why incumbent banks must update the core

Even before the COVID-19 pandemic started, banks were pressured to cut their IT costs because of low-interest rates. The pandemic worsened this problem as banks rushed to develop new digital IT solutions faster and for less money. When these two trends come together, they have led financial institutions to look for new and more creative ways to update their old IT architecture. Even functional areas that used to be untouchable, like risk, finances, and compliance with regulations, are now being thought about.

Approaches to Modernizing the Core Banking Systems

Big Bang or completely replacing the core with a new set of technologies.

Banks usually do this when they need to replace their core platforms quickly because they are outdated or because of regulations. It requires a lot of data migration, and most of the benefits aren’t seen until the last customer is moved and the old systems are shut down.

Progressive modernization.

Lower in risks, this is what most banks have done. It involves keeping the old platform but making it smaller and smaller as they build a new architecture around it. Many leading banks begin with the most critical customer journeys and sequentially hollow out frequently used functions and rebuild them as microservices.

Greenfield or a new way to do banking built on a new set of technologies. Greenfield is often chosen by CXOs who want to stay ahead of the curve because it lets them launch new products and deliver value quickly. It is often thought to be less expensive and safer than the other options because the existing customer base isn’t put at risk until the idea and technology have been proven.

Decision points for making changes to Core Banking Systems

Time to market.

In today’s crowded market, being able to launch products quickly is a way to outthink the competition. But monolithic architectures (which lead to multiple dependencies and bottlenecks), poorly documented legacy code (which makes it too easy to rely on a small number of subject matter experts), and manual delivery processes make it hard to get products to customers faster.

The cost is more important than ever with a low return on equity.

But technical debt in legacy systems uses up a lot of IT money. Clumsy legacy systems are linked to manual software delivery (such as manual regression testing and deployment) and low straight-through-processing rates (where layers of complexity lead to fragmented and manual operational processes) – both of which keep costs higher than they need to be.

Ecosystems. For making the products and services of the future, partnerships are becoming more and more critical. But current architectures don’t connect to third parties, which would make it easier to come up with new ideas (e.g., property-related services for mortgage buyers).

Personalization.

Customers want a more personalized experience more and more. But banks store data in multiple core systems designed for different products, making it hard to meet each customer’s needs.

Setting up plans for the future.

Getting IT costs down.

Banks can cut costs by making developers more productive and getting rid of technical debt. They can save even more time and money by using cloud-based services (which let them quickly roll out new products and grow their infrastructure) and development tools that make automation possible (DevSecOps).

Getting to market faster.

With the help of hyper-parameterized configuration capabilities, banks can quickly and easily make new products and services. Higher levels of standardization make it easier to use modern tools like automated testing and, as a result, to set up deployment cycles that happen more often.

Data and a customer-centric proposition.

Capabilities in Data and Analytics are fast becoming a critical differentiator. Integration of data sets and a single truth source are possible on modern platforms. These, in turn, make it possible to offer personalized experiences and run advanced analytics in real-time, which helps people make better decisions (e.g., for front-line staff).

Being able to grow through partnerships and develop new ideas.

Ecosystems and other services can be built faster and for less money with the help of new platforms. Modular architectures and APIs make it easier to put things together.

Conclusion

Modernizing the CBS makes it more flexible, which makes it easier for business functions to get to essential data, change prices more quickly, and come up with new ideas to meet current and future customer needs.

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Temenos T24 Core Banking Software Implementation in 2022

Next-generation digital and the world’s friendliest scalable core banking software

Temenos T24 brings the most extensive set of functionality across retail, corporate, treasury, wealth, and payments for digital-first banks to ace their game. Legacy banking software gets a new and agile core through its cloud-native and cloud-agnostic technology and architecture. Enabling banks to seize advantage of scalability, security, and lower operational costs (delivered either through SaaS, on-cloud, or on-premises), Temenos T24 Transact banking software brings unparalleled real-time advantages. Maveric Systems is an awarded Temenos implementation partner. Banks leverage Maveric’s deep domain expertise and renowned quality engineering prowess to implement T24 Transact core banking software – on time and budget.

The Market Advantage

Temenos T24 “All in One” integrated core banking solution equips financial institutions to manage banking operations from the back and front end and client relationship management.

Investing 20% of its revenue into R&D to continually offer functional depth and breadth, Transact customers benefit from the only one-of-its-kind upgradability.

Additionally, Temenos Transact achieves market-leading cost-income ratios (the top quartile clocks 26.8%, which is half of the industry average). Research suggests that these clients can invest nearly double the industry average in innovation.

Solution Design and Benefits.

Lower costs with elastic scalability, security, and control help banks reimagine their business.
Innovate faster with unmatched extensibility with 700+ open APIs in the largest Fintech ecosystem
Microservices architecture enables continuous upgrades.
True horizontal scalability in the database layer operates on an active-active basis across multi-cloud.
Through DevOps implementation reduces cost and shortens development cycles.
Immutable logging procedures bring the highest level of threat security.
Explainable AI offers transparency into automated decisions and provides intelligent banking – growing revenues and enhancing CX.
Best-in-class UX through seamless digital journeys across multiple touch points and interaction modes.

Industry-leading features.

T24 Biometrics identification and multi-factor authentication meet regulatory norms and control internal and external risks.
The securities lending component equipped with STP functionality seamlessly processes trading volumes and manages lending risks.
In trade finance, Transact supports complex trade finance structures.
Complete service-oriented architecture offers total rapid, cost-efficient, and precise lifecycle management of the lending process.
A competent delinquency management system monitors, ages, and manages customer repayment obligations.

Maveric’s T24 Transact Core Banking Implementation Support

Today Banks have to engage more discerning customers who shop for better deals across providers. Temenos Transact assists banks in rolling out newer products via proficiencies drawn from all sectors and in bringing services and offers that are relevant and innovative. This dynamic strengthens customer loyalty and generates a buzz that helps acquires new customers.

The three Maveric phases: Implementation – Development – Support

For gaining this advantage, Maveric’s holistic support includes:

– Vision Alignment

– Risk assessment and benefits mapping

– Scenario analysis and situation due diligence

– Knowledge and Product Development

– Project Management

– Maintenance Services 24X7

– Training for core and upgrades

Maveric deep-end support

IT Tech Support (L1 to L4; the L4 being critical with most banks having a large number of COTS products in their portfolio)
IT Tech Operations Support (User management, Parameter maintenance, Close of business runs, Performance optimization, Administration across application, database, and middleware)
Consulting (Product selection, Key features in a particular sub domain or function, Oversight on requirement definition, Critical process management like cut-over, release and post-release management including for trailing data; or System sunset or migration)

Conclusion

As new entrants step into banking, they share a few commonalities – consumer-oriented technology-driven companies leveraging disruptive technologies. Temenos Transact is the solution of choice that leverages these technologies to offer an agile digital banking experience.

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5 Key Benefits of Temenos T24 Core Banking Integration

Temenos T24 (now Transact) is the world’s most widely used digital core-banking solution across retail, corporate, treasury, wealth, and payments, with over 1000 banks in 150+ countries using its cloud-native agnostic technology to create unparalleled customer value.

While each bank is unique, Temenos adapts to a bank’s profile and sector and ultimately works to deliver growth and manage risks and costs.

5 Key benefits of Temenos T24 (Transact) are the following.

Deliver growth through the single business view. Across business lines, banks leverage T24 to support both their corporate and retail businesses in a seamless operation. The 360-degree view of the customer and total client-centricity helps banks make their customers the focal point. This directly improves customer experience across big or small functions. There is the added advantage of flexibility with Transact. Consequently, the banks’ ability to react to market fluctuations and faster go-to-market speeds brings a first-mover advantage.
Cut costs through reduced infrastructure. T24, through its integrated architecture, can offer broad functional coverage that translates to support for a large number of legacy applications. This brings down the operating costs, as most banks can reduce their core systems across retail, corporate treasury, and Islamic banking needs. Transact can further reduce platform costs as banks typically centralize their international and regional hubs.
Faster response time and increased profitability. Supporting almost every financial product across any market, banks equipped with T24 can handle versatile growth scenarios rapidly. This allows for higher innovation potential. Transact, being essentially multi-channel, offers a rare battle-readiness as new products and services can be launched, and new channels can be added that support new products and market opportunities. This adds up to fewer lost opportunities and higher growth margins.
Scalable infrastructure to maintain low costs. With Transact (earlier T24), banks can stay focused on customer services and grow their base as the core applications support geographical expansion and any M&A activities. The 24X7 support necessary for non-stop global operations is wired into T24 solution offerings. This brings a game-changing difference to delivering locally and to consider any country or region-specific nuance. Furthermore, T24’s system design (linear and horizontal scalability) imposes no limit to system volumes, thereby enabling operations to deliver optimally and maintain low costs.
Advanced Service Oriented Architecture (SOA) helps clients directly leverage the feature-rich suite and the modern and flexible standards that come with SOA platforms. Additionally, T24 has a well-documented, efficient way of handling risk and regulatory requirements. With its layered automation and STP (straight-through processing) across countries, offices, and departments, Transact is best in class for exception handling, error reductions, and enhancing control. Constructed with an open architecture, T24 prevents future obsolescence by releasing frequent upgrades to stay abreast of the changing tech landscape and market realities.

Conclusion

Temenos Transact, designed to exploit disruptive technologies, enables banks to meet their customers’ ever-increasing demands. Reducing the complexity and risk of core banking implementations and as a repository for the best practice, T24 systems have been fine-tuned over 600 global deployments. In the rich Fintech marketplace, T24 is accessible through the Temenos banking cloud– making it a perfect innovation sandbox.

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What is PSD2 Compliance, and What Does it Mean for your Business?

What is PSD2 Compliance, and What Does it Mean for your Business?

EU’s Payment Services Directive (PSD2), in effect since Q3 2018, opened innovation opportunities for established payments organizations. Capturing this disruption and harnessing its advantage is about going more profound than its commoditization features.

What is PSD2?

With the global trend of emphasizing security, transparency, and market competition, PSD2 requires banks to provide other qualified payment-service providers (PSPs) connectivity to access customer account data and initiate payments. This legislation comes to level the playing fields for new market entrants and has the potential to transform the banking landscape irreversibly.

Additionally, with this directive, the European Commission wanted to make the payments space safer, protect consumers and ensure lower prices for payments.

Arguably, PSD2’s most resounding impact will be the opening up bank-held customer data to Account Information Service Providers (AISP). Compared to its 2007 predecessor, the act covers Third-Party Providers this time around. Once the AISPs increase their traction, banks risk losing their ownership of the customer interface.

PSD2 and Open Banking System

There are two prominent differences between the terms most used interchangeably.

An additional complexity layer emerges as individual banks may offer their available data through varying technical measures.

First, PSD2 doesn’t mandate creating common API standards. Secondly, PSD2 opens up access to customer transactional data for regulated PSP institutions. But UK’s Competition and Markets Authority (CMA), on the other hand, may grant access to a broader range of third parties through its ‘whitelisting’ process.

Impact on Incumbent Banks

As customers find it easier to ‘shop for price’ and switch providers, the inherent risk for incumbent banks is commoditization. This could mean anything from losing market share to dipping profit margins. Moreover, using the data, PSD2 incentivizes third parties to create new value propositions that meet unmet needs bringing banks’ primary relationship with their customers under threat. Consequently, the possibility of higher customer churn is sure to create a more considerable market disruption, favoring new entrants and nimbler competition.

PSD2’s Positive Implications for Banks

The earlier section may suggest so, but not everything is downhill. The incumbent players have much at stake, from revenues that come from new products to services to the opportunity to gain market share from other banks to providing technology platform services to other banks (API management).

The mentioned scenarios allow these long-standing institutions to retain their customers’ trust, control their data, and redeem their roles as financial anchors.

Agile organizations that bring patient capital investments to fructify innovative products and new business models will seize the PSD2 momentum.

A McKinsey survey reports that 35% of bankers say that FinTech’s will beat the small and medium attacker banks (30%) to disrupt the payments market.

Focal points in the PSD2 Adoption

Along with mitigating the fraud risk by implementing advanced controls (advanced analytics is an example) and adopting pre-emptive tools for triggering cyber-attacks, banks would look beyond the PSD2 compliance mandate. The PSD2 implementation opens up a new window to build processes, onboard new skill sets, and realign the in-house data infrastructure around richer analysis and insight generation. There is no better time to craft growth strategies for new revenue stream creation and exploit data-dependent use cases across retail, corporate, and other institutional businesses.

What does it mean for your Business?

For retail banking, the use cases range from account aggregation, peer-to-peer payments services, consumer-to-business payments, product cross-selling, lifestyle offerings, and identification and authentication services. These retail use cases spring 360-degree offerings – from self-administration benefits, mobile money, and POS transfers, identify lending or investment products and enable services beyond payments (like alternative payment forms).

PSD2 for corporate banking professionals offers similar high stakes. The use cases of balance sheet simulation, multi-account management, integrated cash management, and enhanced risk scoring have game-changing implications for multi-account aggregation, cash pooling, liquidity management, and robust lending practices.

Conclusion

In the light of PSD2 implementation, banks must define their leadership ambition and conduct comprehensive use-case evaluations. When done with a change mindset, these organizations will recognize the genuine potential of their in-house data (customer touchpoints). These insights would then help the incumbent to leapfrog their competition.

Banks must collaborate with innovative tech partners creatively by being the first movers in building a customer-focused finance-based ecosystem.

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