Core banking implementation perils

A core banking Implementation Isno different to open heart surgery.Youmake a change in a live context, without disrupting business-as-usual.And thereinlies the challenge

After 40+ global core banking implementations involving hundreds ofsuppliers, thous.andsof usersand manag ng many man4years of effort. it is relative y easier to identify patterns of misconceptions and common errors that banks make.If you arein the middleof acore banking imp ementation or planning one,hete are five things to address.

1.Isyour core banking implementation a technology project?

Perhaps the most pertinent question that needs be toans\vered is: \vouldyou consider the core banking replacement purely as a technology init ative?If the ansv1er is yes. it could be the gravest of errors cost ng the programme,and the bank.dearly.

Building business ownetship is not just about having asteering committee that constitutes leaders from allfunctions of the bank, but a so about ensuring awareness of the latger end,and paftic pation in the programme is institutionaised acrosslevels: nc uding a core business team that is engaged right from the pcint of selecting thesolution, toengaging in the pfoduct run plan,patametefisat on,migtation of data,testing. simulat onand cutover.The PMO and technology functions can facilitate in br ng ng together patt cipation and supplementing the business role - but it would fail miserably as a mere substitute.

2.Have you got thesuppfler engagement model right?

The likelihood of a programme meetingits stated timelines and budget is higher when the engagement is driven on a fixed fee model with deliverable-linked payment milestones, and not on a time and material basis. More than 60% of core banking programmes are reportedly behind their timelines and exceed original budgetary estimates, and a majority of them do not have a tight payment model or rigour tied to delivery.

While it is now common practice to have third party service providers in the role of data migration and testing services, the model gets much more complicated when there are multiple solution providers. A tight engagement model and linked payment terms could well be the proverbial stitch in time that saves nine.

3. Have you imbibed the secret sauce: ‘Adopt & Adapt’?

A well understood, yet most common challenge with many core banking programmes is the degree of customisation. Keeping a reign on this is not only critical for the effort and the cost of implementation to remain under control, but also ensures that the complexity of interfaces, testing and integration is well managed. And this isn’t rocket science, if one sticks to what I call the secret sauce to success: Adopt & Adapt.

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Adopt the right solution: Investing time, effort and money to determine the best fit solution is well worth it, as this is half the job done – of course, if done well. Picking the right solution, that meets the critical requirements, addresses all the mandatory needs of the bank – be it that of compliance or customer service, and ensuring it has the proof of concept demonstrated with the right peer group of banks,are all pertinent points to consider.Qu te naturally, a better fit solution tends to havealesset degree orcustomisation.

Adapt toglobalpractices: Oncea solution has been identified,encouraging users to adapt to its features is impetative. Customisation should be the last resort, not defau t option.If ground rules are not set, thiscould\•tellbecome an untamed animal.At the end of the day,a solution that has \VOtked v1 th 100 other bankswou d address every requirement, f one is willngadapt to it.There is no point n buying an airplane only to runit on the roadv1ith its wings clipped!

4.Is the communication machinery in place?

All mplementation is only as good asit is communicated. At least 30-40%of imp ementations tend to failmiserably on this count. From having the programme progress communicated to all stakeholders,to setting the right expectat ons\Vithend users, and building a strong externalcommunication machinery - both with customers and with regu ators and relevant author ties, this could easily turn out to be a red herring, well avoidable.

A good communication framework v1ould entail a focused andconcerted effort in art culating the change and the benefits of the programme to the respective stakeholders, clearly preparing the stakeholders for the change and its impact, and identifying the timing and mode of communication. Informing a customer about a potential change to his/her account number or a channel downtime should be well timed. Too early may create panic, and too late will most certainly result in a poor experience. Setting right expectations, at the right time, is key.

5. The final countdown: are you ready?

It’s not just the system and its readiness, but also the elements surrounding it, that need to be in place before you can move to a new platform. Cedar’s RAPID framework is used to determine readiness across five key parameters: Resources: People, including userreadiness; Application: solution and surround systems; Processes: customer communication, business process understanding; Infrastructure: datacentre, networks, channels and branches; Data: migration and cutover plan.

If any one of the above is not in a state of absolute readiness, the post cut-over experience becomes sub-optimal and challenging. As stated earlier, a core banking implementation is like open heart surgery, and the stakes can be high for the bank. If you are looking to carry out an operation, the above five questions are worth watching out for!

Author | V. Ramkumar

For a further conversation on this subject of Cedar View or how we may be able to help please email V. Ramkumar, Senior Partner, Cedar at V.Ramkumar@cedar-consulting.com


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