Key Challenges in Core Banking Replacement
Core banking replacement has, for long, been considered a strict no-no by banks. Established comfort level with existing technologies and processes, relatively comfortable margins that provided the luxury of overlooking operational inefficiencies, and finally, the fear of the unknown, have all ensured that banks steered clear of this subject. But the current competitive environment with increasingly demanding customers is forcing banks to take a reality check on their technology environment and ensure that their IT strategy is aligned to their business objectives. And core banking replacement is often the only solution to their problems. However, replacement of core banking solutions be it for large or small banks, global or regional is akin to a heart transplant. This can be one of the greatest challenge for any institution, which can either result in the bank leapfrogging to a high degree of differentiation and an enriched customer value proposition, or it can create considerable risks for the bank if the transition is not managed properly. "A core banking solution, once implemented, should be robust, scalable and future-proof and serve the business interest for at least 10 years." Key Challenges Banks need to focus on key factors, which make the core banking transformation a successful experience. Broadly speaking, the key challenges in core banking transformation are:
Financial strength and business continuity are the most important attributes for evaluating any vendor. Typically, payback for most core banking replacements could take anywhere around four-five years, even for rapidly growing institutions. Transforming core banking systems bring with them associated changes to operating processes, surround systems, interfaces, hardware and network configurations, coupled with the re-skilling and re-deployment of people. The Total Cost of Ownership (TCO), keeping in mind all these factors, would be quite significant, even for small institutions. Hence, a core banking solution, once implemented, should be robust, scalable and future-proof and serve the business interest for at least 10 years.This is why the long-term viability of the vendor assumes critical significance. Vendor’s commitment to the business Apart from financial viability, the vendor’s commitment to the financial solutions business is crucial. Banks must gauge the vendor’s ability and intent to commit finance, resourcing and infrastructure to continuously enrich their solution offering to meet contemporary banking requirements. Some of the criteria could be the number of customer sites across the globe, profile of client banks, contribution of the financial solutions business to vendor revenues, track record, as well as vendor’s investment in the core banking space.
Vendor’s commitment to the business
Apart from financial viability, the vendor’s commitment to the financial solutions business is crucial. Banks must gauge the vendor’s ability and intent to commit finance, resourcing and infrastructure to continuously enrich their solution offering to meet contemporary banking requirements. Some of the criteria could be the number of customer sites across the globe, profile of client banks, contribution of the financial solutions business to vendor revenues, track record, as well as vendor’s investment in the core banking space.
Vendor’s domain and technology competence
Continuing with legacy technology and outdated banking practices and processes will sound the death-knell for most solution providers and, in turn, severely impact the client bank’s capability to survive and flourish in an increasingly dynamic business environment. A few factors that merit attention are:
Is the deployed technology future proof?
Does the vendor have a good understanding of banking business practices across the globe?
Is the solution based on open standards to facilitate seamless working with surrounding systems and delivery channels, straight-through processing capability and offers real time information to its stakeholders and customers?
Is the technology stable and user-friendly? Typically, minor modifications should be handled with minimal vendor intervention, and without compromising on the solution architecture. Further, the solution should be scalable enough to handle projected business volumes without compromising on response times or consuming substantial resources.
Does the vendor have a clear roadmap for ongoing research, development, upgrade and support?
Does the vendor have the requisite quality and number of trained, experienced personnel to work on the technology platform to ensure business continuity as well as business transformation?
Vendor’s deployment capabilities
For a vendor, developing and marketing the solution to banks is only part of the job. The critical aspect is ensuring a smooth transition to the new system and empowering the bank to leverage its capabilities. The vendor should provide a robust delivery and support platform to manage ongoing business requirements and crisis, within acceptable response times. The main areas that require focus are:
Does the vendor have a proven and properly documented implementation methodology?
Is the implementation methodology designed to ensure proper training, documentation and user empowerment to enable the bank’s personnel to deploy the solution across their businesses with minimal recourse to the vendor?
Has the vendor implemented the solution in the bank’s geography and for banks of a similar profile? Also, what is the implementation track record in terms of success rates, adherence to budgets, timelines and delivery commitments?
Does the vendor have a well-thought through, multi-layered support strategy (both person-based and interactive i.e. web-based with a rich data bank and global best practices) to adhere to stipulated SLAs and ensure best-in- class customer service standards?
This is an extremely critical and at times a painful phase during the implementation process. It entails a complete understanding of the data structures in the existing system, a one-to-one mapping with the relevant fields in the new system, identifying gaps in the data, enriching the same (remember, a core banking solution can only process what is fed into it—garbage in is garbage out!) and finally, migrating the complete data to the new system. This has considerable dependencies on the existing IT teams in the bank as well as the incumbent and new vendor to ensure a smooth cutover. Understanding the prevalent systems and interfaces deployed Proper analysis is required to understand which of these would continue to exist in the revised architecture and, if so, the linkages with the new core banking system. Understanding the functioning of the legacy environment This is required to enable modification and streamlining processes and workflows to achieve desired business objectives with greater operational efficiencies
Configuring new architecture
The new architecture needs to be configured with the objective of eliminating functional redundancies and achieving STP. It should provide banks the flexibility to quickly devise new products and services, ranging from plain vanilla to exotic high-end structured products, tailored to individual markets and segments.
Stakeholders at different levels usually have differing expectations from the solution. A Chief Information Officer (CIO) will expect a well integrated operating environment and a low TCO, a marketing manager the flexibility to design and roll out new products, whereas a Chief Operation Officer (COO) would be more concerned with streamlined, straight through processes and minimal operating risk. It is critical to have complete clarity on the desired outcomes from the transformation. Knowledge and understanding of local practices, regulations, cultural and lingual issues is also important.
"The biggest impediment to a smooth implementation is the migration path from the old to the new. This is further compounded in case of migration from a legacy third party application as compared to that from a manual or a proprietary solution."
Finalization of the scope and the timelines
This should be driven purely by business imperatives and the bank’s ability to commit resources (people, finance, infrastructure) to the project. Based on this, the bank can opt for a variety of approaches like:
‘Big Bang’ approach: All branches and lines of business going live simultaneously.
‘Phased Pilot’ approach: The solution is first implemented at few preselected, pilot locations and finally rolled out across the bank.
‘Line of Business (LOB)’-based approach: The bank identifies one/multiple lines of business (e.g. treasury, loans etc.) where the solution is first implemented in the chosen line of business.
Each of these approaches has its own advantages and drawbacks. The Big Bang approach will result in faster implementation cycles, greater visibility and stakeholder interest levels. On the other side, it calls for considerably higher resourcing on the part of the bank as well as the vendor, and much lower error tolerance levels—there are no second chances. A ‘Phased Pilot’ approach enables the bank to get a first-hand feel of the solution in a smaller space and affords the opportunity to identify lacunae, incorporate learnings, and ensure a better fit to business requirements, enhancing the probability of a successful implementation. This is usually the preferred approach for large, complex deployments. The major downside would be longer implementation cycles, resulting in a longer payback, and, at times, a re-negotiation of the scope of the project. The LOB approach allows the bank the flexibility of migrating solutions as per the maturity and readiness levels of the individual businesses with little impact on other business units. However, this may again create siloed structures with disparate customer information, different workflows and inhibit the bank from deriving the complete benefit of the new technology. banking implementation, resulting in reprioritization, budget and time overruns, and quite often, a high degree of disillusionment and a feeling of being let down by the new technology. "There should be sufficient empowerment at the core and operating team level to enable them to champion the transformation across all stakeholders in the bank."
There should be sufficient empowerment at the core and operating team level to enable them to champion the transformation across all stakeholders in the bank.
Change management and ownership Issues
This occurs primarily due to a ‘top-down’ approach in identifying the business objectives as well as inadequate and improper communication of the change drivers and resultant business benefits. It is important to ensure complete buy-in across all stakeholders and address concerns that the bank’s personnel may face, on account of re-organization, reskilling needs, change in operating practices and fear of redundancy. Clear, timely and relevant communication across all levels is essential.
Midway changes through the project
This is one of the biggest risks in any core banking implementation, resulting in reprioritization, budget and time overruns, and quite often, a high degree of disillusionment and a feeling of being let down by the new technology.
Timely availability of adequate skilled resources and infrastructure such as hardware and network is required. This goes a long way in ensuring a smooth transition within the timelines targeted by the bank.
While the advent of state-of-the-art technologies and global best practices undoubtedly offer improved agility, efficiency, CRM capability and faster implementation cycles, banks need to be mindful of the challenges associated with core banking deployments. These challenges, once understood and mitigated properly, are perfectly manageable. All the same, banks must appreciate that technology is an enabler and not a panacea. As history indicates, successful banks are those that have understood the potential of new technologies and aligned themselves to fully leverage its power. These are banks that have focused on the adaptive change that made the technology transformation process successful.
Our Core Banking Solution : CB-Ace
It is our pleasure to announce the availability of an Ace Core Banking Solution, in conformance with Reserve Bank of India norms and Co-operative Banking requirements. User manageable and friendly menu presentation with resource access using favorite marking, named access and hot key access. Having been in production in co-operative banks for almost 2 decades, the solution assures to offer unique technology experience in banking. Combination of World’s top notch database - Oracle as the back-end of the solution, and .Net frame work and XML used for presentation and data exchange, it is noteworthy to own the solution.
Microsoft .NET Framework 3.0
Oracle Database (10g/11g)
IBM MQ 7.0
365 days banking enabled.
Unbreakable Password Security
Admin settable Password Policy
Encrypted Database credentials
Managed users Profiles
Administrative Roles creation and maintenance
Logs of all account events
Logs of All user events
Dual Authorization can be enabled for crucial transactions
Text based reporting for easy and fast printing
Parameterized Exception handling
Parameterized Charge Calculation
Product based design
System Suspense Accounts for Control
Multiple Clearing zones
Parameterized TDS exemption
Seamless design with virtual branch demarcation
Reports can be generated for a branch as well as for the Bank
No distinction required for Home and ABB transactions
Automatic Branch balancing and reconciliation by system
Each branch can function irrespectively to other branch status
ABB transaction and reporting of a closed branch allowed
Bank specific and Branch Specific Holidays marking
Bank wide calendar creation with Automatic weekly off marking
Effortless addition of a new branch to the system
Branch wise GL / PL accounting
Other branch GL/PL transaction restricted
Global marked GL accounts of HO can be transacted remotely.
Centralized User Management
Daybook/Supplementary book generated on Transaction branch
Trial Balance Generated on Home branch for any date
Branch P&L can be generated for any date
Consolidated P&L can be generated for any date
Cash Balance can be reported branch wise with denomination
Consolidated Trial Balance generated for any date
Centralized /Branch wise Cheque Clearance
Branch wise settable Dual authorization
Branches can windup operations irrespective of other branches
Admin settable Branch Windup Severity Checks
Centralized EOD after receiving all branch windup signal
Admin can enforce any branch windup in cases of emergency
Centralized and Branch wise Account opening
Any branch P/O encashment (Optional)
Intra branch transaction tracking and charging
Customer Profile can be recorded once for all
All further association refers the customer profile
KYC Enforcement with score on support documents
Bank wide account consolidation on customer profle
Customer Association at glance
Customer to Voucher drilldown feature
Customer wise Consolidation of TD interest earning for TDS calculation (Bank wide/Branch wide)
Credit worthiness view of a customer
Interface to personalized cheque book printing
EQUIFAX direct data extraction
ATM Interfacing to NFS (ISO 8583/NPCI conformed)
RTGS -Ready Host Interfacing
SMS service to alert large value transactions
Clearing House Text File Interfacing
Text File Transfer Transactions (TFT) –Salary credit, Dividend Credit Etc.
Zone wise Centralized Inward clearing process
Multiple Clearing zones supported
File feed /Data Entry Transaction modes supported
Zone wise Centralized Outward clearing return process
Clearing type wise reason wise return charging
Multiple sessions of outward clearing supported
ECS Mandate management and validations
Internal Fund Transfer among accounts
One-to-Many, Many-To-One, One-to-One from single menu
No credits executed before debits are cleared
Unclear transfer batch clearance utility
Process Initiated Transfers
EOD initiated Transfers
Scrolled Cash Receipts
User wise Cash Drawer
Cash drawer transaction
Branch wise Cash Vault
Stored Denomination History
Teller wise Receipt Payment Books
Capacity based Vault Transactions
Daily /Monthly Product accumulation
Daily/Monthly Interest Accumulation
Frequency Settable Interest Capitalization
Minimum Balance Penalty Accumulation & Charging
Account type wise charge definition
Stationery charge accumulation & Application
Daily TOD charge Accumulation
Interest rate slab definition
Group Insurance Premium Deduction
Account receivable Maintenance
Limit Sanction Process
Limit Renewal Process
Interest Rate Definition
Undrawn/Overdrawn reporting & Charging
Temporary Limit Management
Security Allocation to accounts
Share Membership Linking
Rate of interest
Overdue Calculation & Charging
Interest Accumulation & Charging
Subsidy Scheme Maintenance
Subsidy Claim, Allocation & Accounting
NPA account Interest Parking and Capitalization
NPA Interest Waiver
Probable NPA account list
Security value erosion monitoring
Sticky account Reporting
No-Credit Received Account Reports
Group Account NPA classification
Priority sector, Weaker sector , Purpose Maintenance
Interest Rate definition
Holiday interest in deposits
Parameterized premature payment
Auto roll over deposits
Interest Accumulation & Capitalization
Irregularity Penalty Calculation
Any branch funding
User Capacity Validation
Account Nature Level Validations
Account Type Validations
Product level Validations
Account Level Validations
Debit Instrument Validations
Account Mandate Validation
ECS Mandate Validation
Branch Level Validations
Role level Validations
Amount level Validations
Transaction Nature wise Validations
Resources Access Permission Validations
Crucial data Integrity Validations
Live Dividend Validations
Share linkage validations
Account status level Validations
Balance Level Validations
Effective Rate Validations
Charge Level Validations
Duplicate printing of Valuable Paper and maintenance
Leaf management to ensure physical correctness of Valuable Paper (TDR/PO/DD)
Stop payments maintenance (record / revoke/enforce)
Locker Tariff Creation
DD -Transfer / Cash
Print on Pre-printed forms
Cash counter Integrated
RTGS/NEFT –Functional Host interface
Structured EOD /EOM/EOQ/EOH/EOY Process
Restricted Post EOD Menu Access
Year End EOD
Restricted Post EOY transfers
Profit/Loss Year wise Initialization (PLYI)
Pre/Post PLYI Trial Balance printing of Any Year
User manageable tree menu for easy navigation
Named Quick Access Shortcuts for direct page access
Personalized Favorite Marking of menu options
Administrator manageable Menu captions and Menu positioning
Role wise Menu presentation
Restricted Post EOD Menu access
Customized Notification Scroll Bar
Thought Of The Day –Random Display of stored messages on LOGIN
User Feedback recording and Management
Quick access Icons of Important Operations
Function Key /Hot Key access
Central EOD strictly after all Branch Windup Intimation
Force Branch Windup by Administrator
Branch Windup Checks for Integrity /Completion
Modular Exception Handling
Unlimited Addresses and phone details
User account operations (Suspend, Lock, Cancel, branch change)
Account number with check digit safety to check human error
Signature retrieval with Mandates
Back dated reports
Template based Letter Generation
Exceptional Transactions Listing
EOD Extract Reports
EOD Transaction Supplementary
Physical Cash Verification Report
OSS data extraction