Intel Report Core Replacement - Flipbook - Page 9
Take, for instance, a bank that holds a significant amount of
management. By doing so, it reduces the cost for the bank on
consumer deposits. The bank moves forward with a conver-
each additional loan, and it’s cheaper to retain the customer,
sion, but in the process something goes amiss. A data port
says Christopher Marinac, director of research at investment
that holds thousands of customer accounts disappears. The
bank Janney Montgomery Scott. Why spend on upgrades to
bank doesn’t realize that until it completes the conversion
a system that allows for the ability to attract new customers
and those customers start trying to access their accounts.
when there are already built-in advantages that the bank can
Their debit card no longer works; they can’t access funds.
glean by simply focusing on existing customers?
Customers don’t understand why there’s an issue, but it’s the
bank that they blame.
While providing the structure that customers see, the core is
inherently a back-end technology. When customers go to the
It’s not just a potential customer nightmare, but a logistical
bank, they only see the features offered. They don’t wonder
one. Employees must be trained on an entirely new system,
what core the bank uses. If the conversion doesn’t dramati-
which adds complexity to the overall core conversion. It isn’t
cally alter the customer experience or significantly impact the
just a technical concern, but one that requires painstaking
ability to convert revenues, then the C-suite and chief informa-
time to train and ensure employees have acclimated to the
tion officer won’t want to go through the career-defining steps.
new system. And customers also must accept the new interface.
“Banks need to be able to honestly address the ‘ready’ question,” says Brett Mastalli, a partner in the financial services
For the C-suite though, another issue permeates: return on
practice at the consulting firm West Monroe. “A core replace-
investment.
ment isn’t just an IT project; it requires representation from
A bank’s best customer is an existing partner. If a customer
takes out a real estate loan with the bank, it’s easier to get
across the bank with goals focused on ongoing value realization that extend well beyond the day the new core goes live.”
the same customer to come back as they open a second,
Despite these concerns, delaying upgrades presents its own
third and fourth loan and use other services, such as wealth
risks.
The Dangers of Remaining Stagnant
While bank leaders prefer to stand still and wait before replacing the core, certain trends or internal
concerns can force a bank to move forward on a core replacement, whether it’s a full or split-core
design. These trends can make standing still riskier than moving forward with a core replacement.
1.The Fintech Threat
The prevalence of financial technology services has become a staple in the banking industry. According
to Ernst & Young, 96% of consumers know of at least one fintech tool to transfer money and make
payments, with 75% using one of the services. Nearly one-in-four (24%) consumers use a fintech as
a banking platform, according to McKinsey & Co. Banks have responded by making use of application
programming interfaces (APIs) to allow users access to fintech tools through the bank’s system.
This reliance on fintech tools, like payment options or budget tracking, only grew during the pandemic.
Within the millennial age group (25-40 years old), 48% at the start of the pandemic used a fintech
tool. By the end of the pandemic, that rate increased by eight percentage points. For Gen X (age
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