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By M. Isi Eromosele
Dramatic forces of change are sweeping the banking industry.
The age of the empowered customer is here, changing the way financial products
are being created, delivered, sold and serviced by banks.
Relationships with clients, partners and regulators are more
complex than ever. The digital world has leveled the competitive environment and
the inflexibility of a traditional bank’s core systems has become the major
obstacle to achieving sustainable growth in this new environment.
Modernizing core systems is a major task that requires
significant time and investment. Several different approaches to this challenge
exist, and each has its advantages.
Successful approaches to core systems modernization are
always progressive, which entails treating modernization as a journey rather than
a fixed end-state. The best way for banks to gain the flexibility and
efficiency they need is to create a componentized architecture that separates
key constructs and their assets from their core transaction engines.
Once this modern core architecture is established, it will
be easier and less risky for banks to acquire the necessary capabilities they
need to support new business models and new functions. Banks can gain the ability
to choose the optimal solution for each need; renovating elements of their
existing system by building customized solutions.
To succeed in today’s economy, smarter banks must move from a
vertically integrated product-centric operating model to a horizontally
integrated customer-centric operating model.
This will enable them to eliminate cost and complexity that
is often obscured by monolithic legacy systems.
Starting with a modular design philosophy, the new approach would
call for the componentization of existing architecture into discrete building
blocks: sets of master data for customers, products and contracts; isolated and
externalized business processes, business logic and associated business rules.
Core banking systems developed using these architectural constructs
would allow banks to better address business and customer needs, avoid cascading
dependencies and isolate changes to the systems.
Business services and components developed once can be shared
across multiple channels, operational processes and product lines. Applications
created in this way can be quickly assembled to deliver a new solution at high
speed and with less risk.
Thoroughly componentizing and modularizing core banking systems
can enable a radical simplification of the banks’ technology environment, while
enhancing the reliability and quality of business-critical information.
If properly implemented, this approach will position back-office
systems to re-emerge as the key engine for growth and innovation throughout the
banks. By creating a componentized architecture that separates out data, processes
and logic from the core transaction engines, banks can gain the flexibility and
efficiency they need.
There are three key imperatives driving a need to address core
banking systems today:
- A new
focus on the customer through improved customer information, insight and
interaction, enabling customer-centricity, product bundling and
relationship pricing.
- The
integration of risk management across the enterprise to mitigate operational
risk, optimize financial returns and meet compliance requirements.
- The need to respond to new business and operating models based on a technology architecture that enables enterprise-wide business agility while lowering the cost of operations.
Once the core architecture is established, banks can address
each particular requirement within the program on a case by case basis; options
include both custom and packaged
components.
By enabling deployment decisions to be made purely on the
basis of business benefits, the architecture-led approach to modernization
delivers value at each step and can be paced up or down as needs change.
This also ensures that the program remains in line with
evolving business objectives.
M. Isi Eromosele is
the President | Chief Executive Officer | Executive Creative Director of Oseme
Group - Oseme Creative | Oseme Consulting | Oseme Finance
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2012 Oseme Group
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