Best Practices to a Successful Core Banking Transformation

Published on: July 12, 2022

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A core banking transformation is one of the most frightening changes that a bank may go through in its lifetime. 

Transforming a traditional bank into a truly digital one is a complex process; that can take several years to complete. Hence many banks are still hesitant to go ahead with this enormous change. 

However, only the willingness to proceed with this change is not enough. Banks must plan accordingly, bringing together the fundamental elements: people, organizational culture, and change management to achieve a successful digital transformation.

In this blog, we will discuss the major challenges banks face when adopting a new core banking system and the key steps to overcome those barriers.

1. Build a business case.


The considerable cost of replacing a core banking system is one of the most significant barriers. Most banks and financial institutions use old on-premise technologies, and entirely replacing them can be costly. So it becomes a challenge for the top management to make significant investments as the pay-off period can be long.

Therefore, the first step towards a successful digital transformation is identifying its short-term and long-term benefits. Building a business case that maps out the objectives, strategic goals and pays off before starting the journey is critical.

A strong business case will provide traceability from the beginning to end of the transition, and help align decisions with overall business goals.

2. Change the Culture.

Embracing new technologies and innovation means changing organizational culture. As a bank, you can't predict what will be the customer's expectations in 10 years. Thus, changing the teams' mindset to embrace adaptability and flexibility is critical. However, some banks tend to be significantly resistant to it. Only a few are quickly producing or adopting game-changing innovations.

But to achieve a successful digital transformation, it is necessary to aim to change. This means striving for continuous improvement and renewal. Testing, innovating, and partnering with tech companies to get the right technologies to meet future customer demands and bring products to market quickly.

3. Choose the Right Implementation Methodology.

Implementing a new core banking system can be complex and extended. Before its execution, you must ensure a robust implementation method to overcome tedious work and reduce time during the process. You also need to have a complete plan for data migration and define timelines.

  • Plan for Data Migration

Data migration is one of the most crucial aspects of core banking transformation. But mapping, extracting, and migrating data from one system to another often becomes challenging. For a successful transformation, it is essential to have in advance a plan to migrate this data seamlessly to the new system.

  •  Define timelines 

Defining a realistic timeline for the transformation is crucial. It outlines what is required, expected, and by what time during the process. Having accurate timelines can help banks track the events' courses, follow the schedule accordingly, and be aware of changes. 

It is essential to choose an implementation method that meets your business goals.

4. Select the right core banking vendor. 

This process can be complicated and overwhelming if you don't know how to approach it from the start. So, ensure you have a guideline to help you follow the steps you need to take when making this selection.

You will need to define a longlist to interview multiple vendors and partners - depending on your needs, shorten it down. Request draft proposals, evaluate them, and build a proof of concept to see if theory and practice meet.

Learn more about how to select a core banking vendor here.

5. Execute the plan and be agile 

At this point, the previous steps are already in place, and although it is essential to stick to the plan, it is also important to stay agile. Before the execution, a lot of preparation is necessary, and the involvement of the right people it’s vital. If there are surprises along the way, your team needs to be ready to handle those surprises with minimum disruption. 

Cost of implementation, stakeholder management, and time to execution may be barriers for banks to embrace a core banking transformation. However, with proper analysis and planning, banks can successfully implement a core banking system and reap the benefits of such a transformation.

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