Wednesday, 9 December 2015

Core banking system mistakes, masterstrokes and predictions

  • My previous blog, looking at the evolution of the core banking systems sector over my 20+ years, seemed to be well received and prompted quite a few memories and opinions among my peers. So I decided to do a second ‘Farewell to Cedar/IBS’ piece as I weigh up my next steps in the sector.
These are my ‘Top Five’ mistakes and masterstrokes and ‘Top Ten’ predictions. Let me know if you agree, any other worthy contenders? It would be good to get a debate going!

By Martin Whybrow, founder of IBS Intelligence

Top Five Core Banking System Own-goals
  1. Internet Solutions/Mpct launching OpenAtlas. The announcement immediately consigned the supplier’s existing Atlas system to the category of ‘legacy’ some way ahead of its time and was the last thing the Atlas sales staff needed. There was no coming back for the company when OpenAtlas failed to materialise.
  2. Sungard buying… well, take your pick. Anyone remember the Infinity trading platform? Or how about paying SG$120 million in 2006 for Singapore-based System Access and its Symbols core banking system? The business was sold for $12 million a few months ago to Malaysia-based Silverlake.
  3. Temenos buying Viveo in 2010. Perhaps not the financial disaster of some others but this resulted in several years of demonstrations and challenges by the French supplier’s staff. ‘Production in India, Money in Switzerland, Jobless in France’ was the rallying cry.
  4. Mainstream suppliers (Misys, Temenos, Financial Objects and others) seeking to build replacement systems. History says they have neither the mindset nor the focus (with the need to continue to invest in and support their existing applications).
  5. SAP seemingly on a quest to sell one licence per country for its emerging core banking system… Ukraine, Russia, China, Belarus, Qatar… Predictably, this meant over-stretched resources, delivery failures and a lot of fire-fighting before things were turned around.
Top Five Core Banking System Masterstrokes
  1. Probably the smoothest arrival of a core banking system on the market was I-flex Solutions with Flexcube. For once, the pioneer banks gained live sites and even the existing Microbanker user base signed up in good numbers. Problem projects followed but I-flex tended to throw lots of resources at these and finally got banks over the line.
  2. The most ground-breaking system was probably the predecessor to Microbanker – Citigroup’s Cosmos. Given that the main developer of this, Ernst Hennche, subsequently left to develop the system that is today’s Temenos T24, it is easy to understand why architecturally there were a lot of similarities between the products of I-flex Solutions/Oracle FSS and Temenos.
  3. Midas. Okay, so I am somewhat biased here, given I was a (bad) programmer on this system in my first job in the sector but who would have thought that this IBM midrange-based workhorse would still be running to this day in so many sites? And it has been a great cash-cow for BIS/Misys over the years.
  4. TCS Financial Solutions buying FNS/Bancs and TKS-Teknosoft’s Quartz, bringing together IPR and lots of resources – for once, consolidation meant increased choice.
  5. The IBS Sales League Table. Well, I had to manage one masterstroke amidst all the mistakes over the years! Not perfect, only a measure of quantity and not size of deal, but the closest the industry has had to a fact-based barometer.
Top Ten Predictions
  1. For many customers, the most welcome progress in the sector in the next few years would be for their banks to have an integrated, error-free, resilient, secure and easy to use online proposition. For all the talk of innovation, far too many banks still struggle with the basics.
  2. Far more column inches will be written about the potential of the Blockchain technology than about its actual application to the financial sector’s challenges.
  3. The biggest sector upheavals will continue to come in the payments space, dismantling the traditional infrastructures, costs and inefficiencies.
  4. Attempts by the core banking system suppliers to componentise their systems and sell these as discreet offerings will continue to disappoint. New niche suppliers will fill the gaps.
  5. The core banking system sector will flat-line, barring another financial sector crash. The main challengers will be at the low-end, leaving tier one and two banks still lacking choice and bringing a revival of in-house developments plus a hybrid model based on third-party building blocks.
  6. Vista will sell Misys and, in some shape or form, the coming together of Misys and Temenos will finally occur.
  7. FIS’s acquisition of Sungard will bring mind-boggling challenges and the most complicated application suite the sector has ever seen.
  8. The hold of the domestic US heavyweight suppliers and their aging systems will finally be broken, with a small number of international vendors making headway so too, at the lower end, some domestic newcomers.
  9. Transparency will be a major issue, with governments putting ever more pressure on the financial services sector to reveal more information, largely to help the fight against terrorism.
  10. The banking sector will be hit by a huge cyber-attack – perhaps the easiest prediction of the lot?
About the author: Martin has been focusing on the core banking software sector for many years. He set up IBS Intelligence back in 1991, and has grown it to be recognised as a worldwide authority on all matters fintech and banking technology. 

1 comment:

  1. I think that some of us might have included some different points in the own-goals and master-strokes sections, but I would not disagree with those that you have chosen Martin. As for the predictions, while we hope that some of them turn out not to be true I think in general terms I would say that you have a reasonabe chance of them turning out to be accurate. ON a final point - interesting to see that you now have apparently even more time to reflect on such things, and as always good to see you publishing those thoughts.