Replacing Legacy Core Banking Systems

Tom Groenfeldt

legacy system in banksMoving a large bank from its existing 20 or 30-year old legacy system to a new core banking platform is often compared to changing engines on an airliner flying at 30,000 feet. Volunteer mechanics have been rare.

But it has been done — Commonwealth Bank of Australia (CBA) has installed SAP as its core system and Nationwide, a mutual bank in England, has also been implementing SAP.

What will it take to move a large U.S. bank off a legacy system?

“It could be a major customer outage, it could be a fraud or just that their competition does it,” said Mark DeCastro, research director at IDC Financial Insights.

SAP said one of the banks that moved to its core system was able to drop their efficiency ratio — the non-interest costs  of generating revenue — into the 40s.

“When you have banks in this country in the 60s to 80, if anybody comes and gets 40s they will start to make the others move.” It could be one of the large regionals or US Bank, perhaps, he said.

Only a couple of companies can do this. Temenos provides systems for mid-size banks but hasn’t done a major money center bank. The leading contender for large banks is SAP which has been installed at Commonwealth Bank of Australia — the 4th largest bank in the world by market capitalization — and is underway in a long-term project at Nationwide, the UK savings  bank.

DeCastro said that Oracle is developing a new platform — not related to the Flexcube core banking system it acquired several years ago — that will be geared to large banks.

“They have been developing it for 18 months and they are still adding modules. In this country it is going to take a significant event to rattle the nerves and get these banks to set up and start modernizing their core systems.”

Wells Fargo, which is a leader in understanding clients to cross-sell and up-sell to increase wallet share — a company-wide objective — is running its consumer accounts on an aging CSC Hogan mainframe system.

Andrew Hagger, general manager for transformation and analytics at Commonwealth Bank (CBA), explained his firm’s use of the SAP core banking platform at an SAP financial services conference in October. With more than 1,000 branches, the bank has the largest volume of transactions in the southern hemisphere, he said.

CBA believes that real-time banking provides a competitive advantage through greater liquidity and reduced transaction costs. Its investment in technology supports its goal to be customer centric, channel agnostic, real-time and 7-day and to be agile in making offers and bundling products — all familiar goals in banking. Still, CBA calls it the Revolution Story.

“The revolution is about simplicity, customization and greater control for you in meeting your customers’ needs. It’s about agility, it;s about consistency, and most of all, it’s about our fitting our customers’ goals and aspirations, not them fitting our products and systems.”

The bank hits a theme that has appeared with increasing frequency in banking technology — industrialization, or as CBA describes it ”Introduction of common processes across businesses, segments and products.” It also talks of multi-entity support — the ability to use the core system to support something like an Internet-only bank or an entirely mobile platform.

Two keys to success are richer customer information and innovation at speed, supported by being able to experiment to find out what customers want.

DeCastro said that banks have typically done a very poor job of managing the customer data they have.

“Typically it is managed at the product level, not at the customer level, although we are beginning to see that change,” he said.

“When I have a customer on the phone or in a branch, I don’t really care so much which products they have. I want to know their overall profitability, behavior, life events  — that is where the analytics and the tools becoming available will really help — looking at the customer as an individual relationship.”

Scott Gnau, chief technology officer at Teradata, said that its analytics combined with Aprimo relationship manager technology for marketing, can draw on data to deliver individually personalized offers through a branch, call center or Internet and mobile banking. The offers are based on the individual, not a broad ranking like a platinum or gold customer, he said.

“When we have an interaction and I say no, the operator hits a button, the system goes back through the infrastructure, recalculates all the segmentations and comes back with the next best offer. It can do that multiple times. That creates the illusion of discretion without the cost of discretion through real-time active data warehousing.”

DeCastro said that American banks have been a little slow in developing highly personalized marketing compared to some other regions around the world.

“Some of that has to do with the legacy core systems we have in this country.

CBA has a significant investment with SAP and because of that they are now able to do a lot more with analytics and drilling very targeted offers.

Implementing SAP hasn’t been easy or quick. The bank’s timeline shows it introduced the idea to the board in 2007 and signed with Accenture and SAP later that year. It launched part of the system in 2009, migrated 10 million accounts in 2010 and offered 24×7 banking later that year.

Some of the goals sound very much like Wells Fargo — long-lasting customer relationships  and the ability to use technology and analytics to deliver the right offers at the right time.  A more ambitious goal is ”to acquire and retain high value customers by meeting their needs at the right time in their decision making process through the right channels.”

DeCastro said banks haven’t successfully absorbed all the new technology, especially on the customer-facing side.

“I think we have spent too much time looking at mobile banking and not enough at looking to integrate all the channels for seamless experience. Mobile has been elevated at the expense of online which is an extremely important channel that won’t go away.”

He expects that banks will eventually move to a single platform which is device agnostic — mobile will operate through a Web browser and provide the same experience as internet banking rather than through an application.


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13 Scary Statistics On Employee Engagement [INFOGRAPHIC]

Jacob Shriar

There is a serious problem with the way we work.

Most employees are disengaged and not passionate about the work they do. This is costing companies a ton of money in lost productivity, absenteeism, and turnover. It’s also harmful to employees, because they’re more stressed out than ever.

The thing that bothers me the most about it, is that it’s all so easy to fix. I can’t figure out why managers aren’t more proactive about this. Besides the human element of caring for our employees, it’s costing them money, so they should care more about fixing it. Something as simple as saying thank you to your employees can have a huge effect on their engagement, not to mention it’s good for your level of happiness.

The infographic that we put together has some pretty shocking statistics in it, but there are a few common themes. Employees feel overworked, overwhelmed, and they don’t like what they do. Companies are noticing it, with 75% of them saying they can’t attract the right talent, and 83% of them feeling that their employer brand isn’t compelling. Companies that want to fix this need to be smart, and patient. This doesn’t happen overnight, but like I mentioned, it’s easy to do. Being patient might be the hardest thing for companies, and I understand how frustrating it can be not to see results right away, but it’s important that you invest in this, because the ROI of employee engagement is huge.

Here are 4 simple (and free) things you can do to get that passion back into employees. These are all based on research from Deloitte.

1.  Encourage side projects

Employees feel overworked and underappreciated, so as leaders, we need to stop overloading them to the point where they can’t handle the workload. Let them explore their own passions and interests, and work on side projects. Ideally, they wouldn’t have to be related to the company, but if you’re worried about them wasting time, you can set that boundary that it has to be related to the company. What this does, is give them autonomy, and let them improve on their skills (mastery), two of the biggest motivators for work.

Employees feel overworked and underappreciated, so as leaders, we need to stop overloading them to the point where they can’t handle the workload.

2.  Encourage workers to engage with customers

At Wistia, a video hosting company, they make everyone in the company do customer support during their onboarding, and they often rotate people into customer support. When I asked Chris, their CEO, why they do this, he mentioned to me that it’s so every single person in the company understands how their customers are using their product. What pains they’re having, what they like about it, it gets everyone on the same page. It keeps all employees in the loop, and can really motivate you to work when you’re talking directly with customers.

3.  Encourage workers to work cross-functionally

Both Apple and Google have created common areas in their offices, specifically and strategically located, so that different workers that don’t normally interact with each other can have a chance to chat.

This isn’t a coincidence. It’s meant for that collaborative learning, and building those relationships with your colleagues.

4.  Encourage networking in their industry

This is similar to number 2 on the list, but it’s important for employees to grow and learn more about what they do. It helps them build that passion for their industry. It’s important to go to networking events, and encourage your employees to participate in these things. Websites like Eventbrite or Meetup have lots of great resources, and most of the events on there are free.

13 Disturbing Facts About Employee Engagement [Infographic]

What do you do to increase employee engagement? Let me know your thoughts in the comments!

Did you like today’s post? If so you’ll love our frequent newsletter! Sign up here and receive The Switch and Shift Change Playbook, by Shawn Murphy, as our thanks to you!

This infographic was crafted with love by Officevibe, the employee survey tool that helps companies improve their corporate wellness, and have a better organizational culture.


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Supply Chain Fraud: The Threat from Within

Lindsey LaManna

Supply chain fraud – whether perpetrated by suppliers, subcontractors, employees, or some combination of those – can take many forms. Among the most common are:

  • Falsified labor
  • Inflated bills or expense accounts
  • Bribery and corruption
  • Phantom vendor accounts or invoices
  • Bid rigging
  • Grey markets (counterfeit or knockoff products)
  • Failure to meet specifications (resulting in substandard or dangerous goods)
  • Unauthorized disbursements

LSAP_Smart Supply Chains_graphics_briefook inside

Perhaps the most damaging sources of supply chain fraud are internal, especially collusion between an employee and a supplier. Such partnerships help fraudsters evade independent checks and other controls, enabling them to steal larger amounts. The median loss from fraud committed
by a single thief was US$80,000, according to the Association of Certified Fraud Examiners (ACFE).

Costs increase along with the number of perpetrators involved. Fraud involving two thieves had a median loss of US$200,000; fraud involving three people had a median loss of US$355,000; and fraud with four or more had a median loss of more than US$500,000, according to ACFE.

Build a culture to fight fraud

The most effective method to fight internal supply chain theft is to create a culture dedicated to fighting it. Here are a few ways to do it:

  • Make sure the board and C-level executives understand the critical nature of the supply chain and the risk of fraud throughout the procurement lifecycle.
  • Market the organization’s supply chain policies internally and among contractors.
  • Institute policies that prohibit conflicts of interest, and cross-check employee and supplier data to uncover potential conflicts.
  • Define the rules for accepting gifts from suppliers and insist that all gifts be documented.
  • Require two employees to sign off on any proposed changes to suppliers.
  • Watch for staff defections to suppliers, and pay close attention to any supplier that has recently poached an employee.

About Lindsey LaManna

Lindsey LaManna is Social and Reporting Manager for the Digitalist Magazine by SAP Global Marketing. Follow @LindseyLaManna on Twitter, on LinkedIn or Google+.


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Time For Banks To Fight Back

Laurence Leyden

Metamora, Illinois, USA --- USA, Illinois, Metamora, Close-up of man photographing checque --- Image by © Vstock LLC/Tetra Images/CorbisThe financial services industry has suffered consecutive blows in recent years. The global banking crisis, new regulations, empowered customers calling the shots, not to mention a new breed of digital disruptors out to steal market share, have wreaked havoc on business as usual.  Profits have been slashed, reputations have been damaged, and management has been blindsided.

The only way forward is change – a change of business model, a change of mindset, and a change of ecosystem.  It’s a major upheaval, and not to be taken lightly. Banks in particular have operated largely the same way for the past 300 years. Management is facing a once in a generation reassessment of 21st century banking.

Changes in customer behaviour, including 24×7 omnichannel service expectations, lack of loyalty by current customers willing to exchange privacy for easier access to information, generational expectations of future customers – “screenagers” and tech savvy Millennials – and technology advances in cloud, mobile, real-time data, and predictive analytics make yesterday’s business model redundant.

Banking isn’t actually about banking anymore. It’s about enabling people’s lifestyles. That means you have to completely re-think how you engage with customers. The lessons are everywhere in parallel industries. Nokia, for example, thought it was about the phone, not the customer experience. Digitisation has both emboldened and empowered customers. Ignoring this fact is pointless. You need to cater to what consumers want. That means your back-end systems need to be integrated, consistent, contextualised and easy to deploy across any channel.

There’s also a whole new ecosystem required to support this new business model. Banks are facing disaggregation as they no longer own the end-to-end value chain, as well as disintermediation as new market entrants attack specific parts of the business (think Apple Pay). Smart banks are forging relationships with different and unexpected partners, such as mobile and retail organisations, even providing products from outside of the group where they are the best fit for a customer’s needs.  As I’ve said in one of my previous blogs, there’s a new mantra for modern banking: “Must play well with others.”

Old-fashioned banking is gone, and with it so have old style processes, business models and attitudes. Nobody wants to be the last dinosaur.  It’s time for the industry to dust itself off, and step up. Embracing change is easier – and far more profitable – than risking irrelevance in the widening digital divide.

I’ve briefly summarised only some of the key drivers of digital transformation, but you can find much more insight – including views from thought leaders in banks, insurance companies, fintech providers, challenger banks and aggregators – by downloading the eBook from the recent SAP Financial Services Forum: The digital evolution – As technology transforms financial services who will triumph.

It’s essential reading if you’re going to successfully fight back.


About Laurence Leyden

Laurence is Director, transaction Banking for EMEA and is primarily involved in helping banks in their transformation agenda. Prior to SAP he worked for numerous banks in Europe and Asia including Barclays, Lloyds Banking Group and HSBC. He regularly presents on industry trends and SAP’s banking strategy.

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Create A Culture That Doesn’t Fear Failure

JP George

A fear of failure could be holding back your business.

If the people on your team are worrying about being ridiculed or blamed for independent creativity or the downfall of an entire project, they are likely to hold back their ideas and stick to completing projects in the same way over and over again. In comparison, people who work in an office culture with no fear of failure feel free to bounce ideas around, which helps generate new practices, keep up with the times, push projects along, and can “wow” customers with innovation.

Changing the way your office works won’t happen overnight, but these five tips could begin to implement positive changes to help steer your team toward a working environment that is good for the staff and good for the business.

1. Recognize and reward

Employee recognition is the key to not fearing failure. When an employee or team member goes above and beyond; make sure they know that their hard work is appreciated and that an efficient system for providing employee recognition awards is in place. Even small things like suggesting a new way to carry out a particular process should be celebrated. If an employee, colleague, or team member has a suggestion that isn’t quite on-point, find the positive; for example, you might say, “You’re on the right lines, your idea will help speed the process up, but…” Always make sure to offer positive feedback first, then mention the thing that needs changing, and end with encouragement: “Once that’s ironed out, we can implement this — great work!”

2. Adopt a team mentality

Seems straightforward and fairly obvious for a first step, but so many companies do not know how to really generate a feeling of teamwork and inclusivity, and instead put up a front of “togetherness” while retaining the bad practices that divide a workforce. Start by calling a team meeting and setting some ground rules together. Yes, it’s a basic ice-breaking activity in almost all training sessions, but it also helps each person to display respect and hear the opinions of other members of the group. Suggest from the start that the team use “we” rather than individual pronouns when discussing projects, as it helps to dispel blame culture and reminds each person that they are all responsible for any successes and downfalls of the team.

3. Say “yes” more

When staff members and colleagues approach you with ideas and innovation, are you more likely to think “straying from the status quo is dangerous,” or are you willing to hear the person out and let their creative juices flow? Even if the first suggestion they offer is horrible, try not to say “no” outright or make the person feel bad for sharing. Try to find a way in which their idea can be incorporated, even if it has to be altered to fit the project. Saying “yes” to the inspiration and thoughts generated by staff and colleagues means that they will be likely to offer more ideas in the future, and without that openness, you might miss the next great innovation in your industry.

4. Blame less

Similarly, try to incorporate policies that encourage employee recognition rather than shame for sharing concepts. If failure does occur, do not publicly belittle the person deemed responsible, even in jest. This creates tension within the office or team and can make the person receiving the blame less likely to contribute in the future, and may even affect their personal well-being. Instead of blaming and shaming, discuss what went wrong as a group, and try to enforce the group mentality of “we could have done…” rather than “I/they/she/he did…”

5. Look for the positives

If, for any reason, your team does experience failure—and you should, otherwise you’re just not aiming high enough—try to see the positives, and discuss the issue as a group — not in cliques of us vs. them, but together discuss what the group could have done better. If a majority insist on blaming one or two people, move onto analyzing how communication channels could be opened up and ask members how inclusivity could be improved. After all, if only a few people are responsible for a project failing, the responsibility was obviously not being shared in an equal manner while the project was underway. There are positives to every situation, even if it is just the ability to improve your team dynamic.

The changes won’t happen immediately, but once the systems are in place and your staff, colleagues, and team members start to understand the goals within both the office and working environment as a whole, your employees’ creativity should start flowing and you will start hearing new suggestions regularly. Even if some don’t work well, remember to recognize employees and enjoy the rewards of your newly open and trusting workforce.

Want more employee engagement tips? See Boost Productivity With These 4 Brain Breaks.


About JP George

JP George grew up in a small town in Washington. After receiving a Master's degree in Public Relations, JP has worked in a variety of positions, from agencies to corporations all across the globe. Experience has made JP an expert in topics relating to leadership, talent management, and organizational business.

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