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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“Love One Another Or Die” [Video]

Jan Grasshoff

A lot of us talk about diversity in terms of statistics or activities, but we need more than just awareness to make a difference. To me, diversity means taking on the mindset that we must love one another or die. Watch my video blog to learn what I mean and how diversity helps bring a better world for all of us.

Do you agree that diversity drives creativity and innovation? What are you doing to promote diversity in your team or organization and what are the impacts of your actions? Please share your ideas.

Learn more about what SAP employees are doing to support diversity in the workplace, check out the It Gets Better: SAP Employees Film.

This post originally appeared on SCN and is republished here with permission.


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See What The Retail Stores Of The Future Will Look Like

Ashley Lutz

retail stores of the future

King Retail Services

Retail stores will look very different in a few years.

In the age of mobile technology, shoppers are changing more than ever, and retailers are rushing to catch up with their customers’ ever-evolving demands.

King Retail Solutions designs modern retail stores. The company shared anecdotes and images about what the store of the future will look like.

“Stores will become more theatrical, more immersive, and more of a life experience rather than simply a place to get something,” said Christopher Studach, creative director at KRS. “As much as they are selling products they will be selling a good time, a lifestyle.”

From cash registers to integrating mobile devices, retail stores will soon look very different.

This is a mock-up of what retail stores will look like in the future. Note the digital signage, less conspicuous cash register and computers made available to customers.

King Retail Services

Here’s another shot of what a market would look like in the future. The chef’s specials are illustrated on digital screens above him.

King Retail Services

Here’s a Mobi PCS store that KRS redesigned. Changes included a central “showroom” area and digital devices on the floor.

King Retail Solutions

Here’s a sleek, modern display at the Mobi PCS store designed by KRS.

Here's a sleek, modern display at the Mobi PCS store designed by KRS.

King Retail Solutions

In the future, retailers will evolve from stores to showrooms to actual “playrooms” in order for shoppers to experience the products. IKEA does a good job of illustrating this.

Retailers might devote less space to mass product on the sales floor and more space to product immersion, as seen in Apple stores.

Retailers might devote less space to mass product on the sales floor and more space to product immersion, as seen in Apple stores.


Inventory could conceivably not even exist in the “store” environment at all, but be shipped directly to your home from a distribution center.

Inventory could conceivably not even exist in the “store” environment at all, but be shipped directly to your home from a distribution center.


Cash registers are now being streamlined to be smaller and more efficient, integrating mobile devices.

 Cash registers are now being streamlined to be smaller and more efficient, integrating mobile devices.

Urban Outfitters

Sales by associates on the sales floor with hand-held devices is also growing. Auto-charging a customer’s account via smart phone is on the horizon for many retailers.

Sales by associates on the sales floor with hand-held devices is also growing. Auto-charging a customer's account via smart phone is on the horizon for many retailers.

Theodore Ritz | Business Insider

Flexible environments are key to staying fresh, and relevant, meaning that displays should be as temporary as possible. One way of doing this is through digital signage, which updates constantly.

Please follow Retail on Twitter and Facebook.


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Tuning Our Strengths

Dr. Andrew Thorn

John's strengths were on the piano

My 16-year-old son John is becoming quite an accomplished piano player. I love to hear him play, but I confess that I haven’t always felt this way.

When he was first learning it sounded more like noise than music. In the beginning, he found a song that we all enjoyed. We encouraged him, and he got better and better at that one song.

He continued playing it over and over again. He never got tired of playing it, but we got tired of hearing it. He played it fast and slow, and loud and soft. He played it in the morning and at night. It seemed like it rang through our home every waking moment.

Eventually, this song that once sounded so beautiful to us became so annoying that we finally had to tell him to never play it again. We just couldn’t take it anymore. He was obsessed with the song. Despite our vocal objections, he continued to play it. He just couldn’t help it.

Learning To Use Our Strengths

That fact that he became good at playing that song did not make it any more tolerable for the rest of us in the house. He overdid it.

Successful leaders must guard against becoming one-dimensional

Most of us understand how our weaknesses make us vulnerable, but we may overlook the thought that our strengths may also make us vulnerable.

This raises a very interesting question. Can a strength become a weakness?

Some find this question to be very challenging. The abundance of evidence supporting a strength-based approach to leading and living makes it difficult for many to even consider the thought that a signature strength can be overdone; but it can.

We may overlook the thought that our strengths may also make us vulnerable

John solved his problem on the piano by learning many songs. He didn’t spend time playing songs he didn’t like; he simply focused his passion to play the songs and style he favored. Now we are treated with wonderful music in our home.

In much the same way, successful leaders must guard against becoming one-dimensional. Each must be responsible for developing many strengths. Learning how and when to use them appropriately is what separates the very good from the very best.

This is a great time of year to take inventory of your individual strengths and how you are using them.

Are you overdoing any of your signature strengths? Are you under-using any of your signature strengths?

Don’t just answer these questions; check-in with those around you. Leveraging their perspectives may help you change your tune before it is too late.

Image by  Paul Wesley


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Enterprise Mobility Minute #2: Think Strategy First

SAP Guest

By Dr. Ahmed El Adl Vice President, Global Mobile Solutions Services

enterprise mobilityIn today’s world of technology-driven transformation, the ability to adopt new technologies quickly – without unduly disrupting the business – is key to remaining relevant, today and in the future.

But when many breakthrough technologies emerge and converge at record speed, how do you make the right decisions to mobilize your business? How can you foresee the impact that your choices will have on the business of your company?

It’s no longer a question of simply implementing lightweight productivity apps or stand-alone solutions. Now, you need to meet the demand for real-time enterprise – which means being able to connect all the relevant activities and information, from products R&D down to sales and customer service. Until recently many organizations have focused on mobilizing sales and service management processes, however, I believe there is larger value to be gained in other areas.

Enterprise mobility – if leveraged in a strategic way – can transform the way we design, build, deliver and maintain each and every product and service we offer. Understanding your company’s overall business strategy on a global, regional and even departmental level can help you:

  • Get detailed understanding of current and possibly future requirements – number of users, line of businesses requirements and challenges, volume of data relevant to each mobile solution, data privacy and security regulations, etc.
  • Discover, define and prioritize the required mobile apps so that you can deliver the right app to the right group of users at the right time
  • Select the right mobility development platform (MADP/MEAP) and chose the suitable architecture and development paradigm for each mobile app
  • Boost user acceptance, increasing the value of each deployed app to the business
  • Choose the right device(s) and app combination for each group of users
  • Decrease or even eliminate security risks and regulatory issues upfront by choosing the right enterprise mobility management platform (EMM) and defining the appropriate security policies and usage guidelines
  • Decrease TCO and increase ROI of your mobile solutions
  • Identify opportunities to enhance your business – or even propose new business models based on new mobile capabilities

Mobile apps: The ‘glue’ that connects and transforms

Enterprise mobility is about a completely new business model where people, processes and even machines are connected in an unprecedented way. Mobile apps provide the glue that fuses technologies together and makes functionality and information available where actions and decisions are being taken – connecting all relevant business areas, layers, and even regions in real time.

Here’s an example. A single app could deliver a customer complaint to the account manager, customer support team, and product manager. Based on predefined criteria, it could then create follow up tasks and reminders for each department. The app could also provide information to an executive dashboard showing the lifecycle of customer satisfaction and product quality, based on both internal and external data including social media.

To achieve this quality of mobile business app, you need a team from business and IT working together to not only collect and analyze business requirements but also to understand the relationship between business areas, products, and services.

And this mobility team mustn’t work in a silo. They must be part of a bigger group responsible for driving business transformation via different mixes of innovative technologies. To make this approach the new norm a cultural shift within organizations is required, which will also ensure new ideas will be heard and taken seriously.

Current innovation in enterprise mobility is setting the stage for a new era of real-time business communications, analytics everywhere, and collaboration between different layers and regions of the enterprise. This is a real game changer. Get ready to understand your business before you go out and get lost in the many options of platforms, paradigms, and tools which may or may not be right for your organization.

In the next articles we’ll outline the different techniques and steps required to understand your business and create your initial enterprise business and IT mobility strategy.

Connect with me on Linkedin or Twitter @aeladl

This post originally appeared on the SAP Community Network and is republished here with permission.


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