Mastering the Supreme Discipline of IT: Core Banking System Replacements
Banque Saudi Fransi decided to undertake one of the biggest challenges in banking IT: a complete core replacement. The benefits outweighed the risks, and it paid off well. The project was recognized by MEA Finance as the Best Core Banking Technology Implementation 2022.
The Challenge
In the age of digitalization, banks have to contend with a paradigm shift in customer demand. Young, digitally savvy consumers are entering the banking market, requiring personalized and seamless multichannel services while at the same time relying less on the financial institution’s advice than older generations. To meet customer expectations, established banks have to adjust their organization and their technical setup. In many cases, this amounts to nothing less than a core banking system (CBS) replacement, which is a daunting challenge due to the cost, size, technical and organizational complexity, and risk. Banque Saudi Fransi (BSF) was faced with the decision on how to adapt its IT landscape to the challenges presented by the changing market situation. It became apparent that the current core would require certain enhancements to meet the bank’s financial, operational and business needs. A new CBS, on the other hand, would allow enhanced offerings and services, accommodate the latest innovations, and enable the bundling of products with dedicated value propositions and pricing. The latter counts among the essentials within the targeted customer segment. CBS replacement projects are rather infrequent occurrences; thus, there is little to no relevant experience within any given organization. Between 25 and 30 percent of these ventures fail in one or more areas. Eight key reasons for failure of a CBS implementation have been identified:
To avoid any of these pitfalls and benefit from existing experience with a CBS replacement, BSF brought in BCG Platinion as a partner for its project, not least because some rather difficult technical challenges were expected. Furthermore, the management of BSF anticipated the need for team-building measures and wanted to avoid any disruptions to customers. The daily routine business therefore had to run smoothly in parallel to the project efforts.
“The core banking system transformation is at the top of BSF’s agenda. It is not only an IT project; its impact will be felt across the bank”
Rayan Fayez, Former BSF Managing Director & CEO
The Approach
There are two major options for replacing a CBS. One comprises the implementation of new products in the new system while retaining the old one, thus augmenting the IT landscape. That way, the new, parallel core covers the advanced needs not met by the legacy system. Once the implemented platform is stable and proven, more and more legacy functions may be migrated. The second option is a complete replacement of the current CBS with a new, state-of-the-art solution. This requires the highest initial investment of all IT modernization solutions, yet it enables the bank to really accelerate the launch of new products and services. Taking into account the inadequacy of the existing core and the ever-increasing pace of market change, Banque Saudi Fransi opted for the latter option. The project team thus had to meet the biggest possible challenge and still deliver the new system on scope, on time, within budget, and without major disruptions. To facilitate that, our team helped to establish a blueprint for a standard program management within the client’s organization and extensively documented the internal processes and architecture of Banque Saudi Fransi. The requirements specification was aligned with industry best practices and standard procedures as well. Furthermore, we introduced agile principles to deliver the new CBS. This is clearly beneficial for the client’s competitive advantage, as it enables all parties involved to deal smoothly with changing requirements, even late in the development process. For example, as the requirements and conditions in the competitive market are changing, the program scope and solutions can be dynamically adjusted. The team’s capacity for self-reflection is enhanced by meeting at regular intervals to capture lessons learned and adjust its behavior accordingly, thus becoming more effective.
“As BCG Platinion could rely on its experience with a number of CBS replacement projects, we gained valuable insights from their participation. They also encouraged our team to go ahead with the culture shift which needs to accompany any change of that dimension”
Thamer Mohammed Al Yousef, BSF COO
The Impact
Thanks to the combined efforts of our team and the client organization, the program was delivered with just one month’s delay, despite the need to switch to a full remote setup due to COVID-19 restrictions. The development and testing phases could even be wrapped up on time. Furthermore, the deployment of the new CBS did not impact the bank’s customers negatively at all. To the contrary, the turnaround times for retail loan and credit card applications are now significantly faster, as disbursements are now possible throughout the day instead of only once a day.
The increased automation of hitherto manual activities in conjunction with these tasks by 20 to 30 percent has also freed up time for more than 1,000 front-office end users, who can now intensify their focus on client services. The outstanding execution of the CBS replacement has also been recognized by neutral subject matter experts: The renowned trade journal MEA Finance recognized Banque Saudi Fransi with the Best Core Banking Technology Implementation Award within the 2022 MEA Finance Banking Technology Awards, which aim at awarding program benchmarks and promoting excellence and standout performance in banking and financial technology, assessing hundreds of entries in 45 different categories.
“The award is a visible sign that we made the right decisions along the road to our CBS replacement. That holds true for the decision to replace outright instead of taking the less risky gradual approach, but also for entering a partnership with BCG Platinion to support our team.”
Irfan Bhatti, BSF Program Director
Looking Into the Future
Banque Saudi Fransi aims to be recognized as best in class on customer experience and turnaround time, offering fully digitized services with 24/7 self-service capabilities. The strategic ambition of Banque Saudi Fransi is to have the number one net promoter score (NPS) ranking by 2023. The CBS replacement will support that goal in many ways. On the technical side, a simplified application landscape will contribute to reducing the overall IT workload, resulting in a leaner organization. The application development lifecycle will be accelerated, and its results will be much quicker and easier to integrate into the IT landscape.
This will, of course, have positive ramifications for business, control, and support functions. The expedited product development will allow for a shorter time to market for future products, while enhanced automation will help to produce leaner structures and faster processing times. Improved market intelligence and controls will provide better customer insights and support the refocusing of efforts toward business and control, away from technical issues. With the complete replacement of the CBS, Banque Saudi Fransi has mastered the supreme discipline of IT challenges and paved the way to the future of banking in the digital age.
“In the end, everybody gains something from the replacement of the CBS: Our IT will be developing for the future instead of having to maintain the past. We will be able to focus on our customers’ needs even more, and the customer will benefit from faster, better, and more comprehensive services.”
Shehzad Ahmed, BSF PMO Head
For inquiries about our approach and experience, please reach out to one of our team members Bhavya Kumar, Ludger Küpper, or Grzegorz Laudy.
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