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Bridging the gap, there are a multitude of core banking strategies to consider. The last few years have seen the emergence of some simple and elegant digital core banking solutions that provide an outstanding experience for customers. However, the downside is that most of these solutions only support relatively simple product suites and digital-only distribution channels and struggle with the complex multi-channel, multi-product, multi-segment banking models that still characterize most of the industry. “That is where our advisory capabilities to help our clients select the right core banking strategy that aligns with their unique business model can power the beginning of the core transformation journey,” says McIntyre.
Given the inherent complexity of the industry, core banking transformations are never mere cut-and-paste jobs. There is always the need for solution customization to fit customer needs; for larger banks replacing core systems is typically a project that costs tens or hundreds of millions of dollars and can last three to five years. “At Accenture, we have invested significant time and resources to understand the levers that drive bank economics. We have the experience and knowledge to recommend solutions that will help clients reduce product launch times, increase cross-sell ratios, simplify operations and lower costs,” McIntyre adds.
Driving the Core Transformation
One of the key drivers catalyzing the core transformation trend within the banking industry is the growing demand for configurable products and contextual advice. Using legacy systems, many banks are struggling to achieve product rationalization without losing product differentiation at the front-end. However, as the quality of data and the ability to analyze it improves, McIntyre asserts that the “holy grail” for banks is to have configurable products that react and adapt in real-time to customer behavior and demonstrated need. “To provide ‘in the moment’ advice, you need accessible and usable underlying data that can be used to identify needs and then configure the right offer and product for the customer—what we refer to as ‘simplicity on the inside, but differentiation on the outside.’ ”
A growing concern for many banks is that their monolithic and often decrepit core banking architecture is unable to provide both the data they need to better understand their customers and the product agility to then serve them. As many legacy core banking systems reach the end of their natural life, the transformation trend is also being driven by regulatory requirements across the U.S. and the UK, where in some cases these systems sometimes fail to deliver even basic banking services.
Core banking transformation can be instrumental for banks in terms of helping them get to where they see themselves in five to ten years down the line
Despite this pressure, there is still a lot of understandable anxiety about replacing systems that support key regulatory filings and that have worked well for, in many cases, 30+ years. So there is also a growing trend to identify ways to create a more nimble and real-time data and product architecture while retaining some of the existing core systems. “Building a middleware-type solution can create the illusion of being a multi-channel, agile, real-time solution while, in reality, most of the back-end work still runs on traditional batch-processing systems,” McIntyre says. This type of architecture also supports another key trend—open APIs that allow third parties to connect with bank systems to extract information. Despite the attraction of middleware solutions, many institutions see them only as a short-term solution to the underlying problems. So many are instead embarking on a ground-up revamp of their systems architecture to build a better digitally enabled bank.
Accenture Core Banking Transformation Framework
Accenture’s core banking pedigree can be traced back to the development of Alnova, their well-established, in-house core banking solution that has more than 200 implementations globally. Despite the success of Alnova as a core banking platform, Accenture’s focus has now shifted from developing software to serving principally as an adviser. “While we continue to support Alnova for existing customers, we are now more focused on providing best-in-breed advice that ensures that our clients have the best possible solutions that map to their unique needs. This approach has been enabled by a series of deep alliances with major core banking software providers, including Temenos, SAP, Oracle, and EdgeVerve,” says McIntyre. “Our proposition to clients is that rather than pushing a single solution, we help them navigate this complex journey and configure a solution that enables them to implement their business strategy.” On that note, he draws an interesting analogy between his personal and work life—story telling. Trying to impart a moral lesson to his four kids, McIntyre uses stories to provide the backdrop that helps his kids better understand the moral lesson. “Through my interactions with clients, I also try to paint a picture that can help our team and our clients better understand not only the final destination, but also the reasons for embarking on the journey. In a core banking transformation it is easy to get lost in the weeds and the overwhelming complexities of the process, so part of my job is to keep their eyes on the horizon and help them understand the long-term payoff that comes from this type of major systems transformation.”
The payoff from a core systems transformation was demonstrated when Commonwealth Bank of Australia decided to opt for a bottom-up replacement of its legacy core systems with SAP Core Banking in 2008.
"Rather than pushing a single solution, we can help clients navigate the journey and configure a solution that is best for their banking model"
“In the U.S., very few institutions have taken the root-and-branch core transformation approach over the last decade. One of the few examples is BBVA Compass, which adopted Accenture’s Alnova platform, which was already the standard in their domestic operations in Spain,” says McIntyre. For the U.S. market, Accenture has mostly focused on the middle layer, which is targeted at aggregating and presenting data in ways that effectively increase the productivity of the underlying core system. “Although our middle-layer approach may add a few more years of mileage to the core systems, without a complete overhaul the underlying system will still suffer from fundamental limitations, and we are beginning to see more institutions consider more fundamental transformations.” McIntyre believes this may indicate that we are approaching a tipping point where the U.S. banking industry will begin to play catch-up with Europe and Asia. “When major U.S. institutions make the decision to renew their core, we can serve as the preferred systems integrator that brings global experience with major, complex transformation projects to our clients,” he adds.
Beyond its work with alliance partners, Accenture also carves out a clear innovation path of its own to make sure it stays on top of key industry trends. Through Accenture Research and venture investments, the firm continually scans the world for interesting technologies to help incubate and further develop innovative products and solutions. Accenture also has its own innovation centers—with the latest addition being in Dublin, Ireland, where it is conducting research to understand the latest technologies. For example, in the core banking world, there is interest in using blockchain and distributed ledger technology, so Accenture is working with a number of startups to understand how this technology can be applied to enhance or replace traditional core banking systems.
The Preferred Consultants
Commenting on Accenture’s ethos, McIntyre says, “We have a great track record of doing what we set out to do and delivering for our clients.” Core banking transformations are long and complex projects that often transcend multiple CIOs and CEOs, and during this journey a clear picture of the goal is imperative. “Our brand and reputation in the market is built on arriving together at the goal with our client, on time, and within budget, and that is why Accenture is a leader in the core banking space. Core banking transformations are some of banks’ biggest and toughest problems and that is the space where we believe we excel as advisers,” concludes McIntyre.