Retail Banking Set For IT Infrastructure Makeover

‘Rip and replace’ is rapidly becoming the de facto standard in the retail banking sector as it struggles to use IT to gain competitive advantage, according to Elizabeth Gooch, CEO of eg solutions.

“There is no doubt in my mind that the recent financial crisis, which has triggered an unheard of level of government, central bank and regulatory action, has transformed the landscape for retail banking here in the UK and abroad,” said Gooch.

“But the current turmoil does not necessarily mean an immediate downturn in IT spending. In fact, in many cases we are seeing the opposite of that with many retail banks using this opportunity to deploy non-invasive technology to augment existing IT platforms and transform their core business systems.”

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Recent research by analyst house Datamonitor, Core Banking Systems Transformation for a New Retail Banking Landscape, released in October 2008 also appears to confirm this trend with 50 percent of respondents to a recent survey in the sector stating that they saw no real impact on their core systems strategy from the recent economic turmoil.

“Retail banks are unlikely to cut ongoing investment in core IT systems now – it could be devastating to the business. And while we are seeing a degree of cost control, we are not seeing a reduction in overall spend. What is clear though is that IT investments will focus on rapid payback in terms of RoI,” she continued.

“According to Datamonitor, there are a number of real business drivers behind the retail banking sectors’ focus on core systems. These include the inherent need to deliver a flexible product development strategy, ongoing issues to do with integration with existing systems, as well as the need to comply with increased levels of regulation. These problems are simply not going to go away no matter what the macro-economic outlook is,” she added.

The recent report from Datamonitor also highlighted the business and operational benefits of transforming core systems within the retail banking sector.

“Those retail banks that are already considering a ‘rip and replace’ strategy are focusing on the short and long term advantages. These include the ability to re-engineer existing processes, expected gain from enhanced operational flexibility, improved financial performance and real–time processing capabilities as well as gaining a single view of the customer and thereby improving sales opportunities,” she added.

“One point came out loud and clear from the research and that is that over 80 percent of those interviewed were willing to adapt current business processes in order to achieve an acceptable degree of fit with a packaged software solution representing a dramatic shift with the past where the emphasis has always been on in-house bespoke programme development.”

“For vendors such as eg solutions the opportunity is clear. Retail banks are increasingly considering using applications such as ours to transform their existing operational performance to stay one step ahead of the market. Financial turmoil has been the transforming agent, a deteriorating market will continue to force the hand of retails banks as they fight to survive,” she concluded.