Core Banking Transformation – Where to Start?

Core Banking Transformation – Where to Start?

Where to start? When you tackle something as large and scary as a core banking transformation the question of where to start can be perplexing. In the history of my core banking transformation career I have seen different models used for different reasons.

I have seen a big bang approach justified based on a belief that legacy systems could not be easily decoupled. I have seen process centric approaches based on assessed value and expected business benefits. I have seen purely technical transformations based on portfolio analysis of legacy systems and applications. I can’t say that I have seen it all. At this point I think there are so many ways to skin the core banking transformation cat that there will not be enough transformations in my life time to see it all.

The question however still persists…where to start?  I have written previously about renovating your way to a core banking transformation and the current trend of large management consultancies to focus a banks direction on operational efficiencies and cost reduction. I am an advocate of transformation by process and that the prioritization of these process transformations has to be linked to tangible benefits related to growing a banks market, as apposed to simple process efficiencies and cost reduction. However I do not think that this is where a core banking transformation should start.

For me the development of the process centric road map and the renovation plan is important however if it were up to me the starting point for any core banking transformation would be master data.  It’s not sexy, it can lead to rework and in some cases throwaway work, if done right the transformation of master data is invisible to your end user, but master data is for me the logical starting point in the transformation of a bank. It provides your organization with a solid foundation, which will accelerate the implementation of your process road map.

Master data is any information that is considered to play a key role in the core operation of a business. In the case of a bank my master data list includes:

  1. Customer information
  2. Account detail and transactional information
  3. General and sub-ledger detail
  4. Organization Structure

For me this is where you should start a core banking transformation. At minimum the transformation should start with customer and account detail. Most packaged banking solutions will rely heavily on these objects and an integration strategy with legacy systems will normally limit the functionality of the new platform. In my opinion customer and account details should be converted to the new platform as soon as possible and applications consuming this data should be adjusted.

Running a close second for me is the early integration of the transformational general and sub-ledger functionality. Reporting requirements, compliance, and the running of day-to-day operations based on better/clearer financial data is extremely important.

Finally for me the ability to define a go forward organizational structure that reflects the realities of the current as-is model and flexible enough to address the requirements of the to-be model is extremely important.

Starting with master data not only provides a solid base to start building new processes against it also provides an opportunity for a bank to develop competencies with new platforms. The ability to develop competencies with a new platform without impacting end user functionality in the early phases of transformation can provide both the transformation team and executive with the confidence they need and the commitment to the new platform that will make the transformation of existing processes less stressful and more successful and will allow the enterprise to take full advantage of the new platforms functionality.

Want to leverage the complete functionality of your new platform while developing your organizations competencies with your new platform with limited visibility to the organization? Then you should think about starting with master data.