The importance of core banking systems at APAC banks

Core banking systems serve as the backbone of financial operations and customer interactions for banks worldwide. They deliver loan management, withdrawals, deposits and other critical transactions in real-time, but a system with this number of capabilities comes at a hefty cost. Financial institutions (FIs) are spending up to US$100 billion a year on technology, and for good reason, as the best-in-class solutions can provide a significant competitive edge. Modern all-in-one platforms offer efficiency improvements, scalability and flexibility, comprehensive data analytics capabilities, robust security measures and, ultimately, cost savings.

The necessity for digital transformation

The COVID-19 pandemic and increased competition have accelerated the pace of digital transformation in Asia-Pacific FIs. Customers increasingly use digital channels and services, so banks allocate more resources to their technology budgets. However, merely maintaining legacy systems is no longer sufficient. Older IT stacks represent significant technical debt creating challenges in maintaining uptime, innovating at pace and meeting evolving market needs.

Investments in technology drive digital maturity, product agility, data-driven personalisation and, overall, enhance the end-to-end financial experience.

Despite the majority having clear digital strategies, over 80 per cent of APAC banks have yet to achieve their digitalisation goals. Furthermore, the emergence of digital-native banks and fintech firms poses a significant threat to traditional incumbent banks. Over 40 digital-native banks had been launched in APAC as of 2023, with a further 100 expected by 2025. Increased competition directly challenges incumbent banks’ market share. To future-proof their operations and mitigate the risks associated with technical debt, existing APAC banks must prioritise core modernisation.

Source: Mambu

The problems of a ‘big bang’ approach

A ‘big bang’ legacy replacement can seem tempting, as it promises a swift and comprehensive solution to outdated core banking systems’ problems. However, this approach often brings about problems that can outweigh benefits. Firstly, the sheer scale and complexity of replacing an entire legacy system can overwhelm resources, leading to prolonged implementation timelines that span years and risk substantial cost overruns. The necessary tech expertise can be hard to source and the risk of operational disruptions during the transition period is significantly higher. This approach also tends to overlook the intricacies of individual banking functions, resulting in weaknesses emerging in critical areas like Customer Relationship Management (CRM), channels and payments. This demands separate transformation efforts and can lead to functional silos and unprecedented costs.

Consider incremental changes

Incremental change using dual and parallel core platforms is suggested as a strategy with less risk and lower cost compared to a ‘big bang’ approach. Dual core platforms involve progressively migrating customers based on key lifecycle events like product rollouts using existing digital capabilities.

Parallel core platforms entail launching new customer propositions and experiences and then aggressively migrating existing customers through re-enrollment or by recreating accounts. Both approaches facilitate incremental transformation for APAC banks by either gradually updating existing systems or introducing new solutions alongside legacy infrastructure. Incremental yet otal transformations then take a matter of months to complete as opposed to years, and without disruption to critical systems.

Other advantages of incremental transformation include a reduction in time-to-market of new products by up to 80 per cent, enabling banks to compete more effectively. It also offers a reduced cost of change by extending the existing digital capabilities with APIs to meet evolving demands. Finally, it facilitates the easy setup and integration of new ecosystems that can future-proof the tech stack.

Source; Mambu

How Mambu can help

Whether choosing to go down a dual or parallel core route, the Mambu cloud banking platform helps banks complete their transformations quickly and with operational stability, at a fraction of the cost of a ‘rip and replace’ approach.

It enables a test-and-learn methodology, allowing organisations to evolve gradually while minimising disruption to services without heavy back end reconfiguration. The single software-as-a-service (SaaS) solution suits to all banking functions, ensuring commercial alignment, and Mambu’s network of third-party partners can further tailor the platform to specific business requirements. This presents a 30 per cent saving on typical integrations and upgrades and 35 per cent saving on product customisations and changes (CRs).

Mambu allocates up to 20 per cent of product innovation budgets to resolving technical debt issues, enabling more forward-thinking initiatives. With up to 50 per cent lower resource requirements for maintenance due to the absence of tech debt-created issuest, the digital core offering optimises engineer focus. This ultimately drives faster project execution and time to market, resulting in an up to 60 per cent improvement in deployment timelines.

Fernando Zandona, the Mambu CEO, said: “Asia Pacific financial institutions that partner with Mambu are able to remain agile while operating on a lean budget, and can find better and faster ways to meet their customers’ expectations.

By enlisting Mambu for their incremental digital transformation journey, APAC banks can unlock new opportunities for competitiveness, agility and customer-centricity in the digital age. To discover how Mambu can take your core banking systems to the next level for less, visit the website or contact one of the expert team today.