Core banking replacements usually can’t support a business case on their own. There tends to be significant process improvements included in all business cases in support of the core banking replacement. This turns a core banking replacement into a core banking transformation.
What is a transformational process? In my opinion a transformational process is any process that significantly improves a banks relationship with their customers, reduces non-value added activities in the middle and back office and reduces the bank’s total cost of ownership of the new core banking solution. Having said this none of the leading core banking platforms come with any significant predefined standard integrated processes. The leading belief is that banks on the whole do not want standard processes, that every bank has a secret sauce when it comes to execution of their processes. Most banks believe this. They believe this until it comes time to take a long hard look at their as-is process and then define a transformational process that works without significant customization of the new core banking solution.
The challenge for banks come from two sides. One challenge comes from the fact that the bank normally has no idea of the functional capabilities that can be realized in the new solution they‘ve bought. Sure there was a review of functionality based on an RFP however most RFP’s are written based on current functionality not on to-be transformational process requirements. The second challenge comes from the fact that most banks do not have a clear understanding of their current processes either. What this creates is a circular discussion. The bank will ask what the solution can do? The solution provider will ask what do you want it to do? This will go on until together they realize that the only starting point is the current as-is processes of the bank.
This means that the bank then needs to define their as-is processes for the solution provider and then together they need to reshape the process to make it “transformational”. The problem is that once this happens the only reference point for the subject matter experts from the bank is their own as-is processes. The as-is is approved, it is known, there is little to no organizational impact if the as-is process is followed. The as-is process becomes a security blanket the transformation team wraps themselves in. Time wasted documenting and communicating the as-is process eats effort and schedule that could have been spent on planning an organizational change to support transformational processes but time and money have run out.
Transformation has to start before the RFP. Requirements need to be defined against the to-be not the as-is. A vision and road map need to be in place and true to-be business processes need to be defined. If this does not happen the core banking replacement that became the core banking transformation gets wrapped up in the as-is security blanket and is transformed back into a core banking replacement.