Revolutionary vs. Evolutionary – Complexity is Killing Your Bank Transformation




I consider myself a Core Banking Transformation Expert. There is no school for it, no degree that can be obtained, and currently no regulating body to assign a designation and develop a body of knowledge. Expertise, in the case of core banking transformations, can, at this point, only be gained through experience. So with over a decade and a half of transformational projects with combined costs of well over 3.5 billion dollars I consider my experience sufficient to have provided a significant level of expertise on the subject. What I have never considered myself to be is a revolutionary.

The transformation projects I’ve worked on evolved over time; mainframe to AS/400, integration of a client server solution, dial-up banking to on-line banking to mobile banking, replacement of a proprietary in-house banking system with an off the shelf ERP based solution. Through all of these projects there has been significant process redesign, organizational changes, and bolt on peripherals, all to enhance the client experience, reduce operating costs and grow market share. Up until a point my skillset, experiences, and general point of view evolved with the technology. The only constant was change but it was well balanced and almost predictable in its timing. At some point this all changed.

The lightning fast speed with which new business requirements were generated seemed to double overnight; new channels, new processes, new service offerings, new partnerships. The feverish integration of new systems and data sources to address these requirements doubled along with the requirements. The complexity of integrated systems started growing exponentially. The more we integrated the slower, more costly, and risky the next round of integrations became.

Complexity 1

This increased complexity within banking environments has contributed to the skewing of the traditional ratio between the cost of the software solution and the cost of implementing the same. This same complexity combined with lower costs of technology, and software development and distribution has created the most disruptive environment banking has ever seen. New entrants in the market can stand up superior technology and customer experiences at a substantially reduced cost. New ideas and concepts can be tried, refined, and perfected before a traditional bank has even had time to complete their internal risk review.  Banks have tied their own hands and feet and put a gagball in their own mouths with the policies, procedures, and internal risk reviews that evolved over time and reflect the complexity of their system landscape.

At a point in time the need to fundamentally change how a bank does business, both internally and externally, and the technology solutions that supports its business will become, or has become already, less about waiting for an evolution and more about instigating a revolution. Many believe that traditional banks are not capable of making the required changes to address their complexity problems. I believe that the ability is there the starting point and direction is missing.

There is a growing band of revolutionaries gathering in the hills around financial institutions. Unwittingly I’ve joined them. The enemy is complexity, the goal is speed; speed to address business needs, customer needs, and investor demands. The outcome is institutional agility through simplification of technology, process, and procedures and a dedicated focus on core business and delighting clients.

To join the fight against complexity contact [email protected]

3 Responses to Revolutionary vs. Evolutionary – Complexity is Killing Your Bank Transformation

  1. Yes it is true that technology has change the way Banking business was / is to be conducted. The banking system is mainly performing two functions – Credit Creation and acting as payment system of economy. The latter function has become predominant over former. Not to say credit creation has no role now, but it is in the changed form. There is a shift from Balance Sheet based financing to Cash Flow based financing. With technology the functional orientation has changed from transaction processing to customer driven transactions through various delivery channels and now banks are becoming the repositories of transactional information. The surveillance of transactions and risk management has become a dominant objective over all other banking functions. The business units are looking for integration of their accounting systematic like SAP / ERP with banking systems and takeover their Receivable and Payable accounts. The Government too wants their tax collections to be integrated with Banking systems to ensure speedy and accurate funds flow. Over all the objective is to accelerate funds movement which in turn may also go to reduce the credit requirements of deficient sector. The complexity is in integration of various systems outside banking and not in actual processing of transactions. The product innovations need to focus on these aspects.

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