More than half of core banking transformation initiates either fail or do not realize the intended benefits. Most of such projects are huge in scale and enormous in terms of impact on the bank.
While the above gives a pessimistic view, there is quite a bit of learning regarding ‘what not to do’ in such initiatives.
Core banking transformation is a resource, time and money consuming exercise which can be compared to performing a heart surgery of a human being. This essentially means that the core system of bank needs to be transformed/replaced while the bank keeps on functioning. Hence such projects are risky by nature.
Such transformation is more than just a project. It is transforming the bank into not only a new technology, but also a new culture, environment. Change management is as important as technology and process transformation.
Here are some of the key learnings from failed core banking transformation projects that come to my mind from hands on experience:
- Not having enough buy in and motivation for change from the top management is a major deterrent. Top management must empower the core team to take quick and meaningful decisions.
- Inadequate preparation of organizational change is hard to overcome at later stages of project.
- Lack of trust and hence co-ordination between technology, business and project management teams is a must before, during and after the project. They cannot work in silos to make the project a success.
- Banks may not realize the potential of Involvement of a system integrator who has hands on experience in early stages of such projects.
- Lack of enough involvement in vendor selection, product walk through stages can be detrimental leading to failure.
- Improper understanding and management of the core banking vendor may lead to increase in timelines, cost and falling short of meeting desired outcome. Expecting vendor to take it forward because bank is paying is no way fair. Bank’s involvement must be there from start to end.
- Appropriate implementation approach is another key element of decision making. ‘Big-bang’, ‘Pilot and Roll Out’ or ‘Geography wise roll out’ – the approach must be decided after considering carefully the pros and cons of each option.
- Selecting the core team for the project is highly important. The most experienced people in bank in terms of technology/business/project management may not always be part of the core team. Resources with the right attitude, clarity in thought about the mission should be part of the core team.
- One more critical factor that may lack focus is: analyzing how close acceptance testing is to the actual ground reality. Preparation of test scenarios and test cases must be well thought of.
- ‘Extraction’ and ‘cleansing’ of data from legacy system to new system is often neglected. This proves to be painful in the subsequent stages of the project in terms of migration related issues/bugs being required to fix.
- Predicting what can go wrong and preparing mitigation plan should be done before the start of the project.
- Not often banks decide on ‘point of return’ for such projects before starting. A clear cut idea in place, for the ‘conditions’ if met bank will abort the project, is highly recommended.
- Banks do not do adequate planning beforehand for post cut over days, resulting in irate customers and bad reputation in the market.
- Banks compare too much on the previous system functionalities / operability etc. with that of the new system. While it is good to do so, they should be ready to accept change due to the new system coming into place.
- All the requirements of the bank may not be fulfilled by the vendor’s solution. Taking judicious call at different stages of the project regarding what should be ‘must have’ and ‘nice to have’ requirements will help. Otherwise there will always be conflict between bank and the vendor resulting in increase in timelines.
Usually there is a lot at stake in the bank during core banking transformation – reputation, regulatory obligations, cost, employee morale etc. Focus from top to bottom in the hierarchy is important along with adequate communication and empowerment from start to end of the project to make it a success.
I feel this is just a start of list & hope it helps you, what else do you think can help to complete this list?