European Core Banking Solutions: Is It Time Yet?

This Financial Insights study analyzes the demand for and offering of core banking systems in Western Europe. Primary factors affecting the demand for core banking systems are explored, including business, structural, and technological aspects, and key market opportunities for packaged core systems compared to internally developed systems are identified.

Western European banks' infrastructure never has never grown by design, but rather, it has expanded in response to the latest technology trends, to changing business needs or regulations, or simply through geographic or business expansion. The result is legacy, spaghetti junctions, business and IT silos, and fragmented customer views. Banks realize that the high costs of the governance information superstructures are largely due to the complexity of the underlying legacy applications.

New technologies are redefining core system reengineering, and many more options are now opened to banks. It is clear that much of the limitations for growth are embedded in old and inflexible systems. To remain competitive in a fast changing environment and enable faster geographic and business expansion, consolidating and replacing existing systems will be critical.

Rachel Hunt, European Banking research manager, concludes: "The banking industry, along with manufacturing, is leading in the adoption of SOAs as the drive for agility and flexibility, an ability to cope with ever more challenging business and regulatory requirements, and a reduction in operational risk continues to increase. Financial Insights believes that a sea change is taking place in the core system industry as Western European tier 1 banks start using vendor components to reengineer their existing core banking solutions. Banks need to review their core system strategies and identify key business area pain points, which reflect their core value propositions. Key to success for these projects will be ability to start small and scale rapidly."