Despite understanding the value of digital core banking, Southeast Asian banks view digital transformation as high risk, according to the Leveraging Digital Core Banking Systems: Next-Level Banking whitepaper from research firm IDC.
Sponsored by SaaS cloud banking platform Mambu, the report found that many established banks in the region have core banking systems that are more than 20 years old. This prevents them from delivering on the promise of digital transformation without exhausting their financial resources or risking their reputation.
“Banks used to be built to last, but now they need to be built for change. Without embracing digital banking technologies, incumbent banks just won’t be able to compete with digital banks that can offer the hyper-personalised and customer-centric experiences that their customers now expect,” says Myles Bertrand, managing director for APAC at Mambu.
He continues: “Historically, integrating multiple core banking systems has been considered much too expensive and far too difficult, so banks would attempt ‘big bang’, or ‘rip-and-replace’ core banking projects even though they were highly risky and often failed.”
One way of lowering the risk of digital transformation, says IDC, is to adopt a ‘multicore’ banking model. This enables banks to adopt digital core banking incrementally over time, with vastly reduced financial, technical, and reputational risks.
“The multicore model values the role of legacy core banking into the future - whether that’s just for a few months or years, or even as long as another decade. However, it’s important to stress that, even with this multicore approach, plans do need to be in place for an eventual migration from legacy to fully digital core,” asserts Steve Shipley, Adjunct CIO at IDC Financial Insights.
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“While there are a number of digital core players that have developed strong technical platforms for building a bank from the ground up, Mambu is able to offer a composable banking approach which allows for the flexible assembly of independent components and systems to fit the precise needs of each bank, and significantly reduce the risk of migration,” he adds.
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