The thought of transforming a financial institution’s core banking system can be a daunting prospect to many bank executives.

One of the biggest barriers is the high cost of implementation.

Core banking replacements are very expensive, and they can take anywhere from 3 to 6 years to implement. The initial investment can be a deterrent because many of the core applications in banks today still use very old technology that has much lower running costs compared to the replacement cost of a new core system.

To avoid that large investment, some banks use digital technology only for their front-end customer-facing systems such as websites and stick with their old systems for their mid-tier or back-end systems.

The Accenture video, “Core Banking Transformation,” says this kind of practice – called scaffolding – can inhibit a bank’s ability be agile, which is a capability that banks need in today’s environment. The video states that most bank executives realize there is a need for change, but they just don’t know how to go about it.

Accenture identifies three principal types of change in banking transformation:

Continuous improvement: Improve IT capabilities and bank flexibility to get the most out of the core system. This involves making several small changes within different departments.

Targeted intervention: Precise modifications to address specific developments or channel opportunities.

Transformational plan: Redefine the end-state to align all organizational capabilities and achieve a substantial increase in performance or competitive positioning.

Ultimately, it is up to each bank to determine which route to take depending on how quickly they want to reach their digital destination.

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