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The value of transforming core banking systems

Streamline for agility, flexibility and long-term growth

Banks around the world face huge economic and regulatory challenges. New competitors are wooing customers with non-traditional business models. New platforms and entities, such as online-only banks and retailers offering banking services, could sideline traditional banks altogether. And the pressure to cut costs and build income is a relentless taskmaster.

One particular obstacle is the complexity of core banking systems. Complexity can add up to 40 percent overhead to a bank’s operating expenses1 . Estimates place the yearly cost of these systems in mature markets at US$200 billion2 . Their inflexibility can be a constant drag on innovation and income growth.

Some banks have launched multi-million-dollar projects to upgrade their core systems3 . But bankers often question whether and how well those investments will pay off. Will they lower costs? Will they raise revenues?


Research by the IBM Center for Applied Insights now shows that banks can speed time-to-value and maximize their return on investment. The key is to focus on specific competencies that yield the best financial benefits

Transform internal operations to provide a foundation for innovation and growth

Source: “Core Banking Systems Transformation Value Quantification.” IBM Center for Applied Insights and the IBM Global Banking Industry. October 2011  Integration and rewards increase as core competencies are achieved, including a streamlined operating environment, standardized business processes, an automated operating environment and an adaptable core banking system.

Core system transformation can help today’s bank operate as a streamlined bank of the future, enabling your bank to:

  • Respond quickly and effectively to changes in the business model―smoothly integrating new customers, channels, partners and suppliers.
  • Deliver complex product and service offerings with rapid development and implementation.
  • Enhance insights into customer needs and segmentation.

In the executive report, The value of transforming core banking systems (PDF,1.64MB), the IBM Center for Applied Insights explores the capabilities that make up this transformation. As part of the research, a hypothetical tier-one bank with US$1.2 trillion in assets was modeled in detail to determine how smarter banking competencies can affect key value drivers.



1.Saket Sinha, Dan Hartman, Jim Brill, Pablo Suarez, Santhosh Kumaran. Core Banking Modernization (PDF,1.10MB). IBM Financial Services Sector. October 2011
2. Saket Sinha. Core Banking Transformation. August 2010
3. Mearian, Lucas. “U.S. banks changing out core systems for real-time processing.” Computer World. July 14, 2011