Some banks find the tight relationship with their IT providers severely restricting their development.
Core banking software allows banks to process daily banking transactions and post updates to accounts and other financial records. Systems typically include deposit, loan, and credit processing capabilities, with interfaces to general ledger systems and reporting tools. In Switzerland, most institutions set up their core banking systems 20 years ago.
While two-thirds of the financial institutions in Switzerland and Liechtenstein trust that their core banking systems will support their business models in the future, one-third of banks are not convinced about their IT infrastructure being up to scratch, according to a study by the Institute of Financial Services (IFZ) at the Lucerne University of Applied Sciences and Arts (in German).
Infrastrucutre & Access
Representatives of neobanks in particular complain the Swiss financial world is heavily monopolized regarding central market infrastructure. Established participants include the Swiss stock exchange SIX and a few IT providers including Finova and Avaloq which dominate the market.
Besides the criticism that players would rather defend the status quo than drive digital transformation, banks increasingly feel tied to their IT partners leaving them unable to adapt their banking to customers’ desires. Implementing embedded banking solutions for partners from outside the industry is a requirement for clients.
Data Storage
Furthermore, changing ecosystems and new business models are leading to a need for distributed solutions that require distributed data storage for example.
Standard interfaces, flexibility to introduce new products in a short time, and cloud-native architecture, including microservices and modular software architecture were named as the most critical requirements for modern core banking systems in the survey, with most industry representatives saying that changes in the future will not be brought about by a sudden migration, but through continuous transformation processes.
Unlike the banks, the situation is comfortable for the manufacturers of core banking systems, as they can continue to count on a stable customer base.
Nevertheless, they must not gamble away this trust. In particular, the lack of accessibility to systems by third parties, inflexibility, and outdated technology must be quickly eliminated, the study says.
