The recent Gartner ‘International Retail Core Banking Report 2013’ ranked many of the major technology vendors in this space, which provide vital current account back-end processing software to banks around the world. The core banking report, covered in bobsguide, also highlighted some emerging trends such as a tendency to consolidate; the need to integrate ‘surround systems’ such as big data analytics, anti-fraud or the mobile channel into core banking systems; the rise of new customer banks in the Middle-East and beyond; and of new cloud-based delivery mechanisms. Bobsguide’s Neil Ainger talked to a number of core banking technology vendors such as Temenos and Fiserv to assess their response to the Gartner report and the current state of the marketplace. Below Infosys Finacle’s Rajashekara Maiya, head of product strategy, answers bobsguide’s Q&A questions.
Q1 (bobsguide): As the Gartner ‘International Retail Core Banking Report 2013’ is released and the list of core banking vendors in the so-called Magic Quadrant is revealed once more, what technology and market trends are you discerning?
A1 (Rajashekara Maiya, Head of Finacle Product Strategy, Infosys): In the last couple of years the definition of ‘core banking’ has become broader as its remit has expanded from a functionality and features point of view. There is an evident need to accommodate 'surround systems' such as mobility, analytics and fraud/AML capabilities, alongside payments and account-based transaction processing – this is a trend we keep seeing in the core banking technology marketplace. Our banking customers from around the world tell me that core banking now includes at least ten functions ranging from contracts management to social networking, for example, and Islamic banking.
Q2 (bobsguide): What other trends are you seeing in the core banking marketplace? For example, increasing standardisation and interoperability / connectivity requirements as banks move towards shared services platforms or common SOAs; less banks wanting more flexible, agile systems that can launch a product faster; a demand for more monitoring BI data, etc.
A2 (Rajashekara Maiya, Infosys Finacle): Our retail banking customers are looking for business solutions that can simplify their banking operations, business architecture and technology transformation projects. In particular, we have seen large banks seeking progressive modernisation and componentised migration procedures at Infosys, with the objective of having as little disruption to the end user as possible. A recent Efma / Infosys ‘Innovation in Retail Banking 2013’ report confirmed this trend, showing 58% of banks would like to look at componentised implementation for their IT transformation projects. The desire for a flexible service orientated architecture (SOA) is alive and well it seems.
In addition, banks increasingly want ready-to-deploy, pre-built integration adaptors for their legacy environment. This is in order to reduce the cost of migration and overcome siloed channels. We are also seeing a trend towards accepting the use of open source technologies so that the total cost of ownership (TCO) is reduced over the longer-term. The Efma / Infosys report found that 78% of banks would look at enterprise-wide solutions to solve their current IT challenges. This desire from bank operational IT experts is in order to avoid multiple solutions being implemented for common business requirements, across multiple business lines. Adopting this route can only lead to confusion, which is why enterprise-wide solutions are favoured.
Q3 (bobsguide): Where are you seeing most of your growth from – (i) geographically? (ii) in terms of functionality and delivery mechanisms like SaaS?
A3 (Rajashekara Maiya, Infosys Finacle): Geographically, we’re witnessing traction and winning contracts around the globe, with regions such as South Asia, Southeast Asia, Africa and Australia particularly prevalent at the moment.
In terms of functionality, we have seen demand for core banking, enterprise payment, enterprise liquidity management, enterprise origination and Islamic banking and wealth management capabilities most in demand. From a technology delivery point of view, and in regard to delivery mechanisms such as Software-as-a-Service (SaaS), we are seeing demand for a combination of on-premise and hosted models. It depends on the customer.
Q4 (bobsguide): What proportion of your recent implementations are replacement / upgrade work in developed markets versus new build contracts in emerging markets?
A4 (Rajashekara Maiya, Infosys Finacle): We see a fairly even split between implementations designed to update projects in developed markets, versus new build core banking contracts in emerging markets.
Q5 (bobsguide): Do you think we’ll continue to see a consolidation trend among core banking technology vendors such as Infosys and what impact do you think this will have upon bank end users, which typically focus on innovation and price as key determining factors?
A5 (Rajashekara Maiya, Infosys Finacle): One of the benefits of consolidation can be increased investment in research and development (R&D) from larger entities, which eventually provides end users with better functionalities and support. I wouldn’t assume that only smaller players invest in R&D, while larger technology companies concentrate on leveraging their size to achieve economies-of-scale price reductions for end users. That is not something that I see: the two are not mutually exclusive. Vendors that continue to invest in bringing new core banking products and services to banks will ultimately be the most successful.
Q6 (bobsguide): Is there increasing demand for better regulatory and risk reporting functionality across payment chains and improved BI customer data?
A6 (Rajashekara Maiya, Infosys Finacle): There is a real thirst for these capabilities and support around regulatory and risk reporting at the enterprise level is now demanded; instead of isolated business line level data. In addition, there is demand from our customers for better and actionable insights from analytics covering customers, products and users. This, allied to the regulatory data demand, is a key trend.
Q7 (bobsguide): As bank CIO budgets are increasingly constrained by regulatory compliance costs and ‘keep the lights on’ legacy costs what impact is this having on the core banking market in terms of available tech budget and preparedness to invest? Is there a preference for Opex SaaS solutions, as opposed to old style Capex build-out solutions?
A7 (Rajashekara Maiya, Infosys Finacle): There are pockets of demand around operational expense (Opex) based and SaaS outcome-based pricing models, but the fact is that retail banks are constrained by their legacy IT systems. These have become the biggest barrier to innovation in retail banking and are sometimes a barrier to competing effectively in the banking marketplace. This is leading to retail banks looking at progressive modernisation techniques, instead of old style ‘big bang’ rip-and-replace strategies.