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Driving revenue with a core system transformation

Core banking transformations provide revenue generation benefits and improved customer satisfaction.

Overview

This article explores the revenue generation benefits and three value levers associated with core banking transformations—customer satisfaction, cross-selling, and product and service innovation.

When it comes to justifying a core modernization program, banks need to look at more than just reducing operating costs and risk, and improving operational efficiency. They also need to consider revenue generation.

A renewed or replaced core platform can offer many benefits, including:

  • Opportunities for cross-selling related products and services.

  • Reduced time-to-market for new products and services.

  • Ability to tailor products to customers’ needs and to adjust pricing accordingly.

  • Improved customer satisfaction by delivering customers an always-on, always-relevant banking experience.

The bottom line is that a core transformation is much more than a cost-cutting and compliance strategy. In fact, half or more of the benefits can be revenue related. For many banks, that insight might make the cost-benefit analysis of undergoing such a complex, expensive project much more attractive.

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Background

Core modernization programs are traditionally seen as enabling financial institutions to reduce operating costs through system consolidation, risk reduction and operational efficiency. Cost savings alone, however, are not enough to fund the investment normally required to modernize.

Without revenue generation, banks are hard-pressed to justify an investment in renewing or replacing their core technology. And, in fact, research shows that banks that have successfully renewed or replaced their core platforms have obtained 40-70 percent of the overall business-case benefits from revenue related sources.

Analysis

Three “value levers” associated with a core transformation shown to have the most effect—boosting annual sales growth by a minimum of 5 percent—are:

  • Customer satisfaction. A new core that is integrated with a next generation customer-relationship-management platform can deliver more automation, systematic processing, real-time contextual information at all interactions and easier workflow configuration. This integration provides customers with the always-on, always-relevant experience they are looking for, and it also frees the frontline to better serve their customer.

  • Cross-selling. No one wants to be “sold to”—but according to Accenture’s 2014 North America Consumer Digital Banking Survey, which surveyed nearly 4,000 retail banking customers in the United States and Canada, 51 percent of customers want their bank to recommend products or services that they might need.

  • Product and service innovation. A modernized core solution can reduce the time-to-market for new products from months to weeks. This not only allows banks to introduce products faster but it gives a bank the opportunity to test products on a small scale in the market place, learn from the initial results, and then adjust and relaunch products to the broader market.

Recommendations

Besides improved customer satisfaction, increased ability to cross-sell related products and services, better testing and improved time-to-market, a new core banking platform allows a bank to tailor products to customers’ needs and to adjust pricing accordingly. An example of this strategy is allowing customers to choose the product features that they really want and to pay only for those they want.

New core banking platforms allow banks to gain the flexibility to determine product pricing based on an optimal number of behavioral, transactional and profitability factors. The bottom line is that a core transformation is much more than a cost-cutting and compliance strategy. In fact, half or more of the benefits can be revenue related. For many banks, that insight might make the cost-benefit analysis of undergoing such a complex, expensive project much more attractive.

Industry & topics highlighted

Banking